Difference Between a Free Zone Company & a Mainland company

Particulars	Mainland	Free Zone
Ownership	In the mainland, foreign investors can own up to 100% of their business. This means they can have full control and ownership of their company without the need for a local sponsor or Emirati partner.	Businesses established in free zones are typically restricted to conducting business within the free zone or outside of the UAE. If they wish to trade within the UAE, they usually need to use a local distributor or partner
Repatriation of Profits	In mainland, you can repatriate 100% of your profits and capital without any restrictions.	In free zones, you can repatriate 100% of your profits and capital without any restrictions.
Market Access	Mainland companies have the advantage of being able to do business anywhere in the UAE. They can freely trade with both other mainland and free zone businesses, as well as with the local market.	Free Zone companies are allowed to conduct business mostly internationally, you may invoice to your UAE customers if you are into Services business otherwise if you are into trading then it is recommended to sell to mainland entities via a local distributor only
Geographic Restrictions	Mainland companies can set up their business in any location within the UAE, subject to municipal and legal regulations.	Businesses established in free zones are typically restricted to conducting business within the free zone or outside of the UAE. If they wish to trade within the UAE, they usually need to use a local distributor or partner.
Regulations	Mainland businesses are subject to UAE labor and commercial laws, which can be more restrictive compared to the regulations in free zones.	Free zones often have more relaxed regulations compared to the mainland, making it easier for businesses to set up and operate.
Taxation	Mainland companies are subject to UAE corporate tax, which is generally 9% for most activities. However, certain sectors, such as oil and gas, may have different tax rules.	Many free zones offer tax exemptions for a specified number of years, and some have no personal income tax, 9% corporate tax, and no customs duty.
Customs Duties	Mainland companies may be subject to customs duties on imported goods.	Free zones provide customs benefits, such as exemption from import and export duties, making them attractive for businesses involved in import/export activities.
Specialized Zones	There are no specialized zone concept as the whole of Mainland area is covered under the Department of Economic Development Authority.	Different free zones cater to specific industries, like technology, media, logistics, and more. This specialization can be advantageous for companies in those sectors
Salary Transfer	In the mainland, you are required to adhere to local labor law regulations, which include the strict requirement of using the WPS (Wage Protection System) for salary transfers.	The majority of free zones do not mandate compliance with the WPS regulation when it comes to salary transfers.
Which types of businesses should evaluate whether registering in the mainland or a free zone is the most suitable choice for them?	If your company primarily concentrates on selling goods or delivering services within the UAE local market or if essential business processes like procurement, sales, or service delivery necessitate local market involvement, then it is advisable to consider registering your company in the mainland.	If all your business suppliers, clients, or service providers operate outside the UAE, then it is recommended to establish your company within a free zone area.

Particulars

Mainland

Free Zone

Ownership

In the mainland, foreign investors can own up to 100% of their business. This means they can have full control and ownership of their company without the need for a local sponsor or Emirati partner.

Businesses established in free zones are typically restricted to conducting business within the free zone or outside of the UAE. If they wish to trade within the UAE, they usually need to use a local distributor or partner

Repatriation of Profits

In mainland, you can repatriate 100% of your profits and capital without any restrictions.

In free zones, you can repatriate 100% of your profits and capital without any restrictions.

Market Access

Mainland companies have the advantage of being able to do business anywhere in the UAE. They can freely trade with both other mainland and free zone businesses, as well as with the local market.

Free Zone companies are allowed to conduct business mostly internationally, you may invoice to your UAE customers if you are into Services business otherwise if you are into trading then it is recommended to sell to mainland entities via a local distributor only

Geographic Restrictions

Mainland companies can set up their business in any location within the UAE, subject to municipal and legal regulations.

Regulations

Mainland businesses are subject to UAE labor and commercial laws, which can be more restrictive compared to the regulations in free zones.

Free zones often have more relaxed regulations compared to the mainland, making it easier for businesses to set up and operate.

Taxation

Mainland companies are subject to UAE corporate tax, which is generally 9% for most activities. However, certain sectors, such as oil and gas, may have different tax rules.

Many free zones offer tax exemptions for a specified number of years, and some have no personal income tax, 9% corporate tax, and no customs duty.

Customs Duties

Mainland companies may be subject to customs duties on imported goods.

Free zones provide customs benefits, such as exemption from import and export duties, making them attractive for businesses involved in import/export activities.

Specialized Zones

There are no specialized zone concept as the whole of Mainland area is covered under the Department of Economic Development Authority.

Different free zones cater to specific industries, like technology, media, logistics, and more. This specialization can be advantageous for companies in those sectors

Salary Transfer

In the mainland, you are required to adhere to local labor law regulations, which include the strict requirement of using the WPS (Wage Protection System) for salary transfers.

The majority of free zones do not mandate compliance with the WPS regulation when it comes to salary transfers.

Which types of businesses should evaluate whether registering in the mainland or a free zone is the most suitable choice for them?

If your company primarily concentrates on selling goods or delivering services within the UAE local market or if essential business processes like procurement, sales, or service delivery necessitate local market involvement, then it is advisable to consider registering your company in the mainland.

If all your business suppliers, clients, or service providers operate outside the UAE, then it is recommended to establish your company within a free zone area.