Dubai has become a fast growing city over the last decade and starting a company in Dubai is easier than ever. The Department of Economic development has a goal to make the process of setting up businesses smooth and time effective. There are two types of jurisdictions in Dubai. The mainland and Free Zones. Each jurisdiction has its own set of advantages and disadvantages.
Though it’s true that from outside free zones look more attractive with the cost effective propositions they make and all the headline promises they propose but if one does an in-depth study of the market they would realize that free zones are not the only option for overseas entrepreneurs looking to start a business in the UAE. In fact they may not even be the most beneficial business structure to start with. For instance if one intends to trade directly in the mainland or acquire government contracts then setting up a business in the mainland is more advisable in the long run.
Final decision on the type of business set up depends on a number of factors including the type of business activities and target customer. Keeping all that in mind let’s analyze below when is it beneficial to have a mainland company set up.
1. Target to trade with other mainland companies:
One of the most important reasons to set up a UAE mainland company is to be allowed to trade with other mainland companies. Whereas with free zone companies there is a strict restriction of trading only within the same jurisdiction and in case they want to trade with any mainland company they have to go through a local registered distributor and pay customs duty. Mainland companies however have access within UAE and beyond without any restrictions.
2. Wider Scope of Business:
UAE free zones have a restriction when it comes to scope of businesses they cater to. For example, companies in Dubai Knowledge Village should only work in education or similar businesses. They do not allow any trading activities. The same goes for Dubai Healthcare City where healthcare related businesses are only allowed. Similarly for Maritime businesses RAK maritime city is the best bet. Also it should be noted that expansion of a free zone company’s activities beyond their free zone licensed trading activity into other areas of the UAE market.
3. Work along with government bodies:
Government projects in UAE are huge business propositions. These projects are high on investment as well as return. These projects need specialized companies to be their contractors. Its clear that being able to take up on such projects can be extremely profitable, and the only way to get such opportunity is having a mainland business license. As it stands, free zone companies are not allowed to pitch for such opportunities, they can only work with private commercial companies. Any business that intends to get contracts with UAE governmental bodies therefore must go ahead with mainland company formation.
4. Market Presence:
The biggest and most important advantage of setting up a UAE mainland company is to allow one to open an office anywhere in UAE. This being the ideal way to trade in local market also allows you to open offices anywhere in UAE and thus have an enhanced presence all over the country.
Whereas companies set up in free zones are generally not permitted to operate outside of the free zone they are registered in. As discussed before these companies need a distributor to carry out their services in the mainland which eats into their profits. Therefore, for businesses looking for a strong presence and long lasting future in the market, a mainland setup is a more suitable option.
5. Financially viable:
Free zones always make the headlines when it comes to low taxes and duty taxes but that doesn’t mean mainland companies don’t match this with some impressive incentives as well.
Also to be noted here is that no minimum capital requirement is required in mainland company formation- thus making them an affordable way of doing business.
This blog post is written by Ms. Roymsa. Feel free to call our Business Adviser today for a quality consultation relating your Business queries. Please send inquiry to
info[at]flyingcolour[dot]com or call +971 4 4542366.