Setting Up Office: Mainland VS Freezone

by Daniel Leese, Head of Business Development

One of the biggest dilemmas most company owners and foreign investors who are planning to set up office in the United Arab Emirates is choosing between Mainland vs Freezone entities. Having full disclosure of the available options is key to the decision making process and ultimately, the success of your business?

Let’s tap into the top 2 options (we’ll leave offshore set up for now) and see which one is best for you.

Here are the top 3 questions you need to ask yourself:

1. Where am I from?

This is not an issue of racial origin at all, as now more than ever, the United Arab Emirates have become more tolerant of foreign investors and startups with Expo 2020 on the horizon. It simply addresses the basic requirement of a Mainland or ‘onshore’ company to have a UAE National act as either a shareholder/sponsor (51% ownership for a Commercial/Industrial/Tourism license) or as a Service agent for Professional license. Local and international trade is allowed without any restrictions and is licensed by DED (Department of Economic Development).
A freezone company on the other hand is more forgiving towards expats as it allows for full ownership by an expatriate provided they acquire a security approval from the freezone area (over 40+ listed within the UAE). However, business can be only be carried out freely within its areas of jurisdiction and would need the assistance of a local distributor who has a license under the DED.

2. What kind of office set up do I want?

A mainland company requires a minimum of 200 square feet of space to operate. However, a new initiative by the DED coined ‘Instant License’ can be availed to bypass the need for a leasing/tenancy contract from the business owner. This, however, is only applicable for the 1st year of operations and office space is still required thereafter.
A freezone entity can operate with or without an office space or virtrually. Options to set up office in trendy areas such as D3 (Dubai Design District), DIFC (Dubai International Financial Centre), and Internet City to name a few can be done. Another alternative for startups and small businesses is opting for co-working spaces such as Let’s Work which has over 33 location in the UAE.

3. How many people am I employing?

Mainland companies can issue unlimited number of resident visas while Freezones are given limited slots depending on the size of the company. Mainlands also have to abide by the Ministry of Labor (MOL) contracts for its employees while freezones don’t require such.
Crucial point:
The size of the business is the main reason why Mainland companies are required to have a local partner. They are to monitor immigration and labor flow.
At the end of the day, all would depend on the individual needs of the companies. Whether it's budget, office space, or trade restrictions you are on the fence with. It’s good to research your options and talk to the right government entities to ensure you’re on the right track to kick off your business. Good luck!
Ready to take the dive to set up your business? Talk our experts to know more about our interior fit-out services and let us help you realize your vision for your future. Email info@kojinteriors.com now!

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