Sagar has an MBA in Strategic Marketing and Project Management, as well as over 15 years of marketing experience. She is responsible for all aspects of Meydan Free Zone’s marketing efforts, including customer research, strategy, e-commerce and customer communications. Sagar brings a wealth of experience to Meydan Free Zone having worked across Corporate-Services, FMCG, Healthcare, Banking and Insurance sectors. Prior to joining Meydan Free Zone, she led a 40-strong team in the role of General Manager of Revenue and Marketing at Business Incorporation Zone – a role that saw her take the lead with significantly raising the company’s brand recognition and developing its lead generation marketing program, innovation, brand management, advertising, market research and customer marketing.
The United Arab Emirate’s free zones are one of the nation’s biggest economic success stories. Encouraging enormous amounts of entrepreneurialism and exciting opportunities, free zones have supercharged the UAE’s business environment since the first free zones opened here in the 1980s.
According to an article on Arab News, there were over 60,000 free zone businesses registered in the UAE in 2021 – a 4.4% increase on the year before. This shows just how popular Dubai free zones are.
So, if you’re thinking of starting a company in a Dubai free zone in 2022, read our blog to understand the key information you need to know about these entities.
- Mainland vs free zone: what’s the difference?
- Can free zone companies do business in the mainland?
- Advantages of doing business in a Dubai free zone
- What is the difference between a free zone and an LLC in Dubai?
- Can a free zone company sell in the UAE?
- How much does it cost to open a free zone company in Dubai?
Mainland vs free zone: what’s the difference?
Most businesses in Dubai choose to either base themselves on the mainland or in a free zone. So, what is the difference between these two options?
- Dubai mainland business
A mainland company in Dubai is essentially an onshore company that has received its licence from the Department of Economic Development (DED). All Dubai mainland businesses are allowed to trade anywhere in the United Arab Emirates as well as internationally, and they face no restrictions on their trade. You must also pay a 5% customs duty on imported goods.
- Dubai free zone businesses
In Dubai, there are several well-respected free zones which are designated areas where businesses can avail themselves of specific advantages. These include a 0% tax on income, 0% customs duty, and 100% foreign ownership, without the requirement to find a local partner. Free zone businesses are allowed to trade with other companies in their own free zone and internationally, but they are not permitted to trade directly with customers in Dubai and the UAE mainland.
Can free zone companies do business in the mainland?
Yes, some select free zone companies can do business in Dubai mainland, but they will require necessary approvals from the free zone. Companies can obtain a no objection certificate (NOC) for certain business activities that allows them to open an office anywhere in Dubai mainland. To ensure their chosen business activity can avail this benefit, they should contact their respective free zone.
That being said, many free zones do not permit direct business in mainland Dubai. They are only permitted to trade internationally, or with other companies based in the same free zone. Non-compliance can lead to fines of as much as AED 100,000. However, there are a number of ways that free zone companies can trade with the mainland if they decide they would like to. These include:
- Find a mainland logistics partner who can move goods within the UAE for you.
- Free zone-based e-commerce companies can use a courier or delivery partner for delivering goods in the UAE.
- You can also set up a branch of your business on the mainland, through which you can trade with companies in Dubai (it must have the same name and activities as your free zone company).
If you are based in a free zone and would like to trade with the mainland you will need to approach the Dubai DED, submit your application form, and pay fees. Your business manager at the free zone you have set up with will advise you on the best way for your company to trade with mainland Dubai.
Advantages of doing business in a Dubai free zone
Starting a business in a Dubai free zone brings multiple advantages. These include:
- 0% income tax
Being based in a Dubai free zone allows you to enjoy a number of tax benefits, which means you keep more of your profits. Business owners can enjoy 0% income tax rate and no customs taxes, excluding import products sold to the mainland. However, VAT is also applicable for business owners in a non-gated free zone.
- 100% foreign ownership
Unlike mainland businesses in Dubai, free zones permit 100% foreign ownership – which can be more attractive for companies owned by foreigners.
- Specialist support for your business
Free zones in Dubai are designed to be attractive for entrepreneurs, providing numerous perks and support as you get your company up and running.
What is the difference between a free zone and an LLC in Dubai?
An LLC operates in the UAE mainland and its structure is similar to a corporation. Businesses can conduct any business activity permitted by the DED and enjoy complete protection from liability.
On the other hand, a free zone is a special economic area in the UAE that is governed by its respective authority. Generally speaking, a free zone license does not require approval from external authorities. Other benefits include 100% foreign ownership, flexidesk and a specific number of visa packages.
Can a free zone company sell in the UAE?
Yes, a free zone company can sell directly in the UAE, provided they are not selling any physical goods. For example, a service-based company can sell its services directly in the UAE. However, a free zone company cannot work with government entities – without exception. A free zone company is not able to sell goods in the UAE directly either, though this is more of a grey area and there are several ways to get around this. You can begin trading with the mainland while still operating from a free zone by:
- Seeking out a mainland logistics partner to distribute goods for you in the UAE
- If you are running an e-commerce business, working with a courier or delivery partner who can deliver parcels for you
- Another option involves setting up a branch office on the mainland.