Mainland vs. Free Zone: What’s Best for Your Business in the UAE?
1. Ownership Structure
Mainland: As of recent reforms, foreign investors can now own 100% of their business in many sectors without the need for a local Emirati sponsor. However, some activities may still require local participation.
Free Zone: Offers 100% foreign ownership from the start, making it highly attractive for international entrepreneurs. No local partner is required.
2. Business Activity and Scope
Mainland: Businesses can operate anywhere in the UAE and internationally. You can trade directly with UAE local markets without restrictions.
Free Zone: Generally limited to operating within the Free Zone and internationally. To trade within the UAE mainland, you’ll need a local distributor or agent.
Office Space Requirement: Free Zone vs. Mainland
Free Zone Office Requirement
Many Free Zones offer flexi-desk or virtual office options
Physical office is optional for most license packages (especially for service-based or consulting businesses)
Ideal for startups, freelancers, and remote-first businesses
Upgrades to shared offices or private workspaces are available if you need visas or banking approvals
Mainland Office Requirement
Mandatory to lease a physical office space before license issuance
Must have a valid Ejari (tenancy contract) approved by Dubai Municipality
Minimum office space is typically around 200 sq. ft. but can vary based on business activity
The size of your office impacts your visa quota (e.g., 1 visa per 9 sq. meters)
4. Visa Eligibility Mainland: Visa eligibility is based on the size of the office. Larger offices can sponsor more employees.
Free Zone: Each Free Zone has its own visa quota, usually starting from 1 to 6 visas with standard packages, with options to increase based on office size.
5. Regulatory Authority
Mainland: Regulated by the Department of Economic Development (DED) of the respective emirate.
Free Zone: Regulated by the specific Free Zone Authority where the company is registered.
6. Taxation and Customs
Mainland: Subject to 5% VAT and 9% corporate tax (if annual profit exceeds AED 375,000). Customs duties apply when importing goods.
Free Zone: Many Free Zones offer corporate tax exemptions (for qualifying Free Zone entities) and 0% personal income tax. Customs exemptions apply for goods imported within the zone or exported internationally.
7. Business Flexibility
Mainland: Offers more flexibility in terms of market reach, office location, and government contracts. Ideal for companies targeting UAE residents and businesses.
Free Zone: Limited to the Free Zone and international markets unless working with a local distributor. Less ideal for retail or service-based businesses targeting UAE residents.
8. Cost of Setup
Mainland: Typically involves higher initial costs due to office rental, licensing, and government fees.
Free Zone: Offers more affordable setup packages, especially for startups and solo entrepreneurs. Flexi-desk packages and shared facilities help reduce costs.
9. Compliance and Reporting
Mainland: Requires more rigorous compliance, including annual audits, ESR (Economic Substance Regulations), and maintaining proper accounting records.
Free Zone: Some Free Zones require annual audits, but compliance is generally less stringent compared to Mainland companies.
The best route for your Dubai company registration depends on your business model, goals, and target audience. A Mainland setup is ideal if you plan to serve the local UAE market extensively. On the other hand, a Free Zone company is perfect for international operations, tech startups, and service providers looking for cost-effective solutions with minimal hassle.
At KrezKo, we specialize in business setup in Dubai and across the UAE, helping you choose the best path to success. From legal paperwork to finding the right location, our experts will guide you every step of the way.