Pros and Cons Between UAE’s Mainland and Free Zone Companies
- Should I move a Free Zone Company to Mainland of UAE?
Pros and Cons Between UAE’s Mainland and Free Zone Companies
UAE is a growing trade and economic hub with the Mainland and Free Zone companies contributing significantly to the growth of the economy.
The business-friendly policies in UAE make it a prime choice for foreign investors to set up their establishments and grow business here in UAE.
100% expatriate ownership in Mainland Companies of UAE
There is a path-breaking change of UAE Commercial Law, the 100% foreign ownership in mainland companies. However, there should be due diligence in choosing the right business jurisdiction.
The 100 % foreign ownership in the UAE mainland has created a buzz in the corporate landscape and is expected to give rise to a host of business opportunities.
It has given a choice for those who are already operating in UAE to gain full control on their business, as well as for the free zone companies to move to the mainland.
Free Zone and Mainland Companies in UAE – Is it wise to move from Free Zone to Mainland?
It is major decision-making for every investor when it comes to moving to the UAE mainland from the Free Zone company. There are multiple factors that determine the choice like:
- More Flexibility in doing business in UAE Local Markets
- Reduced Rental expenses and maintenance costs if the office is away from the city center
- Hire more employees, open new branches, and more.
There are few important points to consider for the free zone company before moving to the mainland, those are:
1. Scope of Business Operations
For Free Zone companies that are specialized in an industry sector, it is best advised to remain in a free zone than in the mainland.
For example, an international trading company is well suited to be in Dubai Airport Free Zone or Hamriyah Free Zone for easy facilitation of trade through the airports and seaports rather than being in the mainland.
The Free Trade Zones have easy access to customs and upscaled logistics setup for easy transit of goods to and from the UAE.
Also, free zone companies can benefit from similar businesses around and work in collaboration.
2. List of Business Activities
Few business activities are only available in the Free Trade Zones and not available in the mainland.
Hence, while transferring the free zone company license to the mainland, the investor must ensure whether a similar business activity is available in the Mainland.
The investor must approach the new licensing authority in the mainland i.e., the Dubai Economic Development for the list of activities.
Also, the process of approvals, procedure for obtaining a business license, UAE residence visa, etc., varies between the mainland and free zone.
3. Shareholder Profile
In the mainland, especially for service companies, the shareholder must have professional qualifications in the field of activity and also attend a training session by the American University and qualify for an exam conducted.
Also, the educational records of the shareholders stamped by the Ministry of Foreign Affairs are required to be submitted for issuing the business license.
Whereas in Free Zone, there are no such pre-approvals for services license to be issued. Few Free Zones in UAE, the company formation can be conducted remotely without the presence of the shareholder.
4. Office Space and UAE Residence Visa
For registering a company in UAE, obtaining the business license for the desired business activity is mandatory irrespective of being in the Free Zone or mainland.
Free Zones offer a wide range of customized office solutions ranging from Flexi-desk to executive office spaces.
In the mainland, there are mostly business centers that offer Flexi-desk solutions. Most of the other businesses choose to have a physical office location on the mainland as their office address.
5. UAE Residence Visa through Company Formation
When it comes to UAE Residence Visa, the mainland companies offer a two-year visa for the employees, and for Free Zones it is mostly three years.
In the mainland, the employee visa quota depends on the office space rented out, whereas in Free Zone there is a reserved visa quota for a business license and can be increased by paying a fee.
Free Zone office space is standard and must have to be upgraded in case of an increase in staff size, which could turn to be a costly affair when compared to the mainland.
The rentals for the commercial spaces in the mainland are much competitive with more options becoming ready across UAE.
6. Flexibility – Scope of Business Operations
The Free Zone business is mostly targeted towards services, general trading, and commercial sectors that export the majority of their products and also venture into the local UAE market through distributors.
The Free Zone company is governed by the Free Zone regulations and policies.
In the case of a mainland registered company, the company can take an office anywhere in UAE and start doing business in UAE. The company can be registered with the chamber of commerce and participate in UAE government tenders for procuring large contracts,
7. Branch of a Free Zone Company
A Free Zone company cannot be directly transferred to the mainland. Opening a branch of the Free Zone Company with the respective Department of economic development is an option to expand the presence in the mainland of UAE.
Another option is to liquidate the Free Zone company and open a new company in the mainland of UAE and continue doing business within the local UAE and GCC markets.
Moving from Free Zone Company to Mainland Business Jurisdiction in UAE
It will be a new entity and the new history of the free zone company can be inherited, All the residence visa, company contracts, bank account, vat statements, invoices, etc.; must be canceled and re-done fresh for the new company.
Hence, businesses while choosing the Free Zones or Mainland region for company formation, the investors must have a clear understanding of their business expansion and growth plans.
Depending on specific business requirements the business jurisdictions in UAE have distinct advantages that investors can benefit from.
To know more about Company Formation in UAE, talk to our expert team right away!
Contact Us: Aurion Business Consultants