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Can a Dubai Free Zone Company Operate on the Mainland?
Published on: 15 July 2024By Aaron Richards
Dubai is a well-known city for its dynamic economy and business-friendly environment. The jurisdiction offers entrepreneurs varied options and business opportunities for setting up a company in Dubai.
Each jurisdiction, both free zone and mainland, has different advantages and restrictions. It is the business owner's responsibility to understand their business requirements and decide a jurisdiction in which to establish their company.
Now, the big question on your mind must be: Can you incorporate a Dubai-free zone company and operate it on the mainland? To answer this question better, let us first understand the difference between the two business zones and how they operate.
Difference Between a Dubai Mainland and Freezone Company
The following table below will help you understand the significant difference between the Dubai mainland company and the Dubai-free zone company.
S.No
Difference in Sectors
Dubai Mainland Company
Dubai-Freezone Company
1
Ownership
If a foreigner plans to establish a business on the mainland, they can only own 49%of the company. A local sponsor is required to own the remaining 51%.
A foreigner can own 100% of the company in the free zone.
2
Business Sector
A Dubai mainland company can conduct business across the UAE.
Unlike the mainland, a Dubai-free zone company is prohibited from conducting business (producing and selling) outside the jurisdiction.
3
Audit
Yes, conducting yearly audits is mandatory for all Dubai mainland company formation.
Auditing is not mandatory to conduct audits for any Dubai-free zone company. However, certain free zones may require it.
4
Government Entities for Company Formation
Mainland companies must get approval from the Department of Economic Development (DED), the Ministry of Labour (MIL), Dubai Municipality, the Ministry of Interior (MOI), and other authorities as per the requirement.
Free zones have set standards for approving any business operating inside their jurisdiction, and they do not require clearance from authorities outside the free zone.
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Free zone companies can conduct business on the mainland by either establishing a branch or acquiring permission from the relevant authorities. Generally, free zone companies operate under the regulations of their respective free zone authorities, which require adherence to basic company setup procedures and licensing requirements. However, conducting business on the mainland necessitates compliance with additional paperwork mandated by the Department of Economic Development (DED), including licensing, acquiring permits, and fulfilling legal requirements specific to mainland operations.
Who Approves the Opening of a Branch Office in Dubai Mainland?
You must obtain approval from the following authorities before opening a freezone branch office in Dubai Mainland:
Department of Economic Development (DED)
Ministry of Economy (MoE)
Federal Foreign Companies Committee
This process includes additional steps, such as appointing a local service agent, obtaining initial approval, and submitting necessary documentation. A professional business setup consultant like BSW can facilitate this process and ensure compliance with all regulatory requirements.
What Would Happen if Someone Violated the Law?
Most people who prefer conducting business in Dubai must follow the rules set by DED. If anyone disobeys the rules and conducts business operations in the freezone without a DED license, they can:
Face a penalty of up to AED 100,000.
License suspension or revocation.
Can suffer legal actions.
The government can blacklist individuals and companies.
This can even tarnish the reputation of the company.
The individuals can be deported.
The company can face high levels of scrutiny and regulatory oversight in the future.
Benefits of Opening a Branch Office in Dubai
There are numerous benefits to establishing a branch office in Dubai; they are:
Complete foreign ownership
Rent an office anywhere in the UAE
Flexibility to trade in the mainland of the UAE
Tax benefits
Minimum audit report requirements
Low administrative cost
BSW's Role in Assisting Clients
If you are considering starting a business in Dubai, Business Setup Worldwide can assist you by providing best-in-class services. Our business advisors possess extensive knowledge of the process and will guide you on the right path to achieve your dreams. Contact us today and let our experts help make your dream a reality.
Aaron Richards is a seasoned expert with over six years of
experience who specializes in offshore company formation, trust
and foundation setup, and corporate services. Through his blogs,
Aaron shares valuable insights to guide clients in making informed
decisions about their global business needs.
Frequently Asked Questions
1. Can a foreign own 100% of the company in the Dubai-free zone?
Yes, a foreigner can own 100% of a company in the Dubai-free zone.
2. Do I need a local sponsor in the Dubai free zone?
No, you don’t need a local sponsor to open a company in the Dubai-free zone.
3. What are the limitations of mainland operations for free zone companies?
Even with approval, specific activities, such as sales and marketing or administrative functions, typically limit a free zone company's mainland operations.
