The recent amendments to the Commercial Company Law in 2020, allowed 100% foreign ownership for a business established in the mainland UAE. This amendment to the Commercial Company law allows 100% foreign investment without the requirement of having an Emirati as 51% owner for registration of an Onshore Company in the United Arab Emirates (UAE).
These changes have made a new development to the Mainland versus Freezone debate:
For establishing a company in mainland, permits have to be taken from the Department of Economic Development (DED) of the respective Emirate and other bodies like Dubai Municipality, Ministry of Labor and Ministry of Immigration. Further, there might be business-specific permissions that need to be taken as per the nature of your business. Whereas establishing a company in a free zone gives the benefit of only taking approvals from the authorities which govern the free zone.
The establishment of a company in the mainland necessitates an office space of 200 square feet. On the other hand, a company in a free zone can be established without the requirement of having an office space but on the downside puts a restriction on the number of visas the company can sponsor. Visas are given based on the office space which needs to be increased to sponsor visas of employees.
For a mainland company, the minimum capital requirement may vary as per the business activity and the Emirate one wishes to function in. For instance, setting up a joint-stock company requires a minimum capital of AED 30,000,000 whereas a private joint-stock company requires a minimum capital of AED 5,000,000. Similarly, the minimum share capital for setting up a company in a free zone varies as per the free zone. In Dubai Silicon Oasis a minimum of AED 100,000 is required as minimum share capital whereas in RAKEZ a minimum share capital of AED 10,000 is required for forming a Limited Liability Company (FZ-LLC).
A company in the mainland can do business throughout the United Arab Emirates (UAE) whereas the free zone companies are only allowed to do business within the free zone they are established and outside of the UAE. If a free zone company wishes to do business in the mainland it would require a local distributor and he will charge a certain fee on their products and services.
The companies in the mainland can set up several branches across the mainland, which a free zone company cannot.
Mainland businesses are allowed to contract with government authorities while free zone companies are not. On the other hand, freezone companies have to pay 0% corporate and personal tax and are also exempted from paying import and export taxes.
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