Difference between Mainland and Freezone in UAE
UAE is always one of the most sought after destination for all the entrepreneurs around the world to start or expand their business. The strategic location of UAE, infrastructure, currency stability, support of the Govt. authorities has made UAE a haven for the entrepreneurs. An entrepreneurs can form a business in UAE either in mainland or free zone or offshore depending on their requirement. Considering UAE’s seven emirates with their seven main land jurisdictions and multiple number of free zones in each emirates makes it overwhelming for an entrepreneur to select the right one. OneClik business setup services LLC FZ assists numerous client to find the right option to select from this enormous options of jurisdictions. We will mainly discuss here the striking differences in between mainland and free zone.
What is a main land company?
A mainland license is issued by the Department of Economic Development (DED) from an emirate. All the seven emirates has their own DED. Mainly when a client needs a physical presence of the business like a shop or retail outlet then it requires a mainland license. This license allows local market transactions as well as outside country transactions.
What is a Free zone company?
A free zone company license is mainly formed where a physical presence or an office or shop is not required. Mainly trading companies who intend to do import and export out of UAE or only inside the designated free zone forms such license. In case a free zone licensed company looking for local market business the same can be done through a distributor registered in the mainland.
Major differences between a Mainland and a Free zone license
Ownership
Mainland companies needed an UAE national as a shareholder in the companies formed by the expats previously. Now except few business activities for most of the business activities expats can enjoy 100% ownership.
Free zone companies on the other hand have always enjoyed 100% ownership.
Presence of shareholders
While forming the mainland company presence of the shareholders to sign the papers are required.
In free zone the verification happens online and hence the presence for the formation of the license is not required.
Laws and Regulations
Mainland licenses mainly need the approval from the DED of a particular emirate. For few regulated activities it may require additional approval from other authorities.
Free zones are governed by the rules and regulations of that particular free zone and only in few cases require additional approval from other authority.
Taxation
Mainland comes under corporate tax and need to pay 9% for any profit incurred above AED 375000 in a year.
Free zone license formed in a designated zone having enough substance can prove itself as a qualifying person and doesn’t need to pay corporate tax.
Visa
Mainland can provide as many as visa for employees as they want by keeping the office size proportionate to the number of employees. A 200 sq. ft. office can accommodate 4 to 5 employment visas.
Free zone licenses can provide 6 visas with a co working space. A Free zone license can increase the number of visas depending on their requirement by taking an office inside the designated free zone.
Office or Shop
While forming a mainland license providing an office or shop rental contract (Ejari) is a must. Hence, there will be an additional cost to rent or buy the space. For instant license for the first year office is not required.
Free zone license cost comes with a co-working space and doesn’t require additional cost until unless it’s not a requirement from the client or for the need of the business.
Business Activities
A mainland license can include approx. seven to ten activities under one license if the activities fall under same activity group. In a mainland license commercial activities cannot be taken with professional activities.
In a free zone license there is freedom to take commercial and professional activities under the same license. Depending on the free zone jurisdiction and the package there can be 3 to 5 business activities under one license. More activities can be added in free zone under one license by paying additional charges.
Cost
The cost for establishing a mainland business in the UAE for an individual who already holds a valid UAE visa can start their venture with a free zone license, priced at AED 6,000.
It completely depends on the person to select which jurisdiction suits him best. There are several free zones which focus on media or publishing or finance or commodity trading etc. Experienced business setup service providers like OneClik business setup services LLC FZ helps the clients to navigate through different option to find the right one to start the business.
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