29 Apr

FREE ZONE OR MAINLAND – WHICH ONE TO CHOOSE FOR BUSINESS SET-UP?

The United Arab Emirates (UAE) offers entrepreneurs various locations - mainly mainland and free zones spread across the seven emirates - to choose from for their businesses set-ups. However, before wading through the differences between mainland and free zone, it is important to learn what they are and their offerings.

UAE mainland company

Onshore business enterprises in the emirates are also known as UAE mainland companies. These firms are governed by the state law. Based on factors such as the business activity, liability, ownership, management, registration, cost and taxation, owners can choose to form a limited liability company with one to 50 shareholders or a sole establishment with a single proprietor. The Department of Economic Development issues licences and registers mainland businesses.

UAE free zone company

Although free zones (also known as free trade zones) are part of the UAE’s physical territories, these areas are not under the jurisdiction of customs control. Therefore, UAE free zone company owners enjoy tax benefits on repatriation on profits, 100% foreign ownership, hassle-free profit repatriation and easy access to well-connected ports among others. The country has about 45 free zones across the emirates. Many of these cater to specific business sectors such as health, media, technology, manufacturing, e-commerce, etc.

Differences between mainland and free zone business set-up

MAINLAND FREE ZONES
OWNERSHIP Although amendments have been made to the Commercial Companies Law, the new changes are not applicable to all business activities. Certain percentage of Emirati nationals’ share in the company’s capital or the boards of directors is required for activities of strategic impact. Foreign investors can enjoy 100% ownership of their companies in all legal entities including branch offices.
SCOPE OF BUSINESS Companies can conduct business across the emirates as well as abroad without any restrictions. Companies with an LLC structure can freely deal with UAE enterprises and those abroad. Other free zone companies can sell their products across the UAE, too, by partnering with a local distributor or setting up a branch on mainland. Moreover, you can also avail a free zone dual licence offered by Ras Al Khaimah Economic Zone (RAKEZ). This enables companies which have a physical office space with RAKEZ to avail an NOC to apply for a licence from Ras Al Khaimah’s Department of Economic Development.
TAX All companies are required to follow the 5% value-added tax (VAT) regulations. Furthermore, businesses with profits exceeding AED 375,000 will have to pay 9% corporate tax starting June 2023. Companies operating businesses only in free zones do not require to pay any form of tax. Free zone companies are also allowed to fully repatriate their capital and profits.
IMPORT& EXPORT The GGC, including the UAE, levy 5% import tax on commercial goods. The rates differ for certain goods, such as sweetened beverages, carbonated and energy drinks, e-smoking devices and tobacco, that fall under sin/excise tax category. Several free zones provide close proximity to ports. For instance, Ras Al Khaimah has an international airport and five sea ports which help business owners make the best of the emirate’s logistical centres for the import and export of their products. Moreover, they are exempt from import and export duties levied by the customs department for goods clearance.
COST Due to a certain degree of ease of doing business, the cost of UAE mainland company incorporation is high. A company set-up package with just a licence and basic services would cost much more the amount compared to free zones. Without a doubt, free zones are more cost-effective than mainland when it comes to business set-up. With RAKEZ, you can launch your company at just AED 5,499 with its Biz Starter package.

Benefits of business set-up with Ras Al Khaimah Economic Zone (RAKEZ)

One of the most trusted UAE free zones, RAKEZ eases the process of setting up a company and assists entrepreneurs through the entire process of getting their business up and running in a sustainable manner. From helping with various applications and visa-related documentation to providing them with a variety of workspace options, the economic zone is a one-stop shop for all that you will require to start your UAE free zone company.

RAKEZ Dual Licence

Under a recently introduced structure with the support of Ras Al Khaimah Department of Economic Development (RAKDED), companies formed by RAKEZ can easily operate business in the economic zone as well as UAE mainland without having to rent any additional facility. Dual licence comprises a free zone branch licence issued by the RAKDED, in addition to RAKEZ licence.

Moreover, through its partnerships with various service providers, RAKEZ also provides value-added services including, financial management assistance, banking and networking opportunities with businesses in similar fields as well as potential distributors and clients.

Book a free business set-up consultation with experts Company set-up consultants at RAKEZ can help you better understand the differences between mainland and free zone to figure out the most suitable area for your business according to the nature of your chosen activity.

You can reach us on +971 7 204 111 or drop an email with your query to info@rakez.com

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