When it comes to establishing a business in the United Arab Emirates, investors from all over the world have a wide range of objectives and preferences. Finding the most suitable and investor-friendly location in which to launch a business is always a priority. One of the reasons why the United Arab Emirates is regarded as a commercial hub is the number of various types of business opportunities available to people with a variety of interests. The United Arab Emirates offers a diverse range of business prospects to foreign investors, including mainland and free zone opportunities. As a result, you are faced with the decision of whether to go to the free zone or the mainland[1].

Both have their own set of advantages and disadvantages, as well as their own investment possibilities, and both are intended to appeal to different types of investors, which is why they are compared. It is entirely depends on the type of activities and business you desire to engage in whether you choose a mainland or a free zone structure. Put another way, if you want to conduct business in the United Arab Emirates, you must choose a mainland structure; however, if you want complete ownership and control over your company's operations, a free zone configuration should be your first option.

Mainland Company
As defined by the United Arab Emirates, a Mainland Firm is an inland corporation that can operate in the local market as well as outside of the country. Businesses on the Chinese mainland have complete flexibility in how they conduct their operations when they hold commercial and professional licenses. An in-country sponsor or an Emirati national is required for the establishment of a mainland business in Dubai, and the typical ownership structure of an Emirati-owned mainland business in Dubai is that the UAE national Sponsor holds 51 percent of the company and the Foreign Shareholders (or their affiliates) hold the remaining 49 percent.

Mainland corporations provide bespoke legal arrangements to international investors and local sponsors, with the local sponsor receiving an annual fee or a share of sales and earnings. When a foreign investor acquires entire control of a company, the local partner is excluded from participation in the day-to-day operations. Dubai's Department of Economic Development (DED) is in charge of the registration and licensing of mainland firms, as well as the enforcement of commercial regulations and the protection of consumers.

Freezone Company
Unlike other legal entities, the Free Zone Company is a separate legal entity that works under its own set of laws and regulations. Each free zone has the ability to conduct business both within and outside of the United Arab Emirates. When comparing mainland and free zones, the most significant distinction is that a free zone company cannot conduct business in a non-free zone without the help of a local agent; in contrast, a mainland corporation can conduct business in any location in the UAE[2]. In Dubai, there are a number of free zones to choose from. The reasons why foreign investors select free zone projects are numerous, and include a number of advantages such as complete ownership rights, access to world-class infrastructure, asset protection, and tax benefits.

Reasons to establish a business in the Free Zone:
If you wish to create a business in the United Arab Emirates, there are various advantages to choosing a free zone.

It is simple to establish a no-fee zone: The process of establishing free zones is really straightforward and straightforward. Because the type of the business and the specific free zone are important factors in the application process, it is important to understand the steps involved. Investors will be required to provide a few pieces of documentation, such as copies of their passports and proof of their business registration. The entire process will take around one week to finish.

Duty-free shopping in a free zone: The tax system is by far the most enticing argument for locating a business in a free zone. The development of a free zone results in the elimination of all company and personal taxes, as well as the exemption of 5 percent from VAT. Not only that, but the free zone firms also provide tax exemptions on imports and exports, as well as the freedom to conduct business with no restrictions on the currency used.

Ownership: Establishing a business in a free zone allows foreign investors with complete ownership of the company they have established. The majority of foreign investors who wish to establish a business on the UAE's mainland will require the assistance of a local sponsor. The process of doing business in the United Arab Emirates: Businesses in free zones are not permitted to trade directly in the UAE's domestic market; however, this has been easily corrected in recent years.

Your company can conduct business with a distributor who has been designated by the local government and whose function will be to offer your goods and services on the local market in exchange for a fee. Begin by establishing a free zone business, and then extend your free zone company throughout the United Arab Emirates. These branch offices can be used to sell your goods and to establish a presence in the UAE's mainland business community.

Assistance and support: The officials of the free zone are available to assist you at any time during and after the formation of your business in the facility. Many free zones will assist you in obtaining visas for shareholders as well as their dependents, such as spouses or other workers. Most free zones also aid with the opening of corporate bank accounts, as well as providing advise on which bank is the best fit for your needs and arranging meetings with bank representatives in-branch on your behalf.

Currently, free zones are expected to provide business advise and networking assistance, as well as connections to various startup centers and growth programs, in order to aid in the success of newly established businesses.

Privacy: Finally, free zones are well-known among investors who value their personal privacy due to the fact that company ownership and other corporate information, such as shareholder details, are never made public.

Differences between Freezones and Mainland Law
Mainland Laws:
The mainland is the most popular option for setting up a business in the UAE because of the following benefits:
Mainland companies in the UAE are exempt from corporate tax, The minimum capital needed for establishing a Mainland Company is 0%, Mainland corporations can do business in Dubai or the UAE with other mainland companies and have the freedom to operate in any region of the UAE[3] or beyond.

Because free zones are often restricted to conducting business exclusively within their particular free zones, this feature set gives them an advantage over free zone companies, and Mainland enterprises, unlike those in free zones, have a variety of possibilities for conducting business. As far as mainland business is concerned, there are no restrictions.

They can provide a wide range of services to the UAE economy.

Mainland enterprises can choose any location in the UAE for their office. This feature not only allows them to conduct business with the local market, but also allows them to open various branches of the company, allowing them to create a strong presence in the UAE, Mainland corporations are allowed to work on government contracts, whereas free zone enterprises are only allowed to work on private commercial projects, There are no restrictions on the number of visas that can be issued under a mainland license.

However, obtaining permits for mainland companies will be totally dependent on the amount of office space purchased, There are no currency restrictions in Dubai for mainland companies, Capital and profits can be repatriated in their whole and The registration process for mainland businesses is simple and does not require a yearly audit.

Freezone Laws:
For freezones the laws are different and can be divided into Advantages and Disadvantages.

Advantages are, foreign investors are offered complete ownership, Complete capital and profit repatriation, completely free money transfers, Import and export tariffs are completely waived, in comparison to forming a company outside of a city, forming a firm in a free zone takes less time, A cost-effective staff and a reasonably simple recruitment process and, A 25-year leasing plan, warehousing facilities, and the possibility of production and assembly sites, among other things.

Disadvantages are that, corporation operating in a free zone is not permitted to trade directly with the UAE market and only locally authorized distributors can start a free zone company's local business.

Licensing requirements for the freezone and mainland set up
In order to receive a license, a mainland company must first obtain routine government clearances from the Department of Economic Development, the Labor Ministry, and the Ministry of Immigration.

The Knowledge and Human Development Authority (KHDA) must approve educational licenses, the Dubai Health Authority (DHA) must approve medical licenses, and the Food Department of Municipality must approve all food licenses.

However, most free zone enterprises deal in imports and re-exports. In this case, the corporations are not required to seek external permission before issuing a license. They can only ask for permission from outside authorities if they want certain services.

As a result, enterprises must choose between locating on the mainland or in a free zone. Simply put, the answer is largely depending on your intended activities and business. You can do business in the UAE via the mainland, but if you want complete ownership and control over your business, a free zone is the best option.

End-Notes:

1. The difference between Mainland and Free Zone for business setup in UAE | MBG (mbgcorp.com)
2. Free zone or Mainland – Which one should you choose? - Business Setup In Dubai Mainland (ebmsbusiness.com)
3. Mainland vs Freezone business set up in the UAE - Dubai & Abu Dhabi | PRO Partner Group