Difference between Mainland, Free Zone and Offshore
Before setting up a business in the UAE you need to know the difference between Free Zone, Mainland, and Offshore. There are unlimited opportunities for entrepreneurs who want to start a business in UAE and expand their presence. The mainland, free zone, and offshore jurisdictions are designed for investors with diverse business needs and requirements. One has to follow stringent laws and regulations to register a company in any of the zones and the successful registration depends on meeting the standards set by authorities. Following are the important differences between Mainland, Free Zone, and Offshore company.
Mainland vs Free Zone vs Offshore business set up in the UAE
Mainland Company
A Mainland Company is licensed by the Department of Economic Development (DED) of the respective emirate. To register a Mainland LLC company, you must have a local sponsor who will own 51% of the shares. Using a mainland company license, you can perform various business activities in local as well as international markets without any restrictions.
Free Zone Company
The Free zone is a designated jurisdiction for company setup. The investor will have 100% ownership over the company registered in any of the Free zones. Most of the entrepreneurs, who want tax optimization, opt for a free zone formation as the authorities offer diverse benefits and incentives for the business setup.
Which is Better? Mainland, Free Zone or Offshore
Mainland Company Features:
- Freely indulge in trade across the UAE, GCC, and the rest of the world
- A minimum office area is mandatory.
- The financials must be audited every year and the companies are subject to VAT Regulations.
- Depending on the office space and work premises, work visas are issued to the company
- A minimum capital requirement from the shareholders
Department of Economic Development (DED) issues the trade license, followed by getting clearance from the Dubai Municipality, Ministry of Labour, Ministry of Interior, etc.
Also Read: Trade License Renewal in Dubai
Offshore Company Features:
- Expat can have full ownership of the company. They cannot have a physical presence in the UAE.
- The registered agent’s address will be their local address for communication.
- Not mandatory for the companies to prepare an audit.
- Don’t have the provision for a residency visa and no requirement of minimum capital investment.
- Allows anonymity in terms of company details
- Designated jurisdictions of RAK, Ajman, and Jebel Ali Free zone govern the companies.
The above mentioned are some of the features of the 3 main zones in UAE. Now let’s look at how a Mainland, Free Zone, and Offshore company differ from each other.
1. Business Activity
When it comes to conducting a business activity, the Mainland company formation offers more flexibility to the investors. Mainland allows the entrepreneurs to perform commercial, professional, and industrial activities. They can conduct business anywhere in UAE. In the Free zone area, the investors are allowed to trade within the free zone or internationally. The offshore doesn’t allow entrepreneurs to conduct any business activity within UAE.
2. Ownership
The major difference between business setup in Mainland, free zone, and offshore company formation is related to the ownership structure. While the free zone and offshore offers 100% ownership, the mainland company requires a local sponsor who holds a 51% share in the company. The local sponsor must be a UAE national.
3. Workspace
For successful mainland company incorporation in the UAE, it is mandatory to have a physical address. The governing authorities will issue the trade license only if the company meets this obligation. For the free zones, there are no stringent office space requirements. The companies can operate with or without any physical office depending on the business activities.
4. Approvals
To obtain a mainland trade license in Dubai, the companies need to secure approvals from various authorities DED, Dubai Municipality, Ministry of Labour, Department for Naturalization Residency affairs of Ministry of interiors or Immigration (MOI). This depends on the type of business activity. On the other hand, the free zone company setup in Dubai is much easier compared to the mainland. Some UAE free zones require a detailed business plan and external approval which depends upon the business activity. For offshore companies, you will not need to get any external approval in the UAE.
5. Visas
There are no restrictions on visas for mainland companies in UAE. E-quota will be issued by the Ministry of Labour for the mainland company that shows the visa eligibility. Depending on the staff and office space requirements, more visas can be issued. As far as Free Zones are concerned, two visas are offered for the smart office package and if more visas are needed, the investors need to lease out a physical space.
Before entering into the company registration, one must be well aware of these rules and regulations. Bizvise can help entrepreneurs set up their dream business in any zone and it depends entirely on the business needs. Hope this article helps you to understand the major difference between Mainland, Free Zone, and Offshore.