Starting a business in Dubai presents entrepreneurs with two primary options: setting up in the mainland or in one of the many free zones. Understanding the distinctions between these two setups is crucial for making an informed decision that aligns with your business goals. Affinitas DMCC is here to guide you through this process, ensuring you make the right choice for your company's needs.

Key Differences

Limitations on Conducting Activities

  • Mainland: Companies in the mainland have the advantage of operating both locally and internationally, with the ability to conduct wholesale across all emirates and retail business in the emirate where the license is issued.
  • Free Zones: Businesses are typically restricted to operating within the free zone or internationally. Some free zones, however, offer dual licenses, allowing operations in both free zones and the mainland without the need for additional office space or local shareholders. These include D3, DAFZA, DIFC, DMCC, ADGM, ADAFZ, KIZAD, and TwoFour54.

Ownership

  • Free Zone LLCs: Allow 100% foreign ownership.
  • Mainland LLCs: most licenses today allow for 100% foreign ownership, there are still some restricted licenses that require a local partner but they tend to be restricted to special cases.

As per UAE law, “The UAE Government amended the federal Commercial Companies Law, granting foreign investors full ownership of specific businesses. This means that foreign investors’ shares will not be limited to a maximum of 49 per cent like before, but can be up to 100 per cent instead.”

Corporate Tax

  • Free Zones & Mainland: subject to 9% corporate tax on normal income. They Benefit from a 0% corporate tax regime on qualifying income. Taxation is applied on profits beyond the defined threshold of 375,000 AED.

Employee Quota

  • Free Zones: Quotas are based on office space.
  • Mainland: Quotas depend on multiple factors, including business activities and compliance with UAE labour regulations. 

Emiratisation

  • Free Zones: No Emiratisation requirements.
  • Mainland: Companies with 50 or more employees must meet specific Emiratisation ratios. From January 1, 2024, companies with 20-49 employees in 14 key sectors will also be subject to these requirements.

Wage Protection System (WPS)

  • Mainland: WPS ensures timely and complete payment of wages.
  • Free Zones: Applicable in selected zones like JAFZA and DMCC for now. We expect this list to be extended over time.

Minimum Capital Requirements

  • Free Zones: Minimum capital varies by zone and activity.
  • Mainland: No prescribed minimum share capital, but sufficient capital is required for incorporation purposes.
Accounting-Tax-Business-Setup-in-Dubai-Abu-Dhabi-Sharjah

Choosing the Right Free Zone

Dubai offers various free zones tailored to specific industries. Here are some notable options:

  • Jebel Ali Free Zone Authority (JAFZA): Trade, imports, and exports.
  • Dubai Airport Free Zone Authority (DAFZA): Aviation and logistics.
  • Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM): Financial services.
  • Dubai Media City (DMC): Technology, media, and telecommunications.
  • Dubai Multi Commodities Centre (DMCC): Commodity trade and services.
  • Khalifa Industrial Zone Abu Dhabi (KIZAD): Industrial services.
  • Hamriyah Free Zone (HFZ): Logistics and trading companies.
  • Ras Al Khaimah Free Trade Zone (RAKFTZ), Ajman Free Zone (AFZ), Fujairah Free Zone (FFZ): General activities.

Deciding between a mainland and free zone setup requires careful consideration of your business's specific needs and goals. 

Affinitas DMCC is dedicated to helping you navigate these options, providing expert advice on company setup and tax strategies to ensure your success in Dubai's dynamic market. Contact us today to start your journey towards a successful business setup in Dubai.