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Dubai’s business jurisdictions are specialized zones with unique economic policies, providing an ideal business environment that attracts and supports expatriate investors. There are multiple business jurisdictions, including free zones, mainland, and offshore, each contributing to Dubai’s overall economic growth. For instance, just JAFZA, a single free zone, alone attracted 400 new companies in 2023, contributing nearly 24% to Dubai’s foreign direct investment according to the FDI Intelligence report. Overall, Dubai’s market conditions are highly supportive for all types of businesses.
Dubai’s multiple business jurisdictions offer investors many choices for handling their businesses based on their distinct features such as the type of ownership, tax exemptions, and business processes. For instance, you can have 100% foreign ownership in free zones and offshore jurisdictions. However, when operating a business on the mainland, you need a local partner holding 51% of the shares, except in specific sectors that are not covered by the recent reforms in the UAE’s Commercial Companies Law (Federal Decree-Law No. 32 of 2021).
Business setups in these jurisdictions are regulated by specific authorities. Free zone businesses are regulated by free zone authorities, mainland businesses by the DED, and offshore businesses by offshore registries like JAFZA. Each business jurisdiction in the city serves various kinds of businesses, varied industry sectors, and operating requirements. For example, you cannot directly trade in Dubai’s mainland with a free zone license without a distributor, according to the UAE Commercial Companies Law (Federal Law No. 2 of 2015). Additionally, offshore businesses cannot trade within the UAE, as per the regulations of JAFZA Offshore Companies and RAK ICC Business Companies Regulations 2016.
However, with this, each jurisdiction offers investors unique opportunities for businesses to grow and operate in Dubai. Like free zones offer 100% tax exemption, the mainland offers freedom of business activities while offshore allows 100% Repatriation of profit. Along with this, they offer multiple options for setting up companies. For instance, you can set up a limited liability company (LLC) on the mainland, an FZE in a free zone, or an offshore company for international operations and asset management, among other options.
What are the business jurisdictions in Dubai?
Dubai’s business jurisdictions are specific geographic areas where businesses operate under local laws and guidelines set by business authorities. Dubai has three main business jurisdictions: free zones, mainland, and offshore. Each jurisdiction has distinct features such as types of ownership, tax benefits, business setup procedures, and profit repatriation policies. The following are the three primary business areas in Dubai.
- Freezone
- Mainland
- Offshore
Free Zone
Dubai’s Free Zones are tax-free areas that offer a favorable environment for businesses, primarily for foreigners, due to their efficient infrastructure. Overall, there are about 27 free zones in Dubai, each operated by specific free zone authorities like DAFZA, which regulates the Dubai Airport Freezone.
The main purpose of free zones is to attract foreign investors by offering 100% foreign ownership, fast and easy business setup procedures, and access to the global market. Along with this, a business in a Free Zone can enjoy the benefits of tax exemptions and lighter regulations.
However, the operations of free zone businesses are primarily confined to transactions within the zone itself. To access the UAE national market, they typically need to appoint local distributors as per the UAE Commercial Companies Law.
Mainland
The Mainland in Dubai refers to the areas where companies operate and trade in both local and international markets, without any restriction on their access to the market. This business jurisdiction is regulated by the Department of Economic Development (DED). It’s ideal for businesses aiming to get into the UAE’s diverse market and global trade routes.
Investors in the mainland enjoy freedom of business activity and location. However, they have to pay a 9% corporate tax on profits above AED 375,000 as per Federal Decree-Law No. 47 of 2023. Along with this investors need to follow the Kafil Sponsorship System with exception to some sectors as per Federal Decree-Law No. 26 of 2020.
Offshore
An offshore jurisdiction is a legal entity established outside Dubai to facilitate international business and asset management. It is not permitted to operate directly within Dubai’s local market. In Dubai 2 offshore jurisdictions are available including Jebel Ali Free Zone (JAFZA) and a branch office of RAK International Corporate Centre (RAK ICC).
The primary purpose of offshore jurisdiction is international tax planning and asset protection, as it offers limited public disclosure of shareholders and financial details.
What are the Benefits of Dubai’s Business Jurisdictions?
Each jurisdiction in Dubai offers unique benefits. The main benefits include 100% ownership and 100% tax exemption for free zones and offshore entities, as well as restriction-free operation of mainland businesses. Below are the key benefits for each jurisdiction.
Mainland
- Businesses can operate across the city
- Flexibility in Business Activities
- Mainland companies can participate in government tenders and contracts
Free zone
- 100% tax
- 100% ownership
- Easy business set-up procedure
Offshore
- Privacy and Asset Protection
- 100% ownership
- Global Business Opportunities
What are the Benefits of Dubai Mainland?
Dubai Mainland offers numerous benefits to entrepreneurs, the most attractive of which is the freedom to operate a business throughout the city. It has access to both the local and international markets with no restrictions as per the regulations outlined by the Dubai Department of Economic Development (DED).
Mainland businesses are not restricted to the specifics of a certain industry, unlike Free Zone companies. For instance, a tech company can engage in software development, establish physical stores for hardware sales, and offer IT training services on the mainland. Additionally, a recent amendment to the UAE Commercial Companies Law has allowed for 100% foreign ownership in select commercial sectors. In short, it’s the best option for businesses that prioritize market flexibility, mobility, and trustworthiness.
What are the Benefits of Dubai Free Zones?
The benefits of Dubai-free zones include 100% foreign ownership, 0% corporation tax on qualifying income, exemption from customs duties, and easy setup processes. However, the range of facilities provided varies for each free zone. For instance, the Jebel Ali Free Zone (JAFZA) facilitates duty-free trade, tax-free business operations, and logistics benefits for international trade, according to the official JAFZA portal. Not only that but also a fintech company in Dubai International Financial Centre can collaborate with global financial institutions and access global markets.
What are the Benefits of Dubai Offshore?
The benefits of Offshore in Dubai are asset protection, tax exemption, and international trade means. Although this jurisdiction has not been given the go-ahead to conduct business operations in the local market, it still affords the privacy and tax advantages offered. According to the Jebel Ali Free Zone Authority’s official portal, businesses in offshore jurisdictions can have 0% corporate taxes, unrestricted global operations, and 100% asset protection.
What are the Disadvantages of Dubai Business Jurisdictions?
Each business jurisdiction in Dubai has its limitations. The disadvantages associated with Mainland, Free Zones, and Offshore businesses are discussed below.
Mainland
- Requires local sponsor for some business types (51% local ownership) except for those that come under Federal Decree-Law No. 32 of 2021 of UAE.
- Subject to corporate tax (when profit is above AED 375,000 ) and VAT compliance.
- Visa quota is dependent on office size and category.
Free zone
- Cannot operate freely outside the designated free zone. Mainland trade is restricted.
- It’s Industry-specific, and expansion requires new licensing
- Activities are limited by policies from the specific free zone authorities.
Offshore
- Cannot trade within the local market of Dubai.
- No visa is allocated to the employ
- Cannot lease office space
What are the differences between MainLand, Free Zone, and Offshore?
The differences between Mainland, Free Zone, and Offshore jurisdictions are mainly centered around ownership structure, market access, and operational flexibility. However, the choice depends on the business model and the desired level of operational control by specific regulatory bodies. For instance, the Dubai Department of Economic Development (DED) allows 100% foreign ownership for mainland businesses in some sectors, while free zone or offshore authorities like DMCC, JAFZA, and RAK ICC allow 100% ownership for all types of businesses.
| Feature | Mainland jurisdiction | Free Zone jurisdiction | Offshore jurisdiction |
| Ownership | Local sponsors required for the sectors out of the range of Federal Decree-Law No. 26 of 2020 | 100% foreign ownership is allowed as perthe Federal Law of the UAE | 100% foreign ownership is allowed without having a local sponsor |
| Market Access | Full access to the UAE market | Limited to zone and international markets as per the specific Freezone Authorities | It can only trade outside the country, with no access to the UAE market |
| Taxation | A corporate tax of 9% is applied to profits above AED 375,000 | 0% corporate tax on qualified income for up to 50 years as per Federal Law | 0% corporate tax and no VAT, governed by the specific offshore authorities like JAFZA Offshore Regulate Jebel Ali Free Zone Offshore section |
What factors should I consider while choosing a jurisdiction for a business in Dubai?
The factors you should consider while choosing a jurisdiction for business in Dubai include ownership structure, market access, operational flexibility, tax benefits, and setup costs. However, to achieve the best result, you must decide based on your business goals and the desired level of operational control. Some of the 5 main factors are mentioned below
- Market Access: Ask yourself whether the focus of your business is a specific Dubai sector, overall Dubai, or even international markets. This helps you reach your target audience more cost-effectively. According to a research titled “The Effect of Business Location on Sales Result in the Traditional Market” by Fauziah Hanum at the University of Labuhanbatu, location has a greater impact on business sales.
- Ownership Structure: What would be preferable to you? Be the only owner or be willing to join a local sponsor? For example, in Free Zones and offshore jurisdictions, you can have 100% foreign ownership. However, mainland jurisdictions require adherence to the specific sectors outlined in Federal Decree-Law No. 32 of 2021.
- Tax Benefits: Make sure to compare the tax benefits available for various jurisdictions and their correlation with your financial plans. Although free zones and offshore jurisdictions offer 0% corporate tax (on qualified income), mainland companies are subject to a 9% corporate tax on profits exceeding AED 375,000.
- Business Type and Industry: Consider which area would be the right choice for your business. As some free zones and offshore jurisdictions are limited to specific sectors, such as DMCC, which focuses on media-related businesses. Additionally, you need to verify the legality of your specific company formation in the chosen jurisdiction to avoid future legal complications.
- Cost and Setup Process: Calculate the initial setup costs to gain a better understanding of your financial needs and ongoing operational expenses, such as sponsorship fees and local compliance costs. To accurately assess your financial needs, factor in the initial setup costs, which can vary between AED 8000 and AED 25,000 for a Freezone, AED 10,000 and AED 40,000 for mainland, and approximately AED 10,000 for offshore.
What is the primary purpose of Main Land Jurisdiction in Dubai?
The primary purpose of mainland jurisdiction in Dubai is direct access to the local market along with the possibility of businesses being able to trade within the UAE and create a presence in the area. The Mainland-wide companies have the leeway to go into almost every industry and do not have been tied by geography as a limiting factor.
What is the primary purpose of Free Zone Jurisdiction in Dubai?
The primary purpose of Free Zone jurisdiction is to have full foreign ownership, get exempt from taxes, and be able to build facilities specific to the respective industries. According to UAE Embassy Free Zones are the perfect places for driving industry advancements, attracting foreign investment, and enabling free international trade.
What is the primary purpose of Offshore Jurisdiction in Dubai?
The primary purpose of offshore jurisdiction in Dubai is to get tax deductions, and asset protection combined with confidentiality while the company is operating internationally. Offshore companies are not intended to participate in business in the UAE; hence they are apt for holding companies or international trade operations.
What are the requirements for a business license in Dubai Business Jurisdictions?
The requirements for a business license in Dubai vary across the 3 different jurisdictions. However, the main requirements are provided below.
- Business Activity Selection
- Company Name Approval
- Legal Structure
- Shareholder Details
- Local Sponsor
- Office Space
- Initial Approval
- Memorandum of Association (MOA)
- License Application
- Trade License Fee
- Special Approvals
- Compliance with Regulations
What Are the Requirements for a Business License in Mainland?
A mainland business license is issued by the Department of Economic Development (DED) for companies operating within Dubai’s non-free zone jurisdictions. The 3 key requirements include:
- Local Sponsor: Any UAE national is required as a partner or service agent for certain activities which are not under allowed category in from the UAE Commercial Companies Law (Federal Law No. 32 of 2021), which replaced the earlier Federal Law No. 2 of 2015.
- Office Space: Physical office is necessary under UAE Commercial Companies Law and regulations from the Department of Economic Development (DED) in Dubai.
- Trade Name Registration: The company name must comply with legal guidelines and be approved by the Department of Economic Development (DED) and supported by the UAE Commercial Companies Law (Federal Law No. 32 of 2021).
What Are the Requirements for a Business License in a Free Zone?
Requirements for a business license in a free zone in dubai include initial approval, registration, shareholder and manager documents, company name, office space, a bank account, and specific work permits. These requirements are issued by specific free zone authorities, such as JAFZA for Jebel Ali Free Zone. To obtain a free zone license, the 3 main requirements are provided below.
- Business Activity Approval: Select from the free zone’s permissible activities allowed by Free Zone Authorities and obtain relevant approvals.
- Shareholder Documentation: Provide passport copies and identification for shareholders which are typically handled by the specific free zone authority.
- Lease Agreement: The free zone authorities require a lease agreement for office space as part of the business setup process. This is supported by the UAE Free Zones Law and specific regulations set by each free zone authority.
What Are the Requirements for a Business License in Offshore?
Offshore entities conduct international business and cannot operate within the UAE. Also, they do not need a license for business operation but are issued a Certificate of Incorporation by offshore authorities.
Which Business Jurisdiction Is More Preferred for Business in Dubai?
The most preferred business jurisdictions in Dubai are: mainland for local market operations, free zones for tax-free business operations, and offshore for international trade operations. However, this preference can change based on the industry sector and business type. Based on conditions below is the breakdown of the preferred jurisdiction
- The mainland is the most beloved place for businesses that operate both locally in the UAE and worldwide. Similarly, people prefer it because they can win government contracts, which are often highly profitable. Additionally, mainland businesses can tailor their strategies to target both local and foreign market segments, giving them a significant advantage in terms of flexibility.
- Free Zones in Dubai are preferred by those considering tax-free business operations, as there is a 0% corporate tax rate (on qualified income) and low customs tariffs, ranging from 0 to 5% for almost everything, according to the UAE Ministry of Economy.
- Offshore jurisdictions have become attractive due to their exemption from tax regulations and their ability to protect assets. They also facilitate international trade, although access to local markets is restricted.
