March 03, 2020
Dubai has become a fast growing city over the last decade and starting a company in Dubai is easier now more than ever. The Department of Economic development has a goal to make the process of setting up businesses smooth and time effective and we can say that has been achieved. There are two types of jurisdictions in Dubai, the mainland and Free Zones. Each jurisdiction has its own set of advantages and disadvantages.
Although it’s factual that free zones look more attractive with cost effective propositions however, with an in-depth study of the market, it would be seen that free zones are not the only option for overseas entrepreneurs looking to start a business in the UAE. For example, if one intends to trade directly in the mainland or acquire government contracts, then setting up a business in the mainland other than the free zone is more advisable.
To make a final decision on the type of business set up depends on a number of factors including the type of business activities and target customer. With all this in mind, are there various benefits of setting up a mainland company in the UAE or not?
One of the most important reasons to set up a UAE mainland company is the ability 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 the event that 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.
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 is limited.
Government projects in UAE are a huge business propositions. These projects are high on investment as well as return. These projects need specialized companies to be their contractors. It’s 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 incorporate a mainland company.
One of the biggest and most important advantage of setting up a UAE mainland company is allowing an open office anywhere in the UAE. Companies set up in free zones are generally not permitted to operate outside of the free zone they are registered in. Furthermore, these companies need a distributor to carry out their services on the mainland, with the ripple effect of profit reduction. Therefore, for businesses in search of a strong presence and long lasting future in the market, a mainland setup is a more suitable option.
Free zones are known for low taxes and duty taxes but the mainland companies match this with impressive incentives as well. In addition, no minimum capital requirement is required in mainland company formation- thus making them an affordable way of doing business.
If you require the best hands for a UAE mainland Company Formation, contact us.