Difference between Free Zone & Mainland Construction Companies

Famously known for its business advantages, the UAE has become the most demanding place for businessmen to commence a construction business. New or old, every business enthusiast wants to open up a business in UAE for which they choose different regions. The two famous jurisdictions are Free Zone and Mainland. People often question: What is the difference between Free Zone and Mainland construction companies? So, let’s get to know about the difference.

What is a Mainland Construction Company?

Mainland Construction Companies is an emirate authority that holds a certain level of freedom in business activities. Mainland has many advantages and one of the best advantages is that it doesn’t have any restrictions on commercial activities. The trade license for the mainland company is issued by The Emirate’s Department of Economic Development (DED). Mainland is counted as one of the advantageous companies if you are willing to do business in the UAE.

What is a Free Zone Construction Company?

While in Mainland, you cannot have 100% ownership of the company but in the Free Zone, you are allowed to have 100% ownership. There is a total of 45 freezone in the UAE and you can opt for any. Every Free Zone have different rules and regulations that is administered by its regulatory authorities. 

Mainland vs Free Zone

Factor	Mainland	Free Zone
Ownership Structure	A local sponsor should have 51% ownership, a foreign businessman can only have 49% of the ownership.	You can get 100% ownership being a foreign individual and you do not need a local sponsor
Business Activities	Can operate within local UAE market and internationally	Can be operated within the free zone only and internationally
Taxation and Duties	VAT and other tax obligations	Tax Exemption
Scope of Business	Wider scope of business activities	Limited activities
Employment and Visa Policies	Not limited by visa quotas and can employ larger number	Limited amount of visas and can only be sponsored if activity is under free zone
Annual Audit	Obligatory	Different regulation in different Free Zones
Regulatory body	Department of Economic Development (DED)	Free Zone Authority (FZA)
Government Regulations	Must comply with national regulations	Free Zones operate under their own regulatory authorities

Advantages of a Mainland Construction Company

There are many advantages that a mainland company offers to entrepreneurs. Following are some of the advantages:

• You can get tax benefits from the mainland companies as you can get benefits on taxes and deductions specific to their operating region.
• Companies established in the mainland are allowed to operate money transactions in their own regional countries which helps in avoiding the hindrance of currency.
• Mainland provides the local expertise as a mainland company owner is more familiar with the local environment and market tricks. 
• There are no visa restrictions in the mainland. You are allowed any number of visas when you open a construction company.
• You are also allowed 100% repatriation of profits

Advantages of a Free Zone Construction Company

Free Zone also has its own advantages no matter it has restricted market access. Let’s get to know about these advantages:

• In a freezone a business owner can have 100% of ownership instead of sharing it with another owner. 
• The tax in free zones is exempted for businesses.
• There are no trade barriers in the freezone companies. You can attract foreign companies and trade with them.
• As per the need of construction firms, freezone provides infrastructure and support services.
• The detail of the shareholder is private to the public
• The recruitment policy is easy in the free zone

Conclusion

If you are someone who is willing to commence a business in the UAE, then you must be having doubts related to these two UAE jurisdictions. Often people get confused between the two. Above mentioned details will help you get a clear picture of the free zone and the mainland. You can make decisions accordingly.

FAQs

1. Which UAE jurisdiction allows 100% ownership of the company?

While in Mainland, you cannot have 100% ownership of the company but in the Free Zone, you are allowed to have 100% ownership. There are a total 45 freezone in the UAE and you can opt for any.

2. What authority issues a trade license to the mainland company?

The trade licence for the mainland company is issued by The Emirate’s Department of Economic Development (DED). Mainland is counted as one of the advantageous companies if you are willing to do business in the UAE.

3. What are the employment and visa policies in the UAE to commence a business?

Mainland companies can employ a larger number of employees compared to freezone companies and are not limited by visa quotas based on office space. Visa quotas in free zones are typically tied to the amount of office space leased by the company. Freezone companies can only sponsor employees for visas if they are operating within the freezone.