When is setting up a UAE mainland company the best option?
Have you considered UAE mainland company setup?
It’s true that for foreign entrepreneurs setting up in the UAE, it is usually the country’s free zones that catch the eye. And when you look at the headline benefits, it’s not hard to see why they get the attention.
However, free zones are not the only option for overseas entrepreneurs looking to start a business in the UAE. In fact, depending on the nature of the business you wish to set up, they may not even be the most suitable environment. If you wish to trade directly with the UAE marketplace or take on government contracts, then setting up a mainland company could make more business sense.
Ultimately, both have great benefits and the setup that’s right for you will depend on a number of factors including your business activities and your intended trading partners. With that in mind, let’s take a look at exactly when setting up a UAE mainland company is the best option, and the advantages of doing so.
1. To trade with other mainland companies: Perhaps the most compelling reason to set up a UAE mainland company is to be able to trade with other businesses on the mainland. Free zone companies can only trade from within their free zone and if they wish to gain access to the local UAE marketplace, they must use the services of a local distributor and pay customs duty. Mainland businesses however can do business anywhere in the UAE and beyond with no restrictions.
Free zone companies can only trade from within their free zone and if they wish to gain access to the local UAE marketplace, they must use the services of a local distributor and pay customs duty.
2. For greater scope of business activities: Some of the UAE’s free zones only allow certain business activities to take place within them. For example, companies in Dubai Media City must work in the media or closely related industries. The same is true of Dubai Healthcare City and the healthcare industry, or RAK Maritime City and the maritime industries. And a free zone company can’t immediately expand their activities beyond their free zone licensed trading activity into other areas of the UAE market – to do so may require them to register as a private business.
Mainland companies have no such limitations and can open up to the wider UAE economy with much greater scope for diversity.
3. To take on government work: Government projects are big business in the UAE. Just last year, the Abu Dhabi Executive Council approved AED 17.5bn (USD 4.76bn) of spending on government projects including over AED 4bn on infrastructure, nearly AED 2bn on education and a combined AED 1.2bn on upgrades to governmental and social facilities. In the UAE more broadly, the country’s rulers are expected to invest AED 165bn (USD 45bn) in 2017 in construction projects alone.
Clearly being able to take on such projects can be extremely lucrative – and setting up in the UAE mainland is the only way to do so. As it stands, free zone companies in the UAE are prohibited from pitching for government contracts and are therefore only able to carry out private commercial work. Any business that does wish to work with UAE governmental bodies therefore must establish a UAE mainland company.
4. To build a presence in the local UAE market: Perhaps the biggest advantage of setting up a UAE mainland company is that it allows you to open an office anywhere in the UAE. Not only is this the ideal way to trade with the local market but as an investor in a mainland business, you’ll also be able to open multiple branches of your company as well – allowing you to build a strong presence throughout the Emirates.
Not only is this the ideal way to trade with the local market but as an investor in a mainland business, you’ll also be able to open multiple branches of your company as well – allowing you to build a strong presence throughout the Emirates.
On the contrary, companies set up under a free zone licence are generally only permitted to operate within their chosen free zone. As we’ve touched upon, trade with the local market is possible but it is not always straightforward and involves a third party who will charge for their services. Therefore, for businesses looking to establish a strong, lasting foothold in the UAE marketplace, a mainland setup can be the most suitable option.
5. For more visas: While most free zones make visa applications easy for entrepreneurs and their dependents, in some cases there are upper limits on the actual number of visas that can be issued. This is not the case with mainland companies. There are no restrictions on the amount of visas that mainland business owners can apply for, allowing entrepreneurs unlimited scope for growth. And that’s not all. Foreign entrepreneurs who establish business on the UAE mainland are also entitled to an investment visa which gives them and their families the right to live and work in the UAE for up to three years.
6. For an easy and affordable way to run your business: Free zones may take the headlines in terms of low tax and duty rates but that doesn’t mean mainland companies don’t offer some pretty impressive incentives as well. As well as a zero rate of corporate tax, mainland companies also have no minimum capital requirements – making them a very affordable way of doing business. Also, unlike some free zones, there are no yearly auditing requirements for mainland businesses.
As well as a zero rate of corporate tax, mainland companies also have no minimum capital requirements – making them a very affordable way of doing business.
Should I set up my company on the UAE mainland?
When it comes to the question of whether or not to set up your business on the UAE mainland, there really is no off-the-peg answer. Neither free zone nor mainland setups are ‘better’ than one another, it simply comes down to what is the best fit for your business.
There’s no doubt free zones offer some very impressive benefits, particularly to the foreign entrepreneur. But don’t make the mistake of thinking this is the only option. In fact, despite a rise in the number of free zones throughout the Emirates, figures from 2015 state that opening up on the mainland remains the most popular way of establishing a company in the UAE.
Ultimately, your decision on which to choose will depend on the type of business you wish to run, your aims and objectives for your UAE company, and how advantageous each setup is likely to be in achieving these aims. Once you’ve got the answers to those questions and are armed with the right information, there’s no reason why either can’t be a great success.
Virtuzone Mainland is dedicated to helping clients open a company on the UAE mainland, providing advice and assistance with every aspect of the company formation. To set up a consultation, please call us on +971 4 457 8200, or click here.