Tax Free Company in 3 Days? Dubai Mainland Company Setup
If you’re considering establishing a business in Dubai, understanding the differences between free zone and mainland companies is crucial. The Wealthy Expat breaks this down for us in their recent YouTube video, highlighting the pros and cons of both options.
Mainland vs. Free Zone Companies
Both free zone and mainland companies offer the allure of zero percent tax, but they operate differently and come with their unique sets of benefits and challenges.
Mainland Companies:
- Direct Business in UAE: They’re essential if you plan to conduct business directly within the UAE, like offering face-to-face services to residents.
- 5% VAT: If you’re selling to UAE residents, you need to charge an additional 5% VAT on your products or services.
- Bank Accounts: Opening a corporate bank account is more straightforward with a mainland company.
- Fast Setup: The process is quicker, with licenses and other necessities being set up in about two weeks or less.
- Property Ownership: A mainland company allows you to own property in the company’s name, which can be an asset protection strategy.
- 100% Ownership: Unlike the past when local Emirati contacts held a significant share, now you can own 100% of your mainland company.
Free Zone Companies:
- Extended Setup: The incorporation process is longer, typically taking up to a month and a half.
- Absolute Tax Freedom: This is your go-to if you want to remain completely tax-free for the foreseeable future.
Which Should You Choose?
Your decision largely depends on your business plans. If you’re not going to do direct business in the UAE, and your main goal is just to secure an Emirates ID or tax residency, a free zone company might be more suitable. However, if you aim to have a significant business presence in Dubai, from hiring many employees to dealing with local customers and banks, a mainland company is probably the way to go.
Drawbacks of Mainland Companies
While mainland companies offer numerous advantages, they also come with certain challenges:
- Cost: Setting up a mainland company can be significantly pricier than its free zone counterpart.
- Upcoming Taxes: Starting in 2023, mainland companies will face a 9% corporate tax. While many dub this as a “swiss cheese tax” because it might not be strictly implemented, it’s something to consider.