Advantages and Challenges of Setting Up Mainland and Freezone Company in the UAE
The UAE brings in a lot of benefits for investors of all scales and mediums. The city is bound to create a growth-oriented business culture to foster organizations in all sectors. From having the best tax consultants Dubai, who guide through the city’s taxation rules to maintaining strong frameworks for proper business functioning, the UAE makes an ideal space for companies to exist and prosper.
If you are along the lines to invest in setting up an organization in the UAE, it is obvious to feel dubious and challenged. Nevertheless, the Emirate is a great place to start with. However, the primary concern here could be deciding between a Mainland or Freezone company. The decision depends on a plethora of factors that surround the company type, its client base (whether in UAE or abroad), the ins and outs of business activities (within the city or outside), etc.
Following are a couple of challenges and advantages of Mainland and Freezone Companies to ease the choice for you.
Pros and Cons of a Mainland Company
Signing up as a Mainland Company implies that you can have an onshore organizational set up in the mainland UAE. Foreigners, in this case, can penetrate the market by opting for LLCs or establishing a branch office of a foreign store. This approach of investing in a company can have potential advantages and quite a lot of difficulties too. So, here’s the gist of it:
- Restriction-free trade opportunities both within and outside the UAE as long as the setup is onshore and established in the Emirate where the company was licensed.
- Financial auditing is obligatory for Mainland Companies. A well-versed tax agent Dubai can solve the complications here.
- Minimum office space of around 140 sq. ft. is mandatory to establish a Mainland company. The area further depends on the number of visa holders in the organization.
- Workers are eligible for visas without restrictions but the number of people your company holds depends on the office space you acquire.
- With effect from July 2021, foreign owners of a Mainland company are allowed to take 100% ownership. Before this, foreigners would have to have a 51% partnership with local sponsors to register in the mainland.
- Around 1000 foreign business listings are now offered 100% ownership but there are still some limitations for certain organization types.
Pros and Cons of Freezone Company
The very first Freezone in the UAE started in the 1980s. As much as the name implies, these areas allow complete ownership for foreign companies and operate under separate jurisdictions within the specific Emirates. At present, there are 45 Freezones in the UAE namely, Dubai Multi Commodities Centre, Dubai Healthcare City, Dubai Internet City, JAFZA, DIFC, ADGM, etc.
- As a foreign company, you have 100% ownership and do not have to involve any local sponsor.
- These companies can trade only within other Freezones of the same jurisdiction or outside the local UAE market.
- Since such setups are governed by special regulatory bodies called the ‘Freezone Authority’, they are exempted from all forms of taxes for 50 years.
- Financial auditing is not mandatory in all cases but top tax consultants Dubai highly recommend getting it done.
- Freezones do not have any limitations in terms of office space but impose restrictions on the number of visas. Usually, virtually incorporated offices are allowed one to six visas. For physical stores, it depends on the office space taken.
It all boils down to the requirements of your company’s establishment. If penetrating the local markets is the goal, then Mainland organizations are compatible. Whereas, if quick setup, freedom to complete ownership, and tax exemption are the target, then Freezones are ideal. Do a reality check, assess your goals, and move accordingly.