The United Arab Emirate’s free zones are one of the nation’s biggest economic success stories. Encouraging enormous amounts of entrepreneurialism and exciting opportunities, free zones have supercharged the UAE’s business environment since the first free zones opened here in the 1980s.
According to an article on Arab News, there were over 60,000 free zone businesses registered in the UAE in 2021 – a 4.4% increase on the year before. This shows just how popular Dubai free zones are.
So, if you’re thinking of starting a company in a Dubai free zone in 2023, read our blog to understand the key information you need to know about these entities.
• Can free zone companies do business in the mainland?
• Advantages of doing business in a Dubai free zone
• What is the difference between a free zone and an LLC in Dubai?
• Can a free zone company sell in the UAE?
• How much does it cost to open a free zone company in Dubai?
Mainland vs free zone: what’s the difference?
Most businesses in Dubai choose to either base themselves on the mainland or in a free zone. So, what is the difference between these two options?
Dubai mainland business
A mainland company in Dubai is essentially an onshore company that has received its license from the Department of Economy & Tourism (DET). All Dubai mainland businesses are allowed to trade anywhere in the United Arab Emirates as well as internationally, and they face no restrictions on their trade. You must also pay a 5% customs duty on imported goods.
Dubai free zone businesses
In Dubai, there are several well-respected free zones which are designated areas where businesses can avail themselves of specific advantages. These include a 0% tax on income, 0% customs duty, and 100% foreign ownership, without the requirement to find a local partner. Free zone businesses are allowed to trade with other companies in their own free zone and internationally, but they are not permitted to trade directly with customers in Dubai and the UAE mainland.
Can free zone companies do business in the mainland?
Yes, some select free zone companies can do business in Dubai mainland, but they will require necessary approvals from the free zone. To ensure their chosen business activity can avail this benefit, they should contact Meydan Free Zone.
That being said, many free zones do not permit direct business in mainland Dubai. They are only permitted to trade internationally or with other companies based in the same free zone. Non-compliance can lead to fines of as much as AED 100,000. However, there are a number of ways that free zone companies can trade with the mainland if they decide they would like to. These include:
• Find a mainland logistics partner who can move goods within the UAE for you.
• Free zone-based e-commerce companies can use a courier or delivery partner for delivering goods in the UAE.
• You can also set up a branch of your business on the mainland, through which you can trade with companies in Dubai (it must have the same name and activities as your free zone company).
If you base yourself at Meydan Free Zone, we can advise you on the best way for your company to trade with mainland Dubai.
Advantages of doing business in a Dubai free zone
Starting a business in a Dubai free zone brings multiple advantages. These include:
0% income tax
Being based in a Dubai free zone allows you to enjoy a number of tax benefits, which means you keep more of your profits. Business owners can enjoy 0% income tax rate and no customs taxes, excluding import products sold to the mainland. However, VAT is also applicable for business owners in a non-gated free zone, such as Meydan, who wish to do business with a gated free zone.
100% foreign ownership
Unlike mainland businesses in Dubai, free zones permit 100% foreign ownership – which can be more attractive for companies owned by foreigners.
Specialist support for your business
Free zones in Dubai are designed to be attractive for entrepreneurs, providing numerous perks and support as you get your company up and running.
What is the difference between a free zone and an LLC in Dubai?
An LLC operates in the UAE mainland and its structure is similar to a corporation. Businesses can conduct any business activity permitted by the DET and enjoy complete protection from liability.
On the other hand, a free zone is a special economic area in the UAE that is governed by its respective authority. Generally speaking, a free zone license does not require approval from external authorities. Other benefits include 100% foreign ownership, flexidesk and a specific number of visa packages.
Can a free zone company sell in the UAE?
Yes, a free zone company can sell directly in the UAE, provided they are not selling any physical goods. For example, a service-based company can sell its services directly in the UAE. However, a free zone company cannot work with government entities – without exception. A free zone company is not able to sell goods in the UAE directly either, though this is more of a grey area and there are several ways to get around this. You can begin trading with the mainland while still operating from a free zone by:
• Seeking out a mainland logistics partner to distribute goods for you in the UAE
• If you are running an e-commerce business, working with a courier or delivery partner who can deliver parcels for you
• Another option involves setting up a branch office on the mainland.
At Meydan Free Zone, we can advise you on the best option for your company.
How much does it cost to open a free zone company in Dubai?
The cost of opening a free zone company in Dubai depends on the number of visas that your business needs for its staff. At Meydan Free Zone, companies that do not require any visas pay as little as AED 12,500 to set up their company. The price rises for each subsequent visa required, with visa applications costing AED 1,850 per additional visa (although special rates are normally available when purchasing six visas or more). With our easy payment plan, you can pay as little as AED 1,042 per month and launch your business immediately.
Why choose Meydan Free Zone?
Meydan Free Zone is a premium free zone with a central Dubai location, a short drive from the airport and seaports. It is located in stunning surroundings, right next to the Meydan golf course and racecourse. With 24/7 access, all the technological support you need and a wide variety of comfortable office spaces, Meydan Free Zone provides you with an excellent place to begin your journey as a Dubai entrepreneur.
Our friendly and efficient consultants can help you with all aspects of business setup in Dubai, and if you need help with things like trading goods and services in the mainland, we can also advise you on the best option for you. This means you can grow your business without limits.
We also offer several additional services to help your business expand and grow, including Meydan Commerce – our e-commerce support service; Meydan Pay – a complete banking solution for your start up; and our Easy Payment Plans – which allow you to spread the cost of starting your Dubai free zone business over the course of several months.