All the time when we are getting inquiries by entrepreneurs who are interested to invest in UAE Market as part of their global expansion, one common inquiry will be: “What is the difference between mainland and free zone companies?”, Why can’t we make our 100% ownership Company?
Let us explain what is a Mainland Company and a Free Zone Establishment are here in UAE.
Mainland Company:
A mainland company is an onshore company licensed by the Department of Economic Development (DED) of the related emirate which is allowed to do business in the local market as well as outside UAE without any restriction.
Free Zone Company:
A free zone establishment is incorporated within a designated jurisdiction of the emirate where the company is allowed to do business inside the same free zone or outside UAE. For commercial licenses and trading of physical goods, the company cannot do local business directly because the government has posed a limitation for trading in the local market through a distributor and by paying 5% duty on the local market invoices.
| Main Land Company | Free Zone Company |
| 1. Scope of Business: It can freely do business in the UAE local market, any free zone or outside UAE. It applies to all commercial or professional licenses. |
It can do business with in the same free zone or outside UAE. It is usually for the entrepreneurs who wish to setup a base in UAE (tax optimization) for their international imports/re-exports. The restriction of local business through a distributor is mainly to differentiate the business in the local market by onshore company and free zone licenses used for imports and exports. Restriction usually applies to the commercial licenses bringing in physical goods outside of a particular free zone into the local market. Professional licenses can still have the liberty of providing the services without much hassle to the local market. Marketing through Printed Media and Door to Door sales becomes limited with a free zone license. |
| 2. Ownership Structure Presence of a UAE National is mandatory in all mainland licenses either as a Local Partner or a Local Service Agent. Note: Local Partner/service agent is responsible for signing all government applications while expat partner is the whole and sole for business operations with no input or profit share from the Local Partner/Service Agent unless agreed. |
As compared with Mainland, Free Zone license is 100% owned by the expat partner. There is no need for UAE National partner/service agent in the license |
| 3. Office Space For every mainland license, there is a minimum space of office to be leased out on annual basis according to activity. Only then the Department of Economic Development (DED) will issue the license. |
Unlike Mainland, free zone license can be incorporated with rent out business centre desk or office within the free zone. It is as a package and rent will be higher than that of main land with limited operation. |
| 4. Visa facility There is no limitation of visas on the mainland license, An E-quota (electronic quota) is issued to every company in the mainland by MOHRE which shows their visas eligibility and it can be increased if the company require more staff. Eligibility for visas depends on the office space. The more office space you have, the higher number of visas you may get. Outdoor sales staff/PRO, technicians, Engineers and driver/messenger visas do not fall under this condition. |
Usually every Free Zone license offers 2 visas on the smart office package. However, different free zones in UAE allow 3 – 6 visas on the smart office package. If any entrepreneur requires more visas then a physical office/warehouse has to be leased out to avail of more visas. |
Why a mainland Trade License is ideal for small business owners?
- You need share capital for a free zone business. No capital is required for a Abu Dhabi mainland (DED) license.
- A free zone license is strictly associated with rented free zone office space. Mainland businesses can be run from a cheaper business Centre.
- Free zone business license and visa costs are cheaper, but it restricts you to work within free zones and international regions only – with a Mainland (DED) license, you can have clients from anywhere in UAE as well as internationally.
- The long-term free zone benefits and services are more appropriate for a large international company than a small business owner
For all new entrepreneurs and investors, it is always necessary to seek advice from their Business Consultants in order to choose the best trade/professional license and that license to be setup in the right jurisdiction. Right advice from the experienced minds like Plus UAE team always serves the business needs in the long term.
# Mainland License #Business Setup in Abu Dhabi #PRO Service