What’s the Difference Between Mainland, Free Zone, and Offshore Companies in the UAE?
The difference between Mainland, Free Zone, and Offshore companies in the UAE lies in their business setup, ownership structure, market access, taxation, office requirements, and visa eligibility. Mainland companies offer unrestricted UAE market access and 100% foreign ownership for most activities but require a physical office and face 9% corporate tax. Free Zone companies provide tax exemptions, full ownership, and profit repatriation, ideal for international trade, but are limited to Free Zone operations and need a physical or virtual office. Offshore companies are tax-free, perfect for asset protection and international business, but can’t operate locally, don’t need an office, and can’t issue visas. Pick based on your business goals, cost of setup, and local market needs.
Mainland vs. Free Zone vs. Offshore Companies in UAE: Which Is Best for Your Business Setup?
The variation in types of companies in the UAE (Mainland, Free Zone and Offshore) lies in their business model, ownership details, market penetration, taxation, office requirements, and visa privileges. Mainland companies provide access to the entire UAE market with 100% foreign ownership for most activities. However, they also require a physical office and have a 9% corporate tax. Free Zone companies have tax exemptions, full ownership, and profit repatriation, suitable for international trade, but can only operate within the Free Zone and maintain a physical or virtual office. Offshore companies are ideal for asset protection and international business as they have no tax obligations, do not operate locally, do not require an office, and cannot issue visas. Choose according to your business objectives, the expense of establishment, and local market demands.
Why Does Choosing the Right UAE Jurisdiction Matter for Business Setup?
Why is selecting a jurisdiction for business setup in Dubai or UAE such a big deal? This is because the UAE is considered one of the best business hubs globally; whether you choose a Mainland, Free Zone, or Offshore Company affects your business objectives, expenses, and market reach. While a Mainland setup allows one to extensively dive into the market in the UAE region, a Free Zone setup allows for tax savings and an offshore company helps in protecting assets. This guide helps answer questions such as “Which is the best Free zone in UAE 2025?” or “What is the cost of setting up a Mainland company in 2025?” aiding in forming companies in the UAE. So, let’s simplify this.
What Is a Mainland Company, and How Does It Work in the UAE?
A mainland company is an economic entity registered with the Department of Economic Development (DED) in an Emirate like Dubai or Abu Dhabi. It is meant with particular reference to the International business strategy territorial system which enhances the growth of a business in the UAE and internationally without restrictions in trading, a broad range of activities, and having many branch offices.
A. Why Choose a Mainland Company for Your Business?
- Full foreign ownership: The process started in 2021; most of the Mainland businesses allow the complete foreign ownership of the company which means that the local sponsor is not needed for foreign investors.
- Unfettered Market Access: Trade anywhere in the UAE, obtain government contracts, and access customers throughout the Emirates.
- Flexible Activities: From retail to consulting, Mainland businesses have no severe restrictions on business activities.
- Best Office Locations: Open your office in Dubai or other Emirates and expand your brand visibility.
- Seamless Transactions: No currency barriers allow smooth financial transactions internationally.
B. What Are the Requirements for Mainland Business Setup?
- Business License: Obtain a business license from the DED, the payment of which is subject to your business activity (in most cases, 5% of office rent).
- Actual Office: You are required to have a minimum of 200 square feet of office space; no virtual offices are allowed.
- Clearances: Get DED approval, trade name approval, and attest to your Memorandum of Association (MoA) in the Dubai Chamber of Commerce.
- Visas: Residence visas are granted based on office size (one per 80 square feet of the office), and there’s no limit.
- Local Sponsor: In some rare cases, local strategic impact activities may need a local sponsor with 51% holdings.
Expert Tip: Partner with business setup consultants in Dubai to breeze through DED approvals and MoA attestation, ensuring regulatory compliance.
What Is a Free Zone Company, and Who Should Use It?
A Free Zone company operates in specific economic enclaves like DMCC, JAFZA or RAKEZ, which are intended to promote trade and export. This is ideal for companies planning to penetrate international markets or specialized regions like tech or media.
Why Opt for a Free Zone Company Setup?
- No Local Sponsor: Foreign investors benefit as control fully vests with them up to 100% ownership.
- Leverage Tax Incentives: Exempt from various taxes for 50 years, including corporate tax and customs duties, significantly reducing the cost of setting up a business.
- International Businesses Enjoy unrestricted Profit Repatriation: All profits and capital can be transferred.
- Exceedingly Simple: The Free Zone Authorities responsible for granting licenses have eased a lot of procedures, making business formation in Freezone very quick.
- Enhanced Access to Industry Verticals: Dubai Media City and Sharjah Publishing City connect you to targeted industry regions.
Expert Tip: Pick emirate-specific Free Zones like ADGM for finance or Twofour54 for media to leverage tax holidays and networking opportunities.
What Do You Need to Start a Free Zone Business?
- Office Space: The lease includes a standard office, virtual office, or Flexi-desk based on the Free Zone.
- Sponsorship: 3-6 visa allocation is permitted based on office sufficiency, e.g., one visa for every 9 sqm office space in DMCC.
- Banking: Active account with the bank in UAE with a minimum share capital deposit, varies from Free Zone to Free Zone.
- Business Scope: Pursue activities approved by the Free Zone and acquire local distributors for access to the UAE market.
- VAT Compliance: Register with the Federal Tax Authority for VAT obligations unless the exemption criteria are met.
What Is an Offshore Company and When Is It Ideal?
An Offshore company is a corporate entity in jurisdictions like RAK ICC, Jebel Ali Offshore, or Ajman Free Zone, tailored for international business, asset protection, and tax savings. It can’t operate in the UAE but excels at holding assets or shares.
Why Set Up an Offshore Company in the UAE?
- Zero Taxes: No corporate or personal tax, ideal for wealth management and asset holding.
- Privacy: Strong asset protection keeps your business confidential.
- No Office Needed: Skip office space costs, lowering business setup expenses.
- Property Ownership: RAK ICC and Jebel Ali Offshore can own real estate in select Dubai areas.
- Fast Incorporation: Quick setup via a registered agent with minimal documentation.
What Are the Requirements for Offshore Company Formation?
- Registered Agent: Use a registered agent for incorporation and corporate bank account setup.
- No Visas: Offshore companies don’t issue UAE residence visas.
- No Capital Requirement: No share capital is needed, keeping costs low.
- Business Limits: No UAE business activities, but can hold shares, trademarks, or real estate.
- Bank Account: Open a UAE bank account for international transactions.
Expert Tip: Combine an Offshore company with a Mainland or Free Zone entity to blend tax benefits with UAE market access.
How Do Mainland, Free Zone, and Offshore Companies Compare?
Confused about Mainland vs Free Zone vs Offshore? Here’s a table and breakdown to clarify how these jurisdictions stack up for your business setup in UAE.
| Aspect | Mainland | Free Zone | Offshore |
| Ownership | 100% foreign ownership; local sponsor for some activities | 100% foreign ownership, no local sponsor | 100% foreign ownership, no local sponsor |
| Business Scope | Full UAE and global trade | Free Zone and global; local agent for UAE | Global only, no UAE operations |
| Taxation | 9% corporate tax, possible VAT | Tax exemptions (up to 50 years), VAT in most cases | No taxes, VAT-exempt |
| Office | 200 sq ft office required | Physical or virtual office (varies by Free Zone) | No office needed |
| Market Access | Full UAE market, government contracts | Limited UAE access via distributors | No UAE market access |
| Visas | Unlimited, based on office size (1 per 80 sq ft) | 3–6 visas, varies by Free Zone | No visas |
| Setup Cost | High (AED 20,000–50,000+) | Medium-High (AED 11,500–70,000) | Low (AED 10,000–18,000) |
A. How Does Ownership Work Across These Jurisdictions?
All three offer 100% foreign ownership, but Mainland may need a local sponsor for strategic impact activities. Free Zone and Offshore give shareholders full control without local partners.
B. Which Jurisdiction Offers the Best Market Access?
Mainland wins for UAE market access, allowing direct trade and government contracts. Free Zones need local distributors for UAE trade, while Offshore is strictly for international business.
C. What Are the Tax Implications for Each Company Type?
Mainland faces 9% corporate tax (since 2023) and 5% VAT for some activities. Free Zones enjoy tax exemptions but often require VAT registration. Offshore is tax-free, boosting wealth management.
D. Do You Need a Physical Office for Your Business?
Mainland mandates a 200 sq ft office. Free Zones offer physical offices, virtual desks, or flexi-desks (e.g., DMCC, JAFZA). Offshore skips office requirements entirely.
E. How Many Visas Can You Get for Your Team?
Mainland offers unlimited visas based on office size. Free Zones provide 3–6 visas (e.g., one per 9 sq m in DMCC). Offshore companies issue no visas.
F. What Are the Costs of Setting Up Each Company Type?
Mainland costs AED 20,000–50,000+, covering license fees and office rent. Free Zone ranges from AED 11,500–70,000, depending on the Free Zone. Offshore is cheapest at AED 10,000–18,000.
Example: A café owner picks Mainland for Dubai customers. A tech firm chooses DMCC for tax breaks. An investor uses RAK ICC to hold real estate.
Which UAE Jurisdiction Is Right for Your Business Goals?
Which jurisdiction fits your business setup in Dubai? Here’s how to pick the best company formation in UAE for your needs.
What Factors Should You Consider for Company Formation?
- Business Type: Retail or services? Go Mainland. Tech or exports? Try Free Zone. Asset protection? Choose Offshore.
- Ownership Needs: All offer 100% foreign ownership, but check Mainland for local sponsor rules.
- Market Goals: Mainland for UAE market, Free Zone for global trade, Offshore for international investments.
- Budget: Offshore is cheapest, Free Zone varies, Mainland is priciest due to office costs.
- Office Plans: Need no office? Pick Offshore. Want flexibility? Free Zone has virtual options.
- Visa Needs: Large team? The mainland is best. Small team? Free Zone works. No visas? Offshore.
- Future Plans: Scaling locally? Mainland. Global growth? Free Zone or Offshore.
How Can You Set Up a Business in the UAE Step-by-Step?
Ready for business setup in UAE? Here’s how to launch each company type, tackling business setup timeline UAE.
A. How Do You Start a Mainland Company?
- Pick your business activity (e.g., retail, consulting).
- Get trade name approval from the DED.
- Secure DED initial approval.
- Attest your MoA via the Dubai Chamber of Commerce.
- Lease a 200 sq ft office.
- Finalize trade license with DED and Ministry of Economy.
- Apply for visas based on office size.
- Open a UAE bank account.
Timeline: 2–4 weeks.
B. How Do You Launch a Free Zone Company?
- Choose a Free Zone (e.g., JAFZA, DMCC).
- Submit business activity and documents to the Free Zone Authority.
- Select a physical office, virtual desk, or flexi-desk.
- Deposit share capital in a UAE bank account.
- Get your trade license.
- Request visas per Free Zone quota.
- Register for VAT if needed.
Timeline: 1–3 weeks.
C. How Do You Establish an Offshore Company?
- Select RAK ICC, Jebel Ali Offshore, or Ajman Free Zone.
- Hire a registered agent.
- Submit documentation (e.g., passport copies).
- Open a corporate bank account.
- Receive incorporation certificate.
Timeline: 3–7 days.
Expert Tip: Check UAE bank licensing for Free Zone or Offshore to ensure smooth bank account setup.
Questions About UAE Business Setup
Q1: What’s the cheapest UAE business setup?
Offshore at AED 10,000–18,000, or budget-free Zones like Ajman Free Zone.
Q2: How long for a Mainland company in 2025?
2–4 weeks, based on DED and office lease.
Q3: Best Free Zone for tech startups?
DMCC or Dubai Design District for tax exemptions and networking.
Q4: Can Offshore companies own Dubai property?
RAK ICC and Jebel Ali Offshore can, not Ajman Offshore.
Q5: VAT for Free Zone companies?
Most register with the Federal Tax Authority for 5% VAT unless exempt.
Conclusion:
Deciding between Mainland, Free Zone, or Offshore for your business setup in Dubai? Mainland unlocks the UAE market, Free Zone saves taxes, and Offshore protects assets. By weighing ownership, taxation, office needs, and visas, you’ll find the perfect jurisdiction. Team up with business setup consultants in Dubai to make company formation in the UAE a breeze. Start your business setup journey today!
