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There are two broad categories of companies in Dubai: mainland companies and free zone companies. Anyone planning for company formation in Dubai will have to choose between these two types.
Dubai Mainland Company
The UAE mainland refers to all places in the UAE except designated free zones.
Businesses set up in the mainland, also known as onshore companies, are governed by the Commercial Companies Law and under the direct jurisdiction of the concerned emirate’s Department of Economic Development.
No Geographic Restrictions
Setting up a Dubai mainland company is the better option if the UAE is your primary market. Mainland companies can:
- conduct business anywhere in the UAE, including the free zones;
- trade with mainland companies;
- do business with government agencies; and
- put up their offices anywhere in the UAE.
Dubai mainland companies can trade, sell, and do business anywhere in the UAE, including Dubai and the six other emirates. Of course, they still have to comply with the individual policies and regulations of each emirate. But in essence, they have unrestricted access to the UAE market.
Foreign Ownership
Prior to the institution of Federal Decree – Law No. 26 of 2020, which amended the Commercial Companies Law of 2015, mainland companies had to be 51% owned by one or more UAE citizens. The amendment, however, abolished this restriction, so foreigners can now own 100% of their Dubai mainland company unless they’re involved in economic activities with economic impact.
As of this writing, the Dubai DED has identified more than 1,000 economic activities that allow for 100% foreign ownership.
Federal Decree – Law No. 26 of 2020 has also abolished the local or national service agent requirement for foreign companies establishing a branch in the UAE. You can now set up a branch of your existing company on the Dubai mainland without having to obtain the services of an Emirati service agent.
Office Space and Visa Restrictions
A Dubai mainland company can set up its office anywhere in Dubai. A company must lease or rent office premises and warehouse spaces (if needed) and provide the lease agreement when applying for its trade license.
The minimum office space required varies depending on the type of license. But generally speaking, 200 square feet is the minimum office space requirement for Dubai mainland companies.
Mainland companies are not subject to specific visa restrictions. There is no limit to the number of visas your company can get. However, if you need more visas, you will need a bigger office since the number of visas depends on your office size.
Government Approvals
As mentioned above, Dubai mainland companies fall under the jurisdiction of the Dubai DED. However, business setup in the Dubai mainland also still requires pertinent government approvals.
Your business activities will dictate what additional government approvals you need. A company dealing in auto parts, alarms and safety equipment, and car rentals, for instance, must get permission from the Ministry of Interior. On the other hand, a legal consultancy firm needs to seek approval from the Ministry of Justice.
Likewise, telecommunications companies must get the approval of the Telecommunications and Digital Government Regulatory Authority, and companies planning to offer insurance and engage in insurance-related activities must obtain the Ministry of Economy’s stamp of approval.
Dubai Free Zone Company
Free zones are specially designated free trade zones in the UAE. Free zone companies are companies whose business address or office location is in a free zone.
Jurisdiction
Free zones are under the direct jurisdiction of free zone authorities. Free zone authorities are in charge of issuing trade licenses to the companies in their jurisdiction.
Dubai has more than twenty free zones, but some authorities manage multiple free zones. For instance, the Dubai Creative Clusters Authority is in charge of Dubai Internet City, Dubai Studio City, Dubai Media City, and Dubai Science Park, among others.
Fiscal and Regulatory Benefits
Free zones are attractive because they offer a wide range of benefits. The following are some of these benefits.
- 100% foreign ownership
- 100% repatriation of both capital and profits
- Full exemption from customs duties
- Full exemption from 5% VAT
- No corporate tax for 50 years, a renewable exemption
- No personal or income tax
- No foreign currency restrictions
- No restrictions on hiring foreigners
Requirements and Government Approvals
Free zones also usually have fewer documentary requirements. To get initial approval, a freelancer may have to submit only an application for registration, a CV, a bank reference letter, and a registry identification code.
Free zone authorities also typically have less stringent reportorial requirements than the DED. Some free zone authorities do not require companies to submit audited financial statements.
Office Space and Number of Visas
A Dubai free zone company is legally domiciled in a free zone. However, free zone authorities have different requirements when it comes to office spaces.
Some free zones offer flexi desk arrangements. In this case, a company’s entire office can be that single office desk-and-chair setup in a large facility built for that purpose. Some free zones also allow for virtual office setups.
Like mainland companies, the number of visas a free zone company can obtain depends on office size. The bigger the office, the more visas it may receive. However, free zone authorities typically have an upper limit on the number of visas a company can get.
Do Business Within the Free Zone or Overseas
Free zone companies may do business within the free zone or outside the UAE, and those that trade exclusively outside of the UAE are called offshore companies.
But free zone companies are not allowed to do business in the UAE mainland.
Therefore, a telecommunications company set up in a Dubai free zone cannot and must not do business in the UAE mainland. However, there are indirect legal avenues by which free zone companies can circumvent this prohibition.
One of the ways is setting up a branch in the mainland. A free zone companymay also set up a mainland distribution channel with the help of a mainland company.
Mainland or Free Zone: Ready to Decide?
Company formation in Dubai is a popular option among companies that wish to take advantage of Dubai’s strategic location and advanced logistics infrastructures. But you must choose whether to put up a company in the Dubai mainland or a Dubai free zone.
Mainland and free zone companies have their pros and cons. You just have to choose which of these two types suits your business needs and goals better.
