Mainland License Dubai Vs Free Zone License – Understanding The Differences

When starting a business in Dubai, one of the most important decisions you’ll need to make is choosing between a mainland license and a free zone license. Both options offer distinct advantages depending on your business goals. Understanding the differences between the two will help you make the right choice for your business setup in Dubai, especially when considering a mainland license Dubai versus a free zone license.

Ownership structure:

A key difference between the mainland and free zone licenses is the ownership structure. In Dubai mainland, foreign investors are typically required to have a local sponsor who holds at least 51% of the company shares. This is a legal requirement to establish a business in the mainland. In contrast, free zone companies offer 100% foreign ownership, which is a major attraction for investors looking to retain full control of their business. This freedom is one of the primary reasons entrepreneurs often opt for a free zone license.

Business scope and trading limitations:

A mainland license allows you to operate and trade anywhere within the UAE, including the local market. This is ideal if your business aims to have a physical presence in the UAE or plans to deal directly with UAE customers. However, businesses with a free zone license are typically restricted to trading within the free zone or internationally. Trading within the UAE mainland requires a separate agreement or partnership with a local distributor.

Licensing and registration process:

Obtaining a mainland license generally involves a more complex and time-consuming process. You’ll need to deal with multiple government entities, including the Department of Economic Development (DED), and you must provide specific documents for registration. Instead, obtaining a free zone license tends to be more straightforward. Free zones are designed to streamline business registration with fewer regulatory hurdles, making it faster and easier to start a business.

Taxation and incentives:

Both mainland and free zone companies benefit from Dubai’s favorable tax policies, but there are differences. Free zone companies enjoy tax exemptions, such as 100% corporate tax exemptions for a certain number of years, depending on the free zone. Additionally, most free zones do not impose VAT on certain goods or services, making them a tax-efficient option. Mainland companies, however, are subject to the local tax regulations, which may include VAT and other charges, though recent reforms have made the tax environment in Dubai more competitive.