Difference between Free zones and Mainland

One of the first steps to set up business in the UAE is to choose between a free zone or mainland Company. What are the differences??

?Ownership: Until recently, as a foreign investor establishing a company on the mainland, you were only allowed to own a maximum of 49%, while the remaining 51% had to go to the Emirati sponsor. However, the UAE government now allows 100% foreign ownership for selective business activities registered on the mainland. Free zones have no such restriction nor need for local sponsors as you enjoy complete ownership from day one.

Business scope: The fundamental difference between mainland and free zone companies is that a free zone company cannot do business outside the free zone without the help of a local agent. This restriction does not apply to mainland companies who have permission to operate everywhere in the UAE.

Workspace:A mainland company must have a minimum of 200sqft for a physical office. After securing the required space, the DED will issue a license for your company. It is not mandatory for free zone companies to ensure a physical location as many free zones allow companies to have virtual workplaces.

Visas: Mainland companies are not subject to any visa restrictions; however, the number of visas issued is dependent on the workspace area. So if your company requires additional visas, it first has to acquire or rent a larger workspace. Unlike mainland companies, free zone companies do have restrictions on the number of visas they can apply for. Typically, the number of visas available depends on the free zone regulations and ranges from 1 to 6.?

Business setup approvals: You will require government clearance from several government agencies for a mainland company. These include the Department of Economic Development, the Municipality of Dubai, the Ministry of Labor, etc. In comparison, each free zone follows its own laws and regulations for any new businesses established inside its jurisdiction. Furthermore, you do not need permission from non-free zone government authorities or agencies to start your company in a free zone.

Company audit:It is mandatory for all mainland companies to prepare a financial audit at the end of each fiscal year. However, not all free zones require companies to process their yearly financial audits. Only free zone companies like FZE and FZCO need to conduct a year-end audit.