What is the difference between free zone, mainland, and offshore companies in Dubai?

Dubai offers entrepreneurs a range of options when it comes to setting up a business. The three primary jurisdictions—Mainland, Free Zone, and Offshore—each have unique characteristics and advantages tailored to different business needs. Understanding the key differences between these jurisdictions is crucial for making an informed decision. This blog outlines the distinctions to help you choose the best fit for your business.

Free zone companies

Free zones in Dubai are designated areas that provide a host of benefits to businesses. These zones are designed to attract foreign investment and promote specific industries, such as technology, media, and logistics.

Key Features:

• 100% Foreign Ownership: Investors can fully own their businesses without the need for a local sponsor.
• Tax Benefits: Free zones offer complete exemptions from corporate and personal income taxes.
• Streamlined Setup: The registration process is efficient and straightforward, with fewer bureaucratic hurdles.
• Business Scope: Operations are typically restricted to within the free zone or international markets. Trading directly with the UAE mainland requires a local distributor.
• No Customs Duties: Goods imported into the free zone are exempt from customs duties.

Who Should Choose Free Zones?
Businesses looking for tax advantages, complete ownership, and a focus on export or international trade will benefit from free zones.

Mainland companies

• Local Market Access: Mainland businesses can trade freely within the UAE without restrictions.
• Ownership Requirements: Historically, mainland companies required a local sponsor who owned 51% of the business. However, recent reforms now allow 100% foreign ownership in many sectors.
• Wider Business Scope: Mainland companies are not restricted to specific areas or activities.
• Government Contracts: Mainland companies are eligible to bid on lucrative government contracts.
• Office Requirements: Physical office space is mandatory for registration.

Offshore companies

Offshore companies are established for international business activities and asset protection. They are not permitted to conduct business within the UAE.

Key Features:

• International Trade Focus: Offshore companies are designed for global operations and cannot trade within the UAE.
• Ownership and Tax Benefits: These companies offer 100% foreign ownership, no taxation, and enhanced privacy.
• No Physical Office Required: Unlike mainland and free zone companies, offshore entities do not require physical office space.
• Ease of Setup: Offshore companies can be quickly and cost-effectively established.

Who Should Choose Offshore Companies?
Entrepreneurs focused on international trade, holding companies, or asset management will benefit most from offshore structures.

Key differences at a glance

(*Dependent on activity; **Corporate tax introduced from June 2023 for certain entities.)

Conclusion