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Company Formation in Dubai

Why is the Dubai is suitable for business?

Seven Emirates together constitute the United Arab Emirates. Owing to the geographical location and the business-friendly environment, Dubai is the most preferred Emirate for multinational companies as well as SME’s to expand and set up businesses. Dubai is where the East links the West, halfway between London and Singapore and has become the trading point in the Middle East and North Africa and the hub for the MENA region.

Mainland Company Formation

Mainland Companies are the means to an end to operate freely throughout the Emirate, without any territorial restrictions. Mainland Companies mandatorily require an Emirati partner/agent (individual or corporate) to operate inside Dubai and other Emirates in UAE. Mainland business can be operated from business centers with reduced rents thereby enabling business owners to conduct business with clients locally as well as globally. The Department of economic development or Municipality of a particular Emirate are the regulatory bodies which govern and issue trade licenses for the Mainland Companies. Depending on the nature of business activity, you may need to obtain external approvals from other local/federal authority.

Mainland Company Setup and Categories in Dubai

Following are the categories of licenses issued by the Department of Economic Development in Dubai:

Professional- this is offered to companies which are engaged in offering services such as training, management consultancy and the like. Basis the required activity, certain companies are permitted to have 100% foreign ownership while there are certain activities which allow 49% of foreign ownership. When the company is fully owned by foreign shareholders, the UAE national acts as Local Service Agent – person or corporate (no shares entitlement). The role of the Local Service Agent is thus limited to administration.

Industrial- this is offered to businesses which function as manufacturers or companies which partake in industrial activities. It requires suitable leased/owned commercial units such as warehouses and manufacturing facilities.

Commercial- available to companies which engage in trading and contracting activities. Under the UAE Companies Law, a minimum of 51% ownership must be held by a UAE National (Local Partner – person or corporate), and 49% ownership could be that of the foreign shareholder.

Types of Mainland Company Formations

Following are the types of Mainland Companies formed and recognized in Dubai:

-Sole Establishment Dubai

-Limited Liability Company Dubai

-Branch of Foreign Company Dubai

-Representative Office

Civil Company 

Suitable option: mainland versus free zone

It is indeed pertinent for any business owner to consider the pros and cons while deciding on the suitable business structure in UAE. While foreign shareholders may be more concerned about retaining sole ownership and associated rights, the local laws grant certain exemptions and mandate certain norms which are purely based on the business activity. The key differentiation between mainland and free zones are as follows:

                                          Mainland Companies                                                          Free Zone Companies

Business Activities:

Business activities that require external approvals from local/federal governments for compliance reasons should be residing in mainland

Not all business activities are permissible within the Free zone as each Free zone has its own list of permissible activities

Territorial restrictions:

It is considered more recognized as a corporate vehicle to do business in neighboring countries of the Arabian Gulf (GCC)

A Free Zone company can only carry out its business within the Free Zone. To engage in any business out of the Free Zone, the company would have to engage a local agent.

Clients:

When you engage with clients who are classified as government parties, the mainland should be your jurisdiction to operate from

Within UAE, a Free Zone company can have the direct client only within the Free zone.

Visa requirements:

Unlike free zone, issuing employment visas for hiring procedure is not restricted to office space size being owned/leased in the mainland

Issuing employment visas for hiring procedure is restricted to office space size being owned/leased in the Free Zone

License Costs:

Mainland Companies require more compliances and as such prove to be a bit expensive as compared to Free zones

As compared to Mainland companies, Free Zone companies have lower license fees for some activities.

Ownership:

There are restrictions in ownership of a mainland company, basis the business activity.

Full ownership scheme is available for foreign direct investments and expat community, unlike in mainland where limited choices are available

 

Kindly note that the aforementioned is generic and every business has its own set of operational leeway and restrictions. For more tailor-made information and support, please feel free to contact us.

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