One of the first decisions any founder in the UAE faces is whether to set up on the mainland or in a free zone. It is easy to treat this as a question of price, because that is how most setup packages are advertised. In practice, the right answer depends on how your business will actually operate.
These five questions will get you most of the way to a clear decision.
1. Who are your customers, and where are they?
This is the most important question. A mainland company can trade directly with customers anywhere in the UAE. A free zone company is designed to trade within its zone and internationally, and selling directly into the UAE market from a free zone usually involves extra steps, such as working through a mainland distributor or obtaining additional permits.
If most of your revenue will come from customers in the UAE, especially consumers, the mainland is usually the more natural fit. If you trade internationally or mainly with other businesses, a free zone may suit you well.
2. Do you need a particular kind of premises?
Some activities need a shop, a warehouse or a site that customers visit. Others can run from a shared office or a flexi-desk. Mainland licences generally require a registered tenancy for the premises, while many free zones offer smaller office packages. Think about what you need now and in two or three years’ time.
3. How many people will need visas?
Every licence comes with a visa allocation linked to the size of your office space. If you plan to hire, or to bring in partners and their families, check the allocation carefully. A cheaper package with too few visas can become expensive once you need to upgrade.
4. What will it cost over three years, not one?
First-year packages often look attractive because they bundle the licence, office and a few visas together. Renewal fees, visa renewals, office upgrades and the cost of adding activities can change the picture considerably. Compare the realistic cost over three years, based on your own growth plans.
5. How will Corporate Tax treat you?
Both mainland and free zone companies are within the UAE Corporate Tax regime and must register. Free zone companies that meet strict conditions can benefit from a 0% rate on qualifying income, but the conditions are detailed and the benefit is not automatic. Whether it applies depends on what you do, who you trade with and how you are set up. It should be part of the decision, not something you find out about afterwards.
Making the decision
There is rarely a single right answer for every business, and the choice is not always permanent. But answering these questions honestly, ideally before you pay for anything, usually makes the best option clear.
If you would like a second opinion on your plans, we are happy to walk through them with you.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
