Compare UAE free zone and mainland business structures. Learn setup costs, tax benefits, ownership rules & more. Start right with BMS Auditing's expert support.
Starting a business in the UAE starts with an important choice — whether to set up your company in a free zone or on the mainland. Both have different benefits, and choosing the appropriate structure is based on your business goals. The BMS Auditing Team guides you through this phase and makes sure that your setup matches your long-term business goals.
Understanding UAE free zones
Free zones are special areas established to encourage foreign investment. Free zones are perfectly suited for start-ups, global entrepreneurs, and companies in all major industry sectors in general. Full foreign ownership is allowed, full repatriation of profits, and exemption from personal income tax and corporate income tax are offered to companies that have been set up within free zones. In addition, the setup process is simplified and costs less. Most free zones also support industry-specific services and infrastructure such as media, logistics, and technology, providing industry-specific offerings.
But one of the main drawbacks is that free zone firms are not allowed to deal directly in the UAE mainland without the services of a local agent or distributor.
Mainland business setup in the UAE
Mainland businesses are authorized to be anywhere in the UAE and can deal directly with the local market. This arrangement is best for businesses that would like to cater to UAE consumers, bid on government contracts, or grow throughout the nation. Advantages include unfettered access to the marketplace, more comprehensive lists of permitted business activities, and more flexibility in procuring employee visas.
Although mainland businesses previously necessitated a UAE national to maintain 51 percent ownership, latest reforms permit total foreign ownership across most sectors, making mainland establishment even more desirable to international investors.
Key differences between free zone and mainland structures
In terms of ownership, free zone companies offer full foreign ownership by default. Mainland companies now also allow 100 percent ownership in most industries, subject to regulatory approval.
For market access, free zone businesses are limited to operating within the free zone and abroad unless they appoint a local service agent. Mainland companies have unrestricted access to the local market across the UAE.
Regarding taxation, free zone entities typically enjoy certain tax exemptions, although VAT still applies in most cases. Mainland businesses are subject to UAE VAT and other applicable taxes based on their operations.
Setup costs tend to be lower in certain free zones (depending on the Emirate), while mainland companies often face slightly higher registration and operational expenses due to local licensing and compliance requirements.
Business activity options are generally more flexible on the mainland, whereas free zones limit operations to the activities approved within their respective jurisdictions.
Making the right choice for UAE company formation
Choosing the best business structure in the UAE depends on your industry, market focus, ownership preferences, and expansion plans. Free zones are ideal for online services, export-driven companies, or businesses that do not require a local customer base. Mainland companies are the better choice for those planning to trade locally or grow within the domestic market.
BMS Auditing offers exceptional support for Dubai company formation and UAE business setup.
Our core services include:
- Strategic advice
- Licensing
- Compliance
- PRO services
- Operational support: tax, accounting, auditing, ICV certification, and all related services
With our deep understanding of UAE regulations and regional business dynamics, we empower you to make confident, informed decisions. Partner with BMS Auditing to take the first step toward building a successful business in the UAE.
Call us today! The BMS Team is ready to leverage its vast experience to your continued business success!
