Free Zone vs Mainland: Where Should You Set Up Your Business in Dubai?

When setting up a business in the UAE, you need to decide whether you’re going to choose a free zone vs mainland Dubai. Your choice will permanently affect how you run your company, including ownership, taxation, office requirements, and costs.

Choosing the right location will depend on your chosen industry and your visa requirements. Some Dubai Free Zones cater to certain industries, including manufacturing, imports, media and finance. 

This article will explain the main difference between mainland and freezone Dubai, and how to choose the right option for your new business. 

What Is a Free Zone in Dubai?

The Free zones are economic areas within the UAE where businesses can enjoy financial and operational advantages. They are ruled by their own set of regulations, such as their own tax and foreign ownership laws. 

The first free zone, Jebel Ali Free Zone (JAFZA), was established in 1985 to attract foreign investors and diversify the UAE economy. Now, there are over 26 free zones across the UAE, each offering unique benefits for businesses. 

Free zones attract international investors in particular due to 100 per cent foreign ownership rules. A key difference between a free zone vs mainland Dubai is that international business owners can take full ownership without the need for a local partner or sponsor. 

For potential Dubai business owners looking for a short answer to the question, “What is a free zone in Dubai?” The simple answer is a designated zone offering businesses 100 per cent foreign ownership, tax exemptions, and an easier business set-up procedure. 

Understanding Dubai Mainland: What You Need to Know

You also have the option to set up your business in mainland Dubai, which comes with its own advantages. Unlike the free zones, it allows you to target the local UAE and international markets. 

When comparing mainland vs freezone business setups, be aware that only mainland companies can benefit from lucrative government contracts up to the value of US $108 million. 

Company Dubai free zone offices are restricted only to their zone, whereas businesses in the Dubai mainland have the option to set up shop anywhere in Dubai and the broader UAE, giving them far more freedom. 

Companies in mainland Dubai will not benefit from tax exemptions but will no longer need a local partner or sponsor to establish themselves. They will also benefit from full access to UAE and international markets and will have more public sector opportunities than those operating in free zones. 

Key Differences Between Free Zone and Mainland Business Setups

The difference between Mainland and Freezone Dubai lies in tax laws, ownership rules, legal regulations, and market access.

Here is a quick overview of free zone vs Mainland Dubai so you can make the right decision for your business. 

Tax Benefits & Exemptions 

• Free Zone - Offers corporate and personal tax exemptions, import and export tax benefits, and VAT exemptions.  
• Mainland - Subject to all local tax laws, including VAT and corporate tax, depending on industry. 

Location 

• Free Zone - Businesses must operate in their specific free zone. 
• Mainland - Can set up and expand operations across Dubai or the broader UAE. 

Business Activities 

• Free Zone - Works best for businesses in international import/export trading and professional services. 
• Mainland - Suitable for businesses looking to trade in the UAE, providing services directly to the local market. 

Ownership Rules and Market Access

Ownership rules differ majorly depending on whether you choose to operate in free zones of the mainland. Setting up in the free zone allows you to own 100 percent of your business as an international owner or investor. 

As of 2024, the UAE government's federal Commercial Companies Law changed. Now, foreign investors' shares can be up to 100 per cent if the business activities do not fall under these commercial and industrial activities. 

A sponsor is no longer needed to set up a business in Dubai as a foreign national unless you’re trading in oil, gas, insurance, banking, transport, security, or military services. 

There are also differences between free zone and mainland visa requirements, which we will cover in more depth below. 

Free Zone vs Mainland: Visa Options and Restrictions

Your visa options differ between mainland Dubai and free zones which you should carefully consider before making a decision. 

In the free zones, businesses can benefit from a simplified visa procedure. There are five visa types to choose from, including:

• Investor Visa 
• Employment Visa 
• Partner/ Investor Visa 
• Student Visit Visa 
• Dependent Visa 

If you want to set up a business, you will need to apply for an investor visa. To sponsor employees to work for you, you will need an employment visa. Your visa will be valid for two years. 

In the company Dubai free zone, your visa will typically take 10 to 15 working days, and the application process can be done online. Some free zones offer packages that will include your visa within the fee. 

Getting a mainland visa will take longer and is a more laborious process. However, it allows you to work in Dubai and the broader UAE, making it a more attractive option for some. Similarly to the free zones, there are five relevant visas for entrepreneurs and employees. 

In the free zones, the cheapest visa costs just AED 2500, whereas in the mainland, you can expect to pay at least AED 7000.

Costs and Fees: Free Zone vs Mainland

Comparing the costs and fees between setting up in Freezone vs Mainland Dubai will help you choose the right location for your budget. Most of the time, free zone companies have lower setup costs to attract startups and international investors. 

However, a free zone company is only able to trade within its specific zones or internationally. It cannot trade directly on the UAE market. 

It’s typically cheaper to set up a free zone company because of the startup packages available from free zones. One example is the DMCCs Jump Start Package, providing everything you need to start trading for AED 43,780. 

In comparison, setting up in Mainland Dubai will cost more, but it also allows you to trade directly with the UAE market. The average cost is AED 15,000 to AED 35,000, but this doesn’t factor in hidden costs like trademarking, additional licenses, document processing fees, notary services, and employee visas.