Being a business consultant in the UAE, I often stumble upon this one repeated question from investors.
What's the difference between a Mainland and a Free Zone business and where should I invest my money?
Let's simplify this here:
A mainland company is an onshore company which is licensed by the Department of Economic Development (DED). It is allowed to do business within and outside UAE without any restriction.
On the other hand,
A free zone establishment, however, is incorporated within a specific jurisdiction. It is allowed to do business only inside its free zone or outside UAE and not in the local UAE markets.
This alone should clarify half of your doubts. Mr. Ali Usman, Senior Business Consultant in Flyingcolour Business Setup Services, has talked about the difference at length in this blog : The Difference Between Mainland And Freezone Companies In The UAE
Depending on the nature of the business that you want to set up, free zones may not often offer the most conducive environment for your business to grow. If you wish to trade directly to the UAE marketplace, setting up a mainland company is the most lucrative investment.
This crucial decision can dramatically change the face of your company in a global landscape. Although both options have their pros and cons, you should evaluate the alternative of having a mainland UAE company before you make a decision.
Read on to know why!
Ability to enter global trade
How do you see your business 10 years from now?
If you think of the future of your business, you must be planning international expansion.
Like every entrepreneur, you want to penetrate foreign markets. Don't you?
Well, Dubai mainland registration allows your business to freely trade on the international platform which is something you obviously need in this increasingly connected world. A Dubai mainland license gives you freedom and flexibility to grow and manage your business. Currently, companies need flexibility to adapt to rapid changes. If the demand for your product rises, you will need a firm logistic system to cater to the rise. It is where a mainland license supports your business.
Freedom to trade with mainland companies
One of the most compelling reasons to set up a UAE mainland company is the privilege to trade with other businesses on the mainland. Free Zone Company set up confines businesses to trade only within their free zones. Nonetheless, if businesses wish to access local UAE marketplace, they need to depend on the local distributor. On the other hand, mainland companies can expand their business without restrictions. A compelling reason that can’t be overlooked!
Liberty to bid for government contracts
Mainland Company set up in the UAE offer another profitable feature – scope to bid for high-profitable government contracts. If your business can provide services that can cater to federal projects, you can easily grab a profitable position. It is not a secret that UAE government contracts are worth billions of dollars per year. Successfully winning a federal contract in UAE can create a blueprint for long-term business networking and growth. Winning state contracts across UAE will not only give you a profitable boost but also improve your business reputation – locally as well as globally.
Bigger scope for business
Some of the UAE’s free zones allow only certain businesses to be established within them. Some free zones have been established and created with a purpose of promoting a specific industry. Besides, a free zone company can’t immediately scale up their business beyond their free zone licensed trading to the other zones of the UAE market. As a relief, there is no such restriction for mainland license.
Free zones often attract investors for their lower tax and duty rates; not that mainland license is devoid of perks. Setting up a mainland business comes with some impressive incentives, such as
- zero rates of corporate tax
- minimal capital requirements
- no yearly auditing and so much more.
Of course, a compelling list of benefits.
Establishing a business in Dubai may seem daunting; however, with the right expert-based business set up consultancy, it is a hassle-free process. Choose a professional company set up expert who can offer consistent service required to structure and effectively conduct your business in UAE. Apart from that, make sure you know the basics of ownership structure and other prerequisites for setting up a mainland company.
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