Mainland vs Free Zones: Key differences[1]
| Aspect | Mainland | Free Zones |
|---|---|---|
| Definition | Mainland refers to areas outside the free zones, regulated by the Department of Economy and Tourism. | Free zones are specially designated areas with their own rules for licensing and registration. |
| Emiratisation Requirements | A minimum of 2% of the skilled workforce must be Emirati nationals. | No Emiratisation requirements for businesses. |
| Jurisdiction for Business Activities | Businesses can operate both inside and outside the UAE, including the broader GCC region. | Businesses typically operate outside the UAE but some free zones allow for both onshore and offshore activities. |
| Types of Legal Entities | Mainland businesses can choose from a wide range of legal forms, such as LLCs, partnerships, and joint stock companies. | Free zones offer specific legal structures like Free Zone Establishments and branches of foreign companies. |
| Ownership Options | Foreign investors can own 100% of businesses in most sectors, with exceptions for strategic industries. | Foreign investors can own 100% of businesses in all sectors. |
| Tax Implications | Mainland businesses are subject to 5% VAT and 9% corporate tax (profits exceeding AED 375,000), but no income tax. | Free zone businesses benefit from full exemptions on VAT, corporate tax, and income tax, with profit repatriation. |
| Audit Requirements | Varies based on business activity and regulatory guidelines. | Typically required for compliance with free zone regulations. |
| Physical Office Requirements | Minimum office space of 100 sq. ft. is required. | No compulsory physical office requirements; virtual offices and flexible space options are available. |
| Minimum Share Capital | No specific minimum share capital requirement; depends on the legal structure. | Minimum share capital varies by free zone. |
| Visa Restrictions | No restrictions on the number of visas, as long as they comply with activity and premises regulations. | Some free zones have quotas on the number of visas, but this can be increased based on certain conditions. |
| Customs Duty Exemptions | Businesses must pay customs duties on goods imported into the UAE. | Free zone businesses enjoy customs duty exemptions on goods imported into the free zone. |
This comparison is primarily applicable to Dubai, as laws and regulations may vary between emirates in the UAE. While the general principles of doing business in free zones and on the mainland (mainland) are often similar across different emirates, each administrative division, whether it’s Abu Dhabi, Sharjah, or others, can have its own specific rules and requirements, particularly regarding taxation, minimum share capital, physical office requirements, and visa policies. It’s essential to consult with legal and business advisors to understand the nuances of each jurisdiction and make informed decisions based on your specific business needs and goals. ↩︎