Free zone vs mainland licence UAE – what’s the difference?

Free zone vs mainland licence UAE – what’s the difference?

September 16, 2022

Free zone vs mainland

With its favourable tax regime and business-friendly infrastructure, the UAE is one of the best places in the world to set up a business. It provides rich opportunities for entrepreneurs and international investors across diverse industries and nationalities.

When setting up a business, you can set up your company on the mainland or in one of the UAE free zones. There are significant differences between the two, and this article spells out the most important differences, covering the following topics:

What is a mainland company in the UAE?

A mainland company is an onshore business registered with a UAE government body and with a trade licence issued by the Department of Economic Development (DED). There are no restrictions on the commercial activities undertaken by a mainland company, but some areas of business need a UAE national service agent or require a UAE national to be a partner in the company.

Key advantages of a UAE mainland licence

  • Freedom to conduct business throughout the UAE without restrictions
  • 100% exemption from personal taxes. (Corporate taxes will be applicable from June 2023)
  • 100% repatriation of profits and capital
  • Potential to bid and work on UAE government contracts
  • Office location can be anywhere in the registered emirate, with multiple company branches, creating a solid presence in the local market
  • Unrestricted access to global markets

What is a Free Zone company in the UAE?

If you set up your company in one of the UAE’s free trade zones, you keep 100% ownership, making them an excellent choice for many business owners and entrepreneurs. Free zones have existed in the UAE since the 1980s and have since become magnets for businesses from across the globe.

There are currently 45 free zones in the UAE. Each zone has a local regulatory authority, each with subtly different laws and regulations. The scope of these zones is enormous – Umm Al Quwain FTZ, for example, has more than 8000 registered companies across 20 million square feet of land with investors from 150 different nationalities.

Key advantages of a UAE free zone licence

  • 100% ownership without the need for a UAE national as partner
  • Quick and easy company formation
  • 100% repatriation of capital and profits
  • 100% exemption from import and export duties
  • 100% exemption from corporate and personal taxes
  • Relatively easy recruitment policy
  • Readily available business advice and networking support

What are the differences between a mainland licence and a free zone licence?

Depending on your business needs, mainland and free trade zones both offer ideal investment opportunities. The jurisdictions involved have distinct structures and regulations, and understanding the key differences is crucial when deciding which one is right for your particular business enterprise.

Let’s focus on some of the key differentiators.

Ownership: Free zones allow you complete ownership of your UAE-based business, without the need for UAE Partner. The UAE government also allows 100% foreign ownership for certain mainland-registered business activities, but other types own a maximum of 49%, with 51% going to the company’s UAE National Partner.

Business opportunities: Free zone companies can only do business outside the free zone through a local agent. In contrast, mainland companies are allowed to operate anywhere in the UAE.

Business premises: All mainland companies require a minimum of 200 square feet of physical office space. Free zones such as UAQFTZ do not require companies to have offices, and you can use a virtual or remote workplace instead.

Visa requirements: There are no visa restrictions for mainland companies, but the number of visas you can apply for depends on the workspace area the company occupies. So, if your company requires additional visas, it must acquire or rent more office space. In contrast, free zone companies have no such restrictions, although the maximum number of visas depends on the local free zone regulations.

Business setup approval: Mainland businesses require clearance from various government agencies. In contrast, free zones have their own laws and regulations. You do not need permission from other government authorities or agencies to launch a business in one of the free trade zones.

Company audit: Mainland companies are required to prepare audits at the end of each financial year. This is not the case in the majority of free zones.

Steps to get a UAE free zone licence from UAQFTZ

There are just five steps to follow when applying for a business licence, whether mainland or free zone: 

Step 1 : Get your company name approved and specify your business. You will be applying as a single partner, multiple partner or branch.

Step 2 : Submit all required documents.

Step 3 : Sign the original incorporation documents and submit them.

Step 4 : Once the documentation has been approved, submit your payment of the specified fees.

Step 5 : Wait for your licence – the process should only take no more than a couple of days.

Why choose UAQFTZ?

The Umm Al Quwain Free Trade Zone adds its own distinct benefits to the general advantages of operating a business in the UAE. Companies here enjoy favourable tax laws, low costs and excellent infrastructure. The zone is also in a great location for trade, import and export, being just 30 minutes from Dubai and with special concessions at UAQ’s sea port.

Here is an at-a-glance list of the benefits of applying for and using your general trading licence in the UAQ Free Trade Zone:

  • You can start your company from only AED 786 monthly using an instalment plan.
  • You do not require a capital proof or bank letter or an audit report when applying.
  • Shareholders do not have to be physically present during the establishment of the business or the general trading licence application process.
  • The establishment card is free of charge.
  • As a business owner, you can use and extend your existing visa without requiring a UAQ visa.
  • Visa holders, whether investors or employees, can sponsor their families.
  • No NOC is required from anyone setting up a company in the UAQ Free Trade Zone.
  • There are no restrictions on foreign employees, so you can hire the best people without barriers.

If you establish your company here, you’ll be joining other businesses in the UAQ Free Trade Zone at a time of growth and new initiatives. The zone is currently in a second phase of development that promises even greater rewards for entrepreneurs in the future.

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