Dubai has become a prime location for global economic activity. The kind of streamlining that has been happening in and around it has made it a point of access for a lot of freshly brewing business while the otherwise successful ones are already aware of the advantages of operating from here. Such large scale operation does require some structural and infrastructural support and that has been provided by the state in largely two forms, that is, a mainland company setup and a free zone company setup. To understand which one works better for you, you need to understand the difference between the two and then compare their respective advantages.
Difference Between Mainland and Free Zone Company Setup
The Department of Economic Development grants a licence to foreign companies to operate from an emirate and also provides them with a prime location to function from. Such licences companies are called mainland companies. On the other and, free zone companies deal in trade and export only and is within the ambit of a certain department of an emirate. One cannot function beyond the designated region.
We have laid down a few difference between the business setup in UAE mainland and free zone company setup:
1. A mainland business has no restrictions on the employment visa. This clause is very beneficial for you as you can bring in your own workforce and maintain the culture or ethos of the company by employing your own people. This ensures that the team remains intact and the quality of work also remains consistent. This also saves one from the hassle of building an equally efficient team from scratch and reaching a level of comfortable mechanism.
2. Cost difference between mainland company setup and free zone company setup also makes a difference to the operation of business. A mainland business has to incur lesser import duties because of the nature of their work and also because of their agreements with the DED. A higher import duty required to function as a free zone company needs a certain scale of business that can limit the access of people and can it make it seemingly less favorable.
3. When it comes to economic viability, all does not end with import duties only. There is also a capital deposit needed for one to work in a mainland setup. While this clause is waivered for the free zone setup. So, there is no one measure to judge your sustainability but you have to delve into the layers of it and see for yourself which cost would suit you more and which gels well with the nature of your business too. Low cost business services requires one to have a holistic view of expenses rather than one-dimensional.
4. For mainland company, a local sponsor is mandatory in all mainland licenses. For commercial mainland license, 51% of the share are held by the local sponsor and 49% of the share by the expats. For professional mainland license, 100% shares are held by expat partner and an emirati as a Local Service Agent. But a free zone setup gives complete ownership of the company to the investors and no need for a local sponsor or agent. The ownership angle introduces a new idea of care and love for the company which might be compromised when the business is highly controlled. It also gives more allowance for creative indulgences and new ideas to crop up and provides for a more conducive environment for dynamism and fervour.
5. For a mainland company, there should be a minimum requirement of 200 sq ft physical office space. For free zone license can be setup with or without physical office.
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