Is it possible for free zone companies to run their businesses in Dubai Mainland?

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Knowing how the economic sector works in the United Arab Emirates is essential for every foreign investor who desires to establish a company in the country, whether in the free zones or the mainland. If you are wondering if free zones companies can do business in Dubai Mainland, here you will find that out.

In this article, you will learn everything related to free zones and Dubai Mainland business relationship, including the differences between these two areas, the norms and regulations that exist in each area, and if it is possible to do business in the mainland if you own a free zone company. Let’s observe:

1. What is Dubai Mainland about?

2. What is a free zone in the UAE?

3. Main differences between Dubai Mainland and free zones.

4. Can a free zone company do business in Dubai Mainland?

5. How can Connectfz help you to obtain more information?

1. What is Dubai Mainland about?

Each of the seven emirates has a main location that is known as the mainland, and in the emirate of Dubai, you will be able to find the Dubai Mainland. Each mainland is also known for being the most important area economically, politically, and demographically. Mainland companies and businesses are able to operate anywhere across the country and internationally too.

In some cases, mainland companies are also called onshore companies, entities licensed by the DED (Department of Economic Development) of the emirate where the companies operate and do business both in the local area and outside the United Arab Emirates. It is possible for these companies to do business internationally due to the few restrictions that regulate mainland businesses.

1.1. Types of Dubai Mainland companies.

You will be able to find five different types of companies that are allowed on the mainland, which are:

  • Limited Liability Companies (LLC): in this case, the company must have at least two shareholders and 50 max.
  • Branch offices: in this other case, investors can set up branch offices in the mainland to expand their business into Dubai.
  • Representative offices: they only have the purpose of research and marketing, which means they cannot conduct business activities. However, they can exist without needing the presence of a shareholder.
  • Public Shareholding Companies: they are only appropriate for the types of business that deals with lucrative figures, such as finance, insurance, and banking.
  • Professional Firms / Civil Companies: in this case, owners can retain 100% of ownership and choose their business field.

2. What is a free zone in the UAE?

These are free trade locations, which their main function is about trading different goods and services. Free zones also work as special locations to boost local and international companies, helping them to achieve success in a matter of time. The benefits and advantages that these locations offer to their investors make them popular business areas where foreign investors can freely start their companies’ setup.

However, it is possible that some regulations can keep free zone companies from doing business in Dubai Mainland. But before concluding this affair, it is important to take a look at some of the most outstanding rules and regulations that have been established in the UAE free zones for all companies and businesses.

3. Main differences between Dubai Mainland and free zones

Main differences between Dubai Mainland and free zones

Among the most remarkable differences that you can find between the mainland and the free zone set up could be the following ones:

  • Ownership: it is mandatory to accept the presence of the UAE National in every mainland license, which can be whether a reliable local sponsor or a local service agent. When it comes to the commercial license, the LLC ownership structure is applied. When it is about the professional license, 100% of shares are held by expat partner, and one UAE National is appointed as a local service agent. Meanwhile, in the free zone, there is no need for a UAE National agent.
  • Scope of business: mainland companies can do business in the local market, in any of the free zones, across the country, and abroad. Meanwhile, free zone companies can only do business within the free zone they are in or internationally.
  • Office space: mainland licenses require at least 200 square feet to be leased out on annual basis, and the Department of Economic Development will be in charge to issue the license. On the other hand, the free zone license is incorporated with or without physical office space.
  • Visas facility: on the mainland license, you can obtain unlimited visas depending on the number of workers that the company requires. Unlike the mainland license, the free zone license offers only 2 visas usually, although some free zones allow 3 to 6 visas on the smart office package.

3.1. Advantages of a mainland company.

Opening a company in Dubai Mainland can bring you a lot of advantages for your business to keep it growing more and more every day. These benefits can also guarantee success for your company in a short period. Some of these advantages that you can obtain are the following ones:

  • You have the freedom to grow your team and company by applying for unlimited visas, which means that the more visas, the more office and warehouse space you will be able to get. Usually, you will be able to obtain 100 square feet per visa. It is something you can negotiate with the Dubai Department of Economic Development.
  • You have the opportunity to expand your company’s branches to other locations in Dubai and across the country if you so desire. Keep in mind that you might need a Dubai DED license if your goal is the expansion of these branches of your company.
  • A flexible startup will be possible when establishing your Dubai Mainland company with the right company formation experts, who can offer excellent packages for you. Make sure that the selected package contains key benefits, such as business setup registration, automated legal administration, a sponsor in Dubai, visa processing, fast and affordable service for your company.
  • If you own a company on the mainland, you will be free to trade across Dubai and in the entire country without restrictions. Setting up in this location means that you will not have to worry about overstepping your trade permission when trading in the city or across the country.
  • Besides trading inside the country, you can also expand your business and trade internationally. This benefit is fundamental for those who seek to expand their branches beyond the border when possessing a company in the mainland.

3.2. Disadvantages of a mainland company.

As for the disadvantages, there could only be two elements you can consider negative for your business if what you are looking for is the contrary of these situations:

  • As we mentioned before, the ownership structure when you get the commercial license is exactly like the structure of LLC companies (Limited Liability Companies). In this case, you will only obtain 49% of shares of the company, while 51% of shares are given to the UAE National.
  • And as you could read in previous paragraphs, it is mandatory to acquire at least 200 square feet of office space to allow your company to operate on the mainland. This requirement does not apply for free zones companies, which means they can work remotely without needing physical office space.

3.3. Advantages of a free zone company.

Free zones are mostly known for the many benefits that they offer to their investors’ companies and businesses, making them more efficient and profitable. Some of these benefits for investors and entrepreneurs include the following ones:

  • 100% of foreign ownership of their companies.
  • Full repatriation of profits and capital.
  • Exemption from taxes on personal and corporate income.
  • Exemption from import and export customs duty for goods and services.
  • Easy setup process and company incorporation process.
  • Friendly business environment.
  • Quick access to professional candidates and workers.
  • World-class infrastructure and efficient resources, including transportation, global connectivity, and more
  • Business-friendly legal framework and company regulations. A good example could be the Fujairah free zone regulations, which are flexible enough to help investors to develop their companies.

3.4. Disadvantages of a free zone company.

Although you may find more advantages, you may also find some disadvantages to setting a company in a free zone. These are limitations that you will discover during the setup process of your company. Some of these disadvantages that you could find are the following ones:

  • In some free zones, business activities are limited to a specific business field, which means that you will not be able to run a company of a different type of business. For example, in the Dubai International Financial Center (DIFC), you can only run a business related to banking, corporate financial activities, wealth management, insurance activities, and many others related.
  • According to the free zone law UAE, there is an element you might consider a disadvantage is that it is not permitted the expansion into other UAE markets. It is a limitation for your company if you are planning to distribute your goods and services to every available market in the country.
  • In the Dubai free zones, there is a requirement for businesses and companies to set up within the free zone jurisdiction, which represents limited choices of available office spaces. Therefore, rent is subject to the prices that are available within the jurisdiction.

4. Can a free zone company do business in Dubai Mainland?

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To summarize, free zone companies are not usually allowed to do business in Dubai Mainland. It is like that due to the law that establishes it, which also establishes that the DED is the only authority that can issue the respective licenses to businesses and service providers who desire to run their companies on the mainland.

However, there is a way in which free zone companies can trade and operate their business on the mainland. It works by using a helping hand from civil work companies, LLC companies, and branches.

4.1. How can free zones companies do business in the mainland?

The first option could be setting up a branch of the company with the DED’s authorization. The requirements would be running the same business activities and using the same name as the parent company. A UAE local service agent is also a requirement.

Other options could be forming an LLC company or a civil work company, which will require following each of the rules and regulations that the law established for these two types of mainland companies.

5. How can Connectfz help you to obtain more information?

If you are looking for professional guidance and advice to boost your company in the UAE free zones or Dubai Mainland, you can contact Connectfz to discover new solutions and make your business grow in a matter of time. You can choose the services you need and let us help you achieve your goal.

If you need to start setting up your company in a UAE free zone, we can also help you to choose the most convenient location for your company according to the type of business that you desire. You can find and compare the different benefits that every free zone offers to you along with the regulations and other important details.

If you already own a company in the United Arab Emirates, feel free to get in touch with Connectfz and request some of the many services we offer to our clients. Among the services you might need to make improvements in your company, you will find our UAE market entry services, banking services, visa services, HR consultancy services, and many more.

Would you like to contact Connectfz to know more about company setup in UAE free zones and business activities in Dubai Mainland? If you have any question, do not hesitate to call us on +97143316688 or email us at info@connectfz.ae, and you will talk to one of our representatives that will gladly answer all of your questions.

Neelisha Khandhway

Neelisha-Khandhway-imgNeelisha KhandhwayAn Associate member of institute of company Secretaries of India with around 6 years of experience in india and uae in providing Company Secretarial, Legal and Corporate Governance services including Compliance, Risk Management, Due Diligence, Anti-Money Laundering (AML), Drafting and vetting of Agreements.

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