There are a few key differences between setting up a company in the Free Zone and on the Mainland. A Free Zone Company is a limited liability company governed by the rules and regulations of the Free Zone in which it is established. The provisions of the Commercial Companies Law (CCL) do not apply to FZEs.
A Mainland Company, also called an Onshore Company is licensed under the Department of Economic Development (DED) of the related emirate in which it is allowed to do business in the local market without any restrictions.
The differences between the two jurisdictions are highlighted below.
Item Description | Free Zone | Mainland |
Ownership | An expat can own 100% of the shares of their company. A local sponsor is not required to start a company. | 51% of the company must be acquired by a local sponsor and the remaining 49% can be owned by the expat who established the company. |
Business Scope | Not usually allowed to do any business outside the free zone. | Free to do business anywhere in the UAE including the free zones. |
Capital Requirement | Contingent on the emirate it belongs to, there will be a capital requirement. | Contingent on the legal form of the business being set up, a capital requirement may be required. |
Cost to Set up | Medium | High |
Office Space | No office space requirement. Virtual offices are permitted. | A minimum of 200 sq. ft of physical office space is mandatory. |
Audit Requirements | Not all require auditing however, free zone companies and free zone establishments but be prepared for a mandatory audit of accounts. | Prepared to be audited every financial year. |
VAT Requirements | Applicable unless otherwise designated by the UAE Cabinet. | Applicable if taxable supplies and imports exceed AED 375,000 per annum. |
Governing Authority | Free zone approval authority inside the respective free zone jurisdiction, no external authority approval is required. | Department of Economic Development, Ministry of Labour, Abu Dubai Municipality, Ministry of Interior, etc. |
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