Business Licensing Options: Free Zone vs. Mainland vs. Offshore

Business Licensing Options in the UAE

In recent years, the UAE has grown into one of the largest business hubs in the world thanks to its business-friendly environment, financially rewarding regulations, and enticing business incentives. As a result, entrepreneurs have traveled from across the globe to setup up their businesses here.

But if you're an ex-pat or are unfamiliar with the business formation process, you likely won't know where to begin. After all, the business formation process in the UAE is quite nuanced and will require knowledge of rules and regulations.

In this blog, we'll walk through some of those rules, including what you need to know to pick the correct license type for your new business. So, if you're looking for quality information on setting up a business in the UAE, stick with us!

Free Zone Vs. Mainland Vs. Offshore Business Licensing

When setting up a business in the UAE, you'll have the ability to choose one of several business jurisdictions. These jurisdictions will vary based on your desired industry and your particular needs. And to pick the right one, you’ll need to know their requirements and benefits. Let’s take a closer look:

1. Overview

a. Free Zone Entities: Free zones are business jurisdictions for investors to exchange goods and services while taking advantage of limited tax and service regulations. For example, many Free Zones will offer 100% foreign ownership, 0 tax responsibilities, and full repatriation of profits. And with over 40 jurisdictions currently operating, there’s something for businesses of every type.

b. Mainland Entities: Mainland companies are entitled to conduct business within local markets and outside the UAE. They're an excellent option for those that hope to operate a business in a different location but still take advantage of business-friendly regulations.

c. Offshore Entities: An offshore company in the UAE is a legal entity incorporated in one of the UAE's offshore jurisdictions, such as the Dubai International Financial Centre (DIFC) or the Ras Al Khaimah International Corporate Centre (RAKICC).

2. Ownership Structure

a. Free Zones: Free Zone companies are 100% owned by their shareholders, who can be individuals or corporate entities. This means foreign investors can completely own and control their businesses without needing a local sponsor or partner. Additionally, Free Zone companies are not subject to the same regulations and restrictions as companies operating in the mainland, making them an attractive option for businesses looking for more freedom and flexibility.

b. Mainland: Mainland companies require a local sponsor or partner to hold at least 51% business ownership. This local partner can be an individual or a UAE-based company, and they are responsible for obtaining the necessary licenses and permits for the business.

c. Offshore: Offshore companies are 100% owned by their shareholders, individuals, or corporate entities. However, unlike Free Zone companies, offshore companies cannot conduct business within the UAE and are limited to working business activities outside of the country.

3. Business Activities

a. Free Zones: Free Zones in the UAE are typically geared toward specific industries or sectors, such as technology, media, healthcare, logistics, and more. Business activities that can be undertaken in Free Zones may include trading, manufacturing, consulting, and professional services, among others.

b. Mainland: Mainland companies in the UAE are not limited in their ability to do business within the country and can operate anywhere within the UAE. This includes engaging in trading, manufacturing, construction, services, and other types of commercial activities. Additionally, Mainland companies in the UAE have access to a larger market, as they can sell their products or services to local and international customers.

c. Offshore When setting up an offshore company in the UAE, the business activities that can be undertaken are typically limited to certain activities, such as asset management, investment holding, and consulting services. Offshore companies in the UAE are not allowed to conduct business within the country and are, therefore, not subject to UAE laws and regulations, making them an attractive option for companies looking to maintain privacy and confidentiality.

4. Cost of Setup

a. Free Zones: The cost of setting up a business in a UAE Free Zone varies depending on a number of factors, including the type of business activity, the size of the company, and the specific Free Zone. In general, the cost of setting up a Free Zone company in the UAE is typically higher than setting up a company in the mainland jurisdiction but lower than setting up an offshore company. However, Free Zone business setup costs in the UAE generally include fees for company registration, license issuance, office space, visa processing, and other related expenses.

b. Mainland: The cost of setting up a mainland company in the UAE will depend on the business's specific requirements and the location where it is being established. But you can expect to plan for expenses including: Sure, here's the randomized list:

• Office rent
• UAE local sponsorship fees
• Attestation of Memorandum of Association (MoA)
• Approval of trade name
• Initial approval from DED (Department of Economic Development)
• Trade license fee
• License fee
• Registration with the Ministry of Economy
• Dubai Chamber of Commerce membership
• Drafting of contract and court agreement attestation

c. Offshore The main expenses associated with setting up an offshore company in the UAE include incorporation fees, registered agent fees, and annual license fees. In addition to these costs, there may be other expenses associated with setting up an offshore company in the UAE, such as:

• Office rentals
• Bank accounts
• Permits and Licensing costs

5. Capital Requirements

a. Free Zone: Free Zone companies will have a minimum capital requirement of between AED 50,000 and AED 10,000.

b. Mainland: The capital requirements for setting up a Mainland company will vary based on the legal form you choose for your company.

c. Offshore:

6. Office Requirements

a. Free Zone Businesses operating in Free Zones will have access to a wide selection of office spaces, including virtual desks, flexi-desks, and more.

b. Mainland Mainland companies are required to secure office spaces of at least 200 square feet. Virtual office spaces and flexi-desks are not permitted in Mainland jurisdictions.

c. Offshore Offshore companies are not permitted to have physical office spaces in the UAE.

7. Visa Requirements

a. Free Zone The visa requirements for Free Zone businesses will vary based on the size of your office. In most cases, a standard office size will permit between 3-5 visas.

b. Mainland: Mainland companies will have a limited number of visas they can secure. In general, you can expect to be granted a single visa per 80 square feet.

c. Offshore: Companies operating in offshore jurisdictions will not be permitted to secure resident visas.

8. Audit Requirements

a. Free Zone Some Free Zones will require annual audits, while others will not. However, some business operations will be required to submit to auditing.

b. Mainland: Mainland companies are required to submit to an audit once a year.

c. Offshore: Offshore companies are not required to prepare audits. However, they are permitted to do so if necessary.

Need Assistance Setting Up a Business in the UAE? MSZ Can Help!

If you’ve thought about setting up a business in the UAE, you’ll want to turn to the local expertise of MSZ Consultancy. Our experience in handling important renewals and staying on top of current business trends in the UAE makes us the perfect partner for your business needs.

With our comprehensive services and attention to detail, we can help streamline your business processes, improve your investments, and help you make the most out of your business in the UAE. So, whether you're a start-up looking for assistance with business setup or an established company seeking to expand your operations, MSZ Consultancy has the expertise to help you achieve your goals.

Take advantage of the opportunity to work with the best. With MSZ Consultancy, you can rest assured that your business is in good hands. Contact us today at +971 52 544 1248 and let us help you make the most out of your business in the UAE.