Dubai is a global business hub. It’s fast, smart, and full of opportunity. In 2024, Dubai’s startup scene experienced a boost, ranking second in the region and 50th globally. It was home to more than 1,000 startups, which was about 87% of the UAE’s startup ecosystem.
A startup or established brand, you typically have two choices for setting up a business setup in Dubai: Free Zone or Mainland. Choosing the right one matters because it affects many things, like ownership, tax, licensing, and how and where you trade.
As one of the leaders in coworking spaces and company formation in Dubai, GAL Business Center has helped many businesses decide what works best for them. In this post, we’ll break this down for you – Free Zone Vs Mainland – side by side.
Let’s dive in.
1. Ownership Structure: What Difference Does It Make?
Business ownership is often a big deal for entrepreneurs, and choosing between the Free Zone and the Mainland will decide how much of your business you can own. If you choose a Free Zone business, you can have 100% foreign ownership. That means you don’t need a local partner. This makes Free Zones popular with international investors and solo founders.
Setting up a mainland company did require a local Emirati sponsor, but things changed recently. Now, many business activities on the Mainland also allow 100% ownership. Still, some sectors, like defense or legal services, may require a local partner.
So, what’s better? If complete control is your goal, Free Zones are your best bet. If your business falls under activities allowed in the new law, Mainland works too. If you’re unsure, it’s best to consult a company formation expert to get personalized advice.
2. Business Activities: What Are You Allowed to Do?
In Dubai, you need a suitable trade license to carry out your business activities. Free Zones usually focus on certain industries, including tech, logistics, finance, and media. But there’s a catch. You can’t trade directly with the local UAE market unless you go through a local agent. In other words, Free Zone is a great choice if you’re a tech startup building software for international clients, not locals.
On the other hand, a Mainland trade license lets you sell your goods or services anywhere in Dubai and across the UAE. So, if you want to open a cafe, retail shop, or beauty salon, you’ll need a Mainland license.
3. Licensing and Regulatory Compliance
Licensing is simpler in Free Zones. Each Free Zone has its own authority, which streamlines things like approvals and inspections. Let’s say you want to set up a media company. You can get a fast and targeted setup with a Dubai Free Zone license, which includes a license and a desk.
Unlike Free Zone, Mainland license requirements go through the DED (Dubai Department of Economic Development). They require extra steps, including license applications, inspections, approvals from different government bodies, and more paperwork.
4. Tax and Financial Benefits
When setting up a business in Dubai, you need to think about long-term tax and financial benefits. Free Zones come with:
- Tax benefits like corporate tax exemptions for a set number of years.
- Customs duty exemptions for imports/exports through the Free Zone.
- 0% VAT if you operate only within the Free Zone and meet regulatory requirements.
Mainland companies must follow UAE corporate tax rules introduced in 2023. Plus, you’ll need to register for VAT and pay 5% on most goods and services.
If you’re planning to scale internationally, Free Zones offer great financial benefits. If local trade is your goal, the Mainland is worth it (even after considering the taxes).
5. Office Space Requirements and Visa Quotas
Serviced offices are already helping startups thrive in Dubai. While renting a physical office in Dubai is easy, this decision can have long-term consequences.
Many Free Zones in Dubai offer cost-effective office solutions like coworking spaces and small serviced offices. However, your visa quota for business depends on the space you lease. In simple terms, a small space means fewer visas.
Mainland companies must have an actual office to get a license. Also, bigger space lets you sponsor more employee visas. You might want to choose serviced offices when setting up a Mainland business.
However, a startup can benefit from a coworking space, which offers flexibility and low-cost office rentals while complying with Free Zone and Mainland licensing rules. Plus, you get admin support, high-speed internet, and a professional business address.
6. Cost Comparison: Which Option is More Budget-Friendly?
Free Zone costs are lower upfront. Many Free Zones in Dubai offer bundles that include a license, flexi desk, and visa quota. It’s not just cost-effective but also fast.
Mainland business setup fees tend to be higher. You might need to pay for:
- Local sponsor (if required)
- Bigger office space
- DED approvals and additional compliance steps
That said, the right partner, like GAL Business Center, helps you save either way. We provide affordable coworking offices in Dubai that meet both Free Zone and Mainland needs. So, no matter what you pick, your setup is smooth and cost-effective.
Free Zone Vs Mainland: Which Option is Better for Your Business?
The truth is, there’s no one-size-fits-all answer. Here’s a quick rundown.
Choose Free Zone if:
- You’re focused on international clients.
- You want 100% ownership without needing local trade.
- Your industry fits into a Free Zone cluster (tech, media, trading).
Choose Mainland if:
- You want to access the UAE market directly.
- You’re in retail, hospitality, or services.
- You need flexibility to operate across the country.
Set Up Your Business in Dubai the Right Way
Both Free Zone and Mainland business setups have pros and cons. It depends on how you want to run your business, where you want to trade, and how much control you need. So, decide based on your business goals, legal requirements, and budget. Remember, the wrong choice can slow you down. But the right one sets you up for growth.
Want a hassle-free company setup? Get in touch with the GAL Business Center today. We’re your one-stop shop for everything from company formation to serviced offices. Let’s build your future in Dubai your way. Contact us today to get started!