Mainland vs. Free Zone Companies: Key Differences

Starting a business in the UAE has a lot of great perks—no personal income tax, amazing infrastructure, and the chance to own 100% of your company in many sectors.

But before you dive in, there’s one big question to answer: should you go for a mainland or a free zone company?

Each option has its own set of benefits and rules that can affect how and where you do business.

In this article, I’ll break down the differences in a simple way, covering what each option offers so you can choose the one that’s right for you.

Why Is the UAE an Attractive Business Hub?

The UAE has made a name for itself as a fantastic spot for business because it's very easy to get started there.

The government is all about making things smooth for businesses with straightforward processes and lots of support.

One of the best things?

There’s no personal income tax.

Yes, you heard that right.

If you're working there, what you earn is yours to keep, which means your business can pocket more profits.

And then there's the infrastructure—it's top-notch!

We're talking high-tech business parks, advanced logistics hubs, and all the modern facilities you'd need to thrive.

It’s not just about work, though.

The UAE offers a great lifestyle too, mixing vibrant city vibes with deep cultural traditions.

It's not just a place to do business; it’s also a great place to live.

Now, each Emirate brings something different to the table. Dubai might get most of the spotlight, but places like Abu Dhabi and Sharjah have their unique flavors and opportunities, depending on what you’re into.

A big decision you'll face is choosing between setting up on the Mainland or a Free Zone.

This comes down to what you want out of your business.

Do you need to focus locally or are you aiming globally?

Each option has benefits tailored to different business strategies.

What Is a Mainland Company?

A mainland company in the UAE is a business that’s officially registered with the Department of Economic Development (DED) in any of the Emirates.

This type of company gives business owners a lot of freedom and flexibility, allowing them to operate anywhere in the UAE and even do business internationally without restrictions.

One of the biggest benefits of having a mainland company is that it lets you issue visas for employees, which makes it easier to grow your team.

On top of that, you can work with other businesses both inside and outside the UAE and even apply for government contracts, which can bring in big opportunities.

In the past, if you wanted to start a mainland business, you needed a local partner who owned 51% of your company.

But things have changed!

Now, thanks to new rules, foreign business owners can have 100% ownership in most industries.

This makes it a lot easier to set up a business without needing a local sponsor.

That said, with more freedom comes a little more work.

Setting up and running a mainland company can be a bit more complicated, with specific rules and processes you’ll need to follow.

But for many businesses, the benefits make it worth it.

What Is a Free Zone Company?

A free zone company in the UAE is a business set up in one of the country's 45+ free zones, which are special areas designed to make starting and running a business easier.

Each free zone has its rules and is managed by a Free Zone Authority (FZA), which helps businesses with everything from registration to operations.

The biggest perk of having a free zone company?

No taxes!

That's right—free zone businesses enjoy zero tax policies, which means more profit for you.

They can sell their products and services to customers around the world and within the free zone itself.

However, there's a small catch: they can’t do business directly in the UAE mainland unless they go through a local distributor or agent.

Another big plus is how quick and easy it is to set up a free zone company compared to a mainland business.

The process is simple, with fewer requirements, making it a great choice for startups and entrepreneurs who want a smooth start.

What Is an Offshore Company in the UAE?

An offshore company in the UAE is a great option for business owners who want to manage their business from afar without operating within the UAE.

It’s mainly used for things like holding investments, handling international trade, and making global payments, all while taking advantage of the UAE’s tax-friendly policies.

One of the biggest perks of an offshore company is that it gives business owners the freedom to manage assets securely and even own shares in other UAE-based companies.

Plus, it offers a high level of privacy and fewer reporting requirements, making it a hassle-free option.

But here’s the thing—offshore companies can't do business within the UAE.

They’re designed for international operations, which makes them perfect for entrepreneurs who want to expand their business globally without dealing with local UAE regulations.

How Do Mainland and Free Zone Companies Compare?

Mainland and free zone companies in the UAE offer different benefits, and choosing the right one depends on your business goals.

Let’s break down the key differences to help you decide which setup suits you best:

Factor	Mainland Company	Free Zone Company
Scope of Business	Can operate anywhere in the UAE and internationally	Can operate internationally and within the free zone only
Taxation	9% corporate tax (on profits above AED 375,000), 5% VAT	0% corporate tax (if qualified), generally 5% VAT
Customs Duties	Subject to customs duty	Exempt from customs duty
Office Space	Must have a minimum of 200 sq. ft office	Can have a physical or virtual office (Flexi Desk)
Ownership	100% foreign ownership in selected sectors; otherwise, 51% local partner required	100% foreign ownership from day one
Visa Eligibility	No restrictions depend on the office space	Limited visa quotas (usually up to 6 visas)
Business Operations	Can trade freely across the UAE	Cannot trade directly in the mainland without a local agent
Audit Requirements	Mandatory annual audits	Depends on the free zone
Registration Authority	Department of Economic Development (DED)	Free Zone Authority (FZA)
Setup Timeline	Around 1 month; physical presence required	1-3 weeks; physical presence usually not required
Legal Entity Types	LLC, private/public joint stock, a branch of a foreign company	FZE (single shareholder), FZCO (multiple shareholders)
Minimum Shareholders	At least 2 for an LLC	Can be a single shareholder
Minimum Share Capital	Typically AED 150,000 - 300,000	Varies (AED 50,000 - 1,000,000 depending on the free zone)
Government Approvals	Multiple approvals are needed from authorities	Approvals only from the free zone authority

What Are the Advantages of a Mainland Company?

Setting up a mainland company in the UAE has plenty of benefits that make it an excellent choice for businesses aiming to grow and succeed.

Here’s why it’s worth considering:

Freedom to Work Anywhere in the UAE: Mainland companies don’t face restrictions on where they can operate. Whether it’s in Abu Dhabi, Dubai, or any other Emirate, you can serve customers across the UAE freely, unlike free zone businesses that are tied to specific areas.
There are no Taxes to Worry About: One of the best perks is no corporate or personal taxes. This means more of your profits stay in your pocket, giving you a financial edge.
Keep All Your Profits: Mainland businesses allow you to repatriate 100% of your profits and capital. You can transfer your earnings back to your home country without any hassle, making it easier to manage your money.
Government Contracts Are Open to You: Mainland companies can bid for government contracts, which are often large and highly rewarding. It’s a great way to grow your reputation and revenue.
Unlimited Visas for Your Team: There’s no limit to how many visas you can apply for, as long as you have enough office space to support your team. This makes hiring and scaling your workforce simple.
Flexibility with Office Locations: You can set up your office anywhere in the Emirate where your company is registered, whether it’s a bustling business hub or a quieter location. Plus, you’re allowed to open multiple branches, helping you establish a strong local presence.
Access to International Markets: Mainland companies have no restrictions on global trade, so you can expand your business internationally while still operating smoothly in the UAE.

What Are the Advantages of a Free Zone Company?

Unlike mainland companies, free zone businesses in the UAE offer great benefits if you’re looking for an easier and more budget-friendly way to start your business.

Here’s why a free zone setup might be perfect for you:

You Own 100% of Your Business: You don’t need a local UAE sponsor. With a free zone company, you get full ownership right from the start, meaning you have complete control over your decisions and profits.
Setting Up Is Super Easy: Free zones are known for their fast and hassle-free setup process. There’s minimal paperwork involved, and the whole process is straightforward, so you can get your business up and running quickly.
Keep All Your Profits: Free zone companies let you send 100% of your profits and capital back to your home country without any restrictions. That’s a big win when it comes to managing your money.
No Import or Export Taxes: A huge plus for businesses involved in trading—you won’t have to pay import or export duties. This can save you a lot of money and make your operations more cost-efficient.
Your Privacy Is Protected: In free zones, your personal and business details stay private, as shareholder information isn’t made public. This gives you an extra layer of confidentiality and peace of mind.
Hiring Is Easier: Free zones have simple and flexible hiring rules, making it easier to bring in the right people to help grow your business.
Business Support and Networking Opportunities: You’ll also get access to helpful business services, expert advice, and networking opportunities to connect with potential clients and partners. This support can be a game-changer for new businesses.

FAQs

What Is the Difference Between a Free Zone Visa and a Mainland Visa?

A free zone visa allows you to work only within the specific free zone, while a mainland visa lets you work anywhere across the UAE without restrictions.

What Are the Disadvantages of Free Zone Companies in Dubai?

Free zone companies cannot operate directly in the UAE mainland without a local agent, and they have limitations on the number of visas they can obtain.

What Is the Meaning of Free Zone Company?

A free zone company is a business registered within a designated economic zone in the UAE, offering tax benefits and 100% foreign ownership.

What Is the Difference Between a Free Zone and an Offshore Company?

A free zone company can operate within its zone and internationally, while an offshore company is mainly for international business and cannot operate within the UAE.

Last Words

We’ve come to an end, but your journey to starting a business in the UAE is just getting started.

If you want to serve customers across the UAE, a mainland setup gives you the freedom to do that.

But if you're more focused on international markets and want tax benefits, a free zone might be the way to go.

Take your time, think about your plans, and don’t hesitate to ask for expert advice.

If you have any questions, feel free to reach out to us—we’re here to help!