Establishing a company in the UAE presents multiple structuring options for foreign or local investors and international enterprises: Free Zone, Mainland, and Offshore. Each offers distinct regulatory frameworks and commercial advantages. The right choice depends on the market access needs, business model, cost expectations, and long-term objectives.
This article outlines the key differences between Free Zone and Mainland setups, with a brief overview of Offshore structures, to support informed decision-making for foreign subsidiaries and SMEs entering the UAE market.
Mainland Company Setup: Regulatory Framework and Business Flexibility
Mainland companies are regulated by the Dubai Economy and Tourism (DET) and are licensed to operate across all emirates. They face no geographic or sectoral limitations, except for certain strategic industries requiring local participation.
Key Advantages of Mainland Setup
Mainland structures are ideal for businesses aiming for full integration into the UAE economy.
- Full UAE Market Access
Operate freely across the country and engage directly with both private and public sector clients.
- Full Foreign Ownership in Most Sectors
Permitted across the majority of business activities, excluding strategic sectors that mandate local shareholding.
- Scalable Visa Quotas
Visa entitlements are tied to leased office space, allowing flexible workforce expansion as the business grows.
- Access to Government Projects
Only Mainland-licensed entities are eligible to bid for public tenders and government contracts.
- Flexible Office Location Options
Companies can establish offices anywhere within the licensed emirate, providing strategic location flexibility.
These features make Mainland setups particularly suitable for companies engaged in B2B, B2G, or direct-to-consumer operations within the UAE.
Free Zone Company Setup: Benefits and Limitations
Free Zones are sector-specific jurisdictions designed to attract foreign direct investment through simplified regulation, infrastructure, and tax incentives. Each operates under an independent legal framework aligned with its designated industry focus such as technology, media, logistics, or healthcare.
Key Advantages of Free Zone Setup
Free Zone structures offer strategic advantages for export-oriented, digital-first, or early-stage businesses.
- Complete Foreign Ownership Rights
No requirement for Emirati shareholders or partners in most Free Zones.
- Specialised Licensing Options
Business activities are aligned with the sectoral focus of each Free Zone, providing regulatory clarity and support.
- Lower Setup and Operational Costs
Many zones offer flexible packages with shared desks or co-working facilities, reducing initial and ongoing costs.
- Attractive Tax Environment
Qualifying Free Zone companies may benefit from a 0% corporate tax rate, subject to Economic Substance Regulations (ESR).
- Efficient Registration Process
Digital registration and streamlined documentation allow for faster business setup.
- Onshore Access Through Dual Licensing
Some Free Zones (e.g., DMCC, DAFZA) allow selected Mainland activities via DED cooperation, without forming a separate entity.
Limitations to Consider
While Free Zones offer compelling benefits, several operational boundaries must be considered:
- Restricted Onshore Trade
Direct business within the UAE market requires either a DED-licensed distributor or a Mainland branch.
- Ineligibility for Government Tenders
Free Zone companies cannot bid for public-sector contracts.
- Limitations in Intellectual Property Registration
Some Free Zones do not support the registration of certain IP categories under UAE federal systems, which may impact IP protection strategies.
Mainland vs Free Zone: Comparative Summary
| Criteria | Mainland | Free Zone |
| Market Access | Full UAE access | Limited; distributor or DED branch required |
| Foreign Ownership | 100% (except strategic sectors) | 100% permitted |
| Government Contracting | Eligible | Not eligible |
| Visa Allocation | Scalable based on office space | Fixed quota per license package |
| Office Requirements | Physical office mandatory | Flexi-desk/shared office allowed |
| Corporate Tax | 9% (above AED 375,000); exemptions may apply | 0% on qualifying income with substance obligations |
| Audit Requirements | Mandatory above certain thresholds | Varies by Free Zone and activity |
| Compliance Obligations | UBO and Corporate Tax | UBO and Corporate Tax |
| Setup & Renewal Costs | AED 20,000–40,000+ depending on location and space | AED 12,000–25,000 on average with bundled packages |
Choosing Between Mainland and Free Zone: Key Considerations
To determine the right company structure, businesses should align their operational objectives with applicable licensing frameworks, market access requirements, and cost considerations. The following considerations support informed decision-making when evaluating Mainland versus Free Zone structures:
- Licensing Scope and Activity Range
Mainland licenses allow wider operational flexibility across multiple sectors. Free Zone licenses are restricted to the activities supported by the zone.
- Domestic Market Access and Client Channels
Businesses targeting UAE-based consumers or public tenders must opt for Mainland licensing. Free Zone entities require intermediaries to engage in local trade.
- Workforce and Visa Planning
Visa quotas in Mainland entities scale with office space, accommodating workforce expansion. Free Zone licenses typically include fixed visa entitlements, which may limit staff growth.
- Startup Costs and Operational Efficiency
Free Zones offer lower setup costs and are ideal for low-overhead, international, or digital-first operations. Mainland structures entail higher initial expenses but provide broader long-term capabilities.
- Taxation and Substance Requirements
Both structures are subject to UAE Corporate Tax and ESR. Free Zone companies must maintain sufficient substance, such as office space and staff, to qualify for tax exemptions. Failure to meet requirements can result in penalties or loss of preferential status.
Offshore Company Setup: A Distinct Option
In addition to Free Zone and Mainland options, investors exploring strategic asset protection may consider Offshore entities.
Offshore companies such as those registered under JAFZA Offshore or RAK ICC are used for international holding, investment structuring, and IP ownership. These entities are not licensed to operate or trade within the UAE domestic market.
When to Choose a Mainland Setup?
Opt for a Mainland company structure if:
- Your business model depends on unrestricted trade within the UAE.
- You intend to participate in government tenders or serve public-sector clients.
- Flexibility in workforce planning is essential.
- A strategic office location within the UAE is required.
When to Choose a Free Zone Setup?
A Free Zone setup is better suited if:
- Your business is focused on international services, trade, or exports.
- You are entering the UAE market with minimal onshore requirements.
- Your income qualifies for corporate tax exemptions under ESR compliance.
- You seek a cost-efficient setup aligned with a sector-specific Free Zone.
Conclusion
Choosing the appropriate UAE company setup depends on your market access needs and business objectives. Mainland offers full local integration, while Free Zones provide cost-effective, sector-specific advantages. Understanding these differences ensures a business structure aligned with your objectives and compliant with UAE regulations.
About SimplySolved
SimplySolved is an ISO 9001, 27001, and 42001 certified firm providing full spectrum support with inhouse teams as Corporate Service Provider supporting local or foreign entities, startups, and subsidiaries entering the UAE market. From jurisdictional selection, company formation to visa processing, licensing, and compliance, our advisory team ensures complete alignment with UAE commercial laws, governance frameworks, labour law and tax regulations. We operate across multiple lines of business including Company Formation, Finance & Tax (FTA Tax Agents) and HR & Payroll to offer our clients full support from planning to operational support.
Partner with SimplySolved to build a compliant and reliable foundation for your UAE business and support to manage key Finance, Tax and HR/Payroll operations.
While this guide provides high-level guidance, it is not a substitute for tax or legal advice, and we encourage you to seek advice regarding the specific matters that concern you. If you wish to speak to us, you may contact us directly.
