Mainland vs. Free Zone vs. Offshore: A Comparison
Choosing the Right Jurisdiction for Your UAE Business
One of the most important decisions when setting up a business in the UAE is choosing the right jurisdiction: Mainland, Free Zone, or Offshore. Each option offers distinct advantages and limitations, and the best choice depends on your business model, target market, and strategic objectives. This guide provides a comprehensive comparison to help you make an informed decision.
Comparison Table
|
Feature
|
Mainland
|
Free Zone
|
Offshore
|
|---|---|---|---|
|
Foreign Ownership
|
100% for most activities (recent reform)
|
100%
|
100%
|
|
Trade with UAE Market
|
Yes, unrestricted
|
Restricted (cannot trade directly with mainland)
|
No (cannot conduct business within UAE)
|
|
Government Contracts
|
Eligible
|
Generally not eligible
|
Not eligible
|
|
Physical Office
|
Required (Ejari)
|
Flexible (virtual to physical)
|
Not required (no physical presence)
|
|
Visa Eligibility
|
Yes (based on office space)
|
Yes (based on package)
|
No
|
|
Tax Benefits
|
Subject to 9% Corporate Tax
|
0% for Qualifying Free Zone Persons on qualifying income
|
No UAE taxes (but no operations in UAE)
|
|
Setup Speed
|
1-2 weeks
|
Few days to 1 week
|
Few days
|
|
Typical Cost
|
Moderate to High
|
Low to Moderate
|
Low
|
|
Best For
|
Local market access, retail, contracting, government work
|
International trade, tech, media, startups, cost optimization
|
Holding companies, asset protection, international invoicing
|
Mainland: Full Market Access
Pros: – Unrestricted access to the entire UAE market (B2B and B2C). – Eligibility for government tenders and contracts. – 100% foreign ownership now available for most activities. – Flexibility to operate from any commercial location.
Cons: – Requires a physical office with Ejari. – May require a Local Service Agent for certain professional activities. – Generally higher setup and operational costs than some Free Zones.
Best For: Businesses targeting the local UAE consumer or B2B market, retail stores, restaurants, contracting companies, and those seeking government contracts.
Free Zone: Tax Efficiency & Simplicity
Pros: – 100% foreign ownership guaranteed. – Potential 0% Corporate Tax on qualifying income. – No import/export duties within the Free Zone. – Simplified and often faster setup process. – Flexible office solutions (virtual offices available).
Cons: – Cannot trade directly with the UAE mainland market. – Limited to operating within the Free Zone or internationally. – Must work through a distributor or establish a separate Mainland entity to access the local market.
Best For: International trading companies, e-commerce, technology firms, media companies, consultants, startups, and businesses primarily serving clients outside the UAE.
Offshore: Asset Holding & Privacy
Pros: – 100% foreign ownership. – No physical presence or visa requirements. – Low setup and maintenance costs. – Useful for holding assets, intellectual property, or shares in other companies. – Can open a UAE bank account (for holding purposes).
Cons: – Cannot conduct any business within the UAE. – No visa eligibility. – Cannot rent office space or have employees in the UAE.
Best For: Holding companies, asset protection structures, international invoicing, and wealth management.
Need Help Deciding?
The right choice depends on your unique business needs. T4ME’s experts can analyze your situation and recommend the optimal structure.