The UAE continues to be one of the most attractive destinations in the Middle East for entrepreneurs and investors. Thanks to its business-friendly environment, zero-tax policies, strategic location, and robust infrastructure, the country offers unmatched opportunities across various sectors.
When starting a business in the UAE, one of the most common questions is:
Should I Choose a Free Zone or a Mainland Company?
At UBIXO, we understand that choosing between a Mainland or Free Zone company is a critical decision that affects your business's legal obligations, ownership structure, operational freedom, and growth potential. This guide will walk you through the key differences, advantages, and considerations for each option.
What Is a Mainland Company in the UAE?
A Mainland company (also known as an onshore company) is licensed by the Department of Economic Development (DED) in the respective emirate. These companies are permitted to operate across the entire UAE and engage in international business without restriction.
Key Features:- Can conduct business anywhere in the UAE and internationally
- Eligible to bid for UAE government contracts and projects
- Can open multiple branches throughout the UAE
- Subject to UAE commercial and labor laws
- Allows 100% foreign ownership for most business activities (post-2020 reforms, no local sponsor required in many cases)
What Is a Free Zone Company?
A Free Zone company operates within a designated economic zone that has its own regulatory framework and authority. These zones are ideal for entrepreneurs and SMEs seeking full ownership, simplified business setup, and tax advantages.
The UAE has over 45 Free Zones catering to specific industries such as technology, media, education, healthcare, finance, logistics, and more.
Key Features:- 100% foreign ownership from the start
- Perfect for import/export, consulting, and digital/e-commerce ventures
- Zero personal income tax and corporate tax (up to applicable thresholds)
- Simplified licensing, visa issuance, and business setup procedures
- Not allowed to conduct direct business within the UAE mainland without a local distributor or agent
Free Zone vs. Mainland: A Full Comparison Table
| Feature | Mainland Company | Free Zone Company |
|---|---|---|
| Ownership | Up to 100% foreign ownership (for most activities) | 100% foreign ownership from day one |
| Scope of Business | Can operate anywhere in the UAE and globally | Can operate inside Free Zone and internationally |
| Government Projects | Eligible to bid for UAE government contracts | Not eligible for public or government tenders |
| Office Requirement | Mandatory physical office (min. 200 sq. ft.) | Virtual/flexi-desk offices allowed in many zones |
| Visa Eligibility | No limit (based on office size and approvals) | Limited (typically 1–6 visas depending on package) |
| Taxation | 0% personal income tax, 9% corporate tax above AED 375,000 | 0% personal tax; corporate tax may vary or be exempt based on Free Zone |
| Audit Requirement | Annual audit mandatory | Varies by Free Zone (some don't require audits) |
| Customs Duty | Customs duty applies (standard UAE rate: 5%) | Usually exempt from import/export duties within Free Zone |
| Public Directory Listing | Yes (company details publicly listed) | No (shareholder details are kept private) |
Common Questions Business Owners Ask – Answered by UBIXO
Can I do business in the mainland with a Free Zone license?
Not directly. You need to appoint a local distributor or commercial agent to legally offer goods or services in the mainland from a free zone.
Can I own 100% of my mainland company?
Yes, thanks to the UAE's new Foreign Ownership Law, 100% foreign ownership is allowed for most business activities. However, a few activities still require a local Emirati partner.
Which is cheaper – Free Zone or Mainland?
Generally, Free Zone setups are cheaper in terms of license costs, office space, and setup fees. However, they may have a limited business scope. A mainland setup can be costlier initially but offers broader market access.
Can I open a bank account in the UAE with both licenses?
Yes, both mainland and free zone companies are eligible to open corporate bank accounts in the UAE. Free zone companies may be asked for more documentation.
Which is better for e-commerce?
Free zones like Dubai CommerCity, RAKEZ, and Sharjah Media City (Shams) offer tailored packages for e-commerce businesses with lower fees and faster approvals.
Advantages of Setting Up a Mainland Company
- Operate anywhere in the UAE without restrictions
- Ability to take on government and private sector contracts
- No limits on the number of visas (based on office size)
- Better chances of opening bank accounts and getting funding
- Freedom to rent office space anywhere in the emirate
- Strong reputation with local companies
Advantages of Setting Up a Free Zone Company
- Full foreign ownership with zero local sponsor requirements
- Lower startup and operational costs
- Access to modern infrastructure and coworking spaces
- 100% repatriation of profits and capital
- No customs duties within the free zone
- Faster company setup with minimal paperwork
- Support services like legal, admin, HR within the zone
Things to Keep in Mind – Before You Decide
Every business structure comes with its own unique requirements. While both Free Zone and Mainland companies offer numerous benefits, it’s helpful to be aware of a few practical considerations so you can plan accordingly.
For Mainland Companies:
- Office Space Is a Must: To operate as a mainland company, you are required to lease a physical office (minimum 200 sqft). This adds to your operational footprint – but also enhances your local presence and credibility among UAE clients.
- More Government Interactions: Since mainland businesses must register with various departments (DED, Municipality, Labour Ministry, etc.), the setup involves more paperwork. With UBIXO handling it all on your behalf, you can focus on your business without delays.
- Annual Financial Audit: Mainland companies must conduct a yearly financial audit. This ensures transparency and positions your company strongly when applying for loans, investors, or government contracts.
For FreeZone Companies:
- Trade Within UAE Requires a Local Agent: Free zone companies can’t directly trade in the UAE mainland. But this also helps maintain focus on global markets and e-commerce, which are fast-growing sectors in the region.
- Visa Allocation Is Capped: Each free zone offers a set number of visa slots depending on your package. If your team grows, you can always upgrade to a larger space or additional visa quota — something UBIXO can easily assist with.
- Limited Public Visibility: Free zone companies are not listed in public directories. While this protects privacy, it may require additional marketing to establish brand recognition locally.
How UBIXO Helps You Make the Right Choice
At UBIXO, we don’t just guide you through setting up your business — we help you strategically choose the best jurisdiction based on your goals, industry, and budget.
Our consultants will:
- Help you compare and evaluate free zone vs. mainland
- Identify if your activity qualifies for 100% foreign ownership
- Assist with name reservation, initial approval, legal drafting
- Find cost-effective office space (physical or virtual)
- Handle visa applications, labour cards, and immigration
- Offer post-setup services like VAT registration, accounting, PRO services, and more
Choosing Between Mainland and Free Zone – Key Takeaways
| Consideration | Go for Mainland if… | Choose Free Zone if… |
|---|---|---|
| Business Reach | You want to serve the UAE market directly | You only want to operate internationally |
| Ownership | You're eligible for 100% ownership | You want 100% ownership with zero restrictions |
| Budget | You have a moderate to high startup fund | You're bootstrapping or want low setup costs |
| Industry | You want to work in regulated sectors | You’re into trading, services, consulting, etc. |
| Speed of Setup | You’re okay with more paperwork | You want a fast-tracked setup |
Let UBIXO Make Your Business Launch Smooth & Successful
With thousands of successful company formations in the UAE, UBIXO is your trusted partner for seamless business setup. We ensure your business is registered efficiently, legally, and cost-effectively — with transparent pricing and expert advice.
From initial consultation to complete documentation and ongoing support, UBIXO handles it all. Whether you’re a solo entrepreneur, SME, or a multinational expanding into the UAE, we’ve got your back.
Book a FREE Consultation Today
Let’s discuss your business plan and find the right setup strategy — Free Zone or Mainland — tailored just for you.
📞 Contact Us today to turn your business idea into a reality in Dubai.