Top Legal Structures for Dubai Business Setup: Mainland vs Free Zone vs Offshore
Starting a business in Dubai? It’s one of the best places in the world for entrepreneurs but before you jump in, there’s one important decision to make: choosing the right legal structure.
Whether you're opening a new business in Dubai or increasing your global business, choosing between Mainland, Free Zone and Offshore setups is the first and most important decision. Each of them has its pros, cons and regulations. Throughout this guide, we'll explain them in plain, human language so you can choose what works best for your business.
1. Mainland Business Setup in Dubai
By mainland business setup in Dubai, we mean businesses that are licensed by the Department of Economic Development (DED). Through this license, you are able to set up anyplace within the UAE, as compared to free zones or offshore setups.
Over the last few years , the UAE has liberalized much of its regulation such as needing a local partner in most ventures. So these days, numerous businesses can be completely foreign-owned even in the mainland.
Why Mainland?
If your company will be dealing directly with the UAE market selling to residents or to government agencies the mainland setup is your best bet.
You can:
Conduct business anywhere in the UAE and the world.
Get unlimited visas (depending on the size of your office).
Get government or semi-government contracts.
Establish yourself in prime city locations.
What's the catch?There are a few more regulations to follow compared to free zones, and you’ll need a physical office space. Also, while the 51% local partner rule is mostly phased out, certain “strategic” sectors might still require a local shareholding.
2. Free Zone Business Setup in DubaiDubai boasts more than 40 free zones each providing for a different industry. It's media, technology, finance or logistics; there is a free zone suited to your business type.
The greatest advantage? You get to own 100% of your business without a local sponsor.
Why Free Zone?
If you're planning for international trade or providing services beyond the UAE market, establishing in a free zone is typically quicker, less expensive and more versatile.
The following is what you receive:
100% foreign ownership.
Complete repatriation of capital and profits.
No personal and corporate tax on income (most cases).
Quick business establishment process some licenses can be obtained within a few days.
Office choices such as flexi-desk, co-working or full space.
Free zones are ideal for companies that:
Export products beyond the UAE.
Have an online business and do not require a retail shop.
Offer digital or knowledge-based services around the world.
Any disadvantages?
Yes,free zone companies are prohibited from trading directly in the UAE mainland. If you wish to sell consumers in Dubai city you must use a local distributor or establish a branch later with a mainland license.
Also, visa quotas can be determined by your office size (more room, more visas) and some free zones have higher setup fees based on where they are and what industry.
3. Offshore Business Setup in DubaiOffshore businesses are slightly different. They're typically employed for holding assets, cross-border trading or investments structuring. You can't have a physical business in Dubai with an offshore business and they're not for local trade or employing staff.
Why Offshore?
Imagine it as a lawful shell to hold your cross-border operations with utmost tax efficiency and secrecy.
With an offshore business, you can:
Invest in other companies' shares.
Own real estate (in specific areas).
Open offshore business bank accounts.
Minimize tax burden for worldwide business activities.
Most favored places for offshore locations in the UAE are:
JAFZA Offshore (Dubai)
RAK ICC (Ras Al Khaimah)
And the restrictions?
Offshore companies:
Are not allowed to lease office space within the UAE.
Are not allowed to request visas.
Are not allowed to do business within the UAE.
In brief, they're great for global wealth management, not for running a local business.
So Which One Is Right for You?Suppose you're setting up a business in Dubai, how do you know which structure to use?
Here's the way to think about it in human terms:
You should opt for a Mainland license if:
You need to have a retail shop, restaurant or salon in Dubai.
You intend to serve customers within the UAE, rather than online.
You intend to bid on government contracts or projects.
You want to employ a staff and provide on-site services.
You're better off with a Free Zone license if:
Your business is digital, consulting or export-oriented.
You don't necessarily need to sell to the UAE public directly.
You're a freelancer, startup or remote business that wants easy setup.
You're seeking tax benefits and absolute ownership with less bureaucracy.
Offshore could suit you if:
You wish to shield assets or invest in real estate in Dubai.
You require a worldwide trading entity with no physical presence.
You're thinking of worldwide tax planning or secrecy.
You're not going to be employed in Dubai or take an office.
Other Things to ConsiderWhen setting up a new business in Dubai, there are other important factors that determine your choice:
OwnershipMainland companies now permit 100% foreign ownership in most industries. Free zone and offshore companies already provide you with complete autonomy.
Visa RequirementsMainland licenses provide you with greater freedom in obtaining employment visas. Free zones usually link visa quotas to your office size. Offshore? In the majority of cases, no visas at all.
Office SpaceMainland companies are required to lease an office in Dubai. Free zones allow you to begin with a flexi-desk (shared space) and offshore arrangements require no office space whatsoever.
CostsFree zones tend to package services as packages, some of which are highly affordable for startups. Mainland prices are activity and size-specific for the office, while offshore arrangements tend to be lowest upfront.
Avoiding Common PitfallsDon't presume free zones are a better option just because they're easier to establish; they restrict your market.
Offshore companies may sound great, but if you need to conduct an active business in Dubai, they won't assist you.
Establishing a business without having knowledge of visa regulations can introduce drastic delays.
Getting the wrong legal form could cost you more in the future and seek professional advice up front.
Dubai Business Setup: Last Words
Dubai provides the ideal springboard for international entrepreneurs but first, lay the right legal foundation.
Deciding whether to Mainland, Free Zone or Offshore is based on your business aspirations, your market, and how involved you want to be in the UAE.
However much you're starting a virtual startup, a restaurant, or handling international assets, Dubai has a legal structure to suit your needs. Just don't go it alone.
Need Assistance? Work with BizVise in DubaiIf all that is starting to seem a little overwhelming, don't panic. That's where BizVise in Dubai can assist you.
They have guided thousands of business people like you through hassle-free, intelligent business setup in Dubai. From deciding on the correct structure to organizing licenses, office establishment, visas, and banking BizVise takes care of it all.
Whether it's a Dubai business setup, free zone license, or offshore holding company, BizVise is the professional business setup firm in Dubai that makes it happen.
Your business dreams begin here.