What are the Key Differences between
Mainland and Freezone Companies in the UAE?

In the UAE, there are three primary jurisdictions where businesses can incorporate – Mainland, Free Zone , and Offshore. In this article, we’ll examine the key distinctions between a Free Zone and mainland business.

Ownership: In a mainland company, foreign investors are required to have a UAE national as a partner or sponsor with at least 51% ownership. This means that the local sponsor will have control over the business and its operations. In contrast, free zone companies allow 100% foreign ownership.

Taxes: Free zone companies enjoy tax benefits such as zero corporate tax, zero income tax, and zero import and export taxes. In contrast, mainland companies are subject to a 5% value-added tax (VAT), which is applicable to most goods and services.

Licensing: Free zones offer a simplified and streamlined licensing process, which means that the process of obtaining a licence is quicker and easier. Mainland companies, on the other hand, require several approvals and permits from different government agencies, which can be a time-consuming process.

Location: Mainland companies can operate anywhere in the UAE and are not restricted to a specific location. Free zone companies, however, are required to operate within the designated free zone where they are registered.

Employment: Mainland companies are required to hire a minimum number of UAE nationals in their workforce. Free zone companies are exempt from this requirement and can hire employees from any country.

Customs duties: Mainland companies are subject to UAE customs duties on all imported and exported goods. Free zone companies, however, are exempt from these duties if they operate within the free zone.

It’s important to note that the rules and regulations can differ between free zones, so it’s always best to consult with a professional to understand the specific requirements and benefits of each type of company.