Mainland company
- Licensed by the relevant Department of Economic Development (DED) of the emirate (e.g., Dubai DET, Abu Dhabi ADDED).
- Can trade directly with all UAE customers and bid for UAE government contracts.
- Since 2021, most mainland activities allow 100% foreign ownership; some "strategic impact" activities still require Emirati participation.
- Subject to UAE Corporate Tax (9% above AED 375,000) [1]; standard 5% VAT applies.
- Must employ UAE nationals under Emiratisation quotas if ≥ 50 employees.
Free-zone company
- Licensed by a specific free-zone authority (DMCC, JAFZA, RAKEZ, ADGM, DIFC, etc.).
- 100% foreign ownership and easy repatriation of capital and profits.
- Restrictions: typically cannot trade directly with the UAE mainland market without using a mainland distributor or registering a mainland branch (rules vary by free zone).
- Eligible for the 0% Qualifying Free Zone Person rate on Qualifying Income, subject to economic substance, audited accounts, and transfer-pricing compliance [2].
- Some free zones (DIFC, ADGM) operate under their own common-law-based legal framework distinct from UAE federal civil law.
How to choose
- Sell to UAE consumers/businesses → mainland.
- B2B services to free-zone or international clients → free zone.
- Holding company / regional HQ / IP company → free zone (DIFC/ADGM particularly).
- Government contracts → mainland.
For a specific business case, consult a UAE corporate-law / tax advisor before incorporating — the choice affects banking, hiring, taxation, and exit options.
Citations
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This is general legal information, not legal advice. For advice tailored to your specific situation, consult a UAE-licensed lawyer.
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