Setting up a company in Dubai is an exciting journey filled with opportunities and challenges. With the country’s strategic location, business-friendly policies, and tax benefits, Dubai is a magnet for entrepreneurs worldwide. Diving into the UAE business landscape without proper planning can lead to costly mistakes. To guide you better, Dahhan Business Services has come up with a list of top mistakes to avoid while establishing a company in Dubai.
Mainland, Freezone, and Offshore Company – Find the Best?
With mainland, free zone, and offshore options presenting different ownership rules and tax implications, the choices are wide open for entrepreneurs and investors. Understanding your operational needs, licensing requirements, and target markets is crucial to choosing between mainland, freezone, and offshore setups. Consulting with a UAE business setup expert in Dubai can help ensure compliance while optimizing ownership, taxation, and growth potential. Now, let’s discuss the common pitfalls that you need to be aware of while establishing a company in Dubai.
Mistake 1: Choosing the Wrong Jurisdiction
Free Zone vs Mainland: Key Differences
Ownership Structures: For establishing a company in the mainland, companies traditionally require 100% local partner ownership except for a few activities, such as Manpower Supply, Distributor Agent, while free zones offer 100% foreign ownership but with geographic operation restrictions. For mainland business setup, contact our business setup consultants in Dubai.
Tax Considerations: Offshore entities face 0% corporate tax but cannot trade within UAE markets, whereas mainland companies & non-designated free zones must comply with the new 9% corporate tax on profits over AED375,000.
Market Access: Only mainland and certain free zone companies can bid on government contracts or sell directly to UAE consumers without third-party distributors. Dahhan Business Services, the business setup Dubai will guide you with the process of finding the right jurisdiction for your business.
Mistake 2: Overlooking Hidden Costs
True Cost Comparison of UAE Business Structures
License Variations: Certain free zone licenses start at AED 5,500, while mainland business licenses cost around AED 15,000, approximately.
Visa Allocations: Freezone Company Formation package includes 3 employee visas, while mainland companies pay AED 4,000-7,000 per visa application for establishing a company in the UAE.
Mistake 4: Poor Visa Planning
Understanding UAE Residency Through Business Setup
Minimum Investment: Investor visas require AED 10,000+ in capital for free zones versus AED 73,000 for mainland establishments.
Processing Times: Mainland company owner visas typically process in 3-5 days versus 5-7 days in most free zones.
Mistake 5: Neglecting the Future Growth Plans
Scalability of Different UAE Business Structures
Investor Exits: Freezone/offshore company liquidations can be completed in 30-90 days, while mainland closures require 45-50 days of regulatory clearances. And for Sole Proprietorship or Civil Company, the timeframe varies between 5-7 working days.
Ownership Transfers: Free zone business sales don’t require notarized MOA amendments like mainland entities.
Establishing your Company is Now Easy with Dahhan
With 10,000+ successful business setups and having provided consultation services to 13,000+ clients, we are your trusted partner in navigating the UAE’s business landscape. Our expertise ensures a smooth, compliant, and efficient company formation process tailored to your needs. Contact our business setup in Dubai to schedule a free consultation with our experts.
Frequently Asked Questions (FAQs)
What's the biggest mistake when choosing between a UAE free zone vs a mainland company setup?
Selecting the wrong jurisdiction for your business activities is the most common mistake. Dahhan Business Services advises analyzing your target market before deciding.
How does choosing the wrong company type affect my UAE business?
Incorrect company type selection can lead to legal issues, higher costs, and operational restrictions. Offshore companies can’t trade locally, while free zones can’t supply their services/products inside the mainland jurisdiction, and also cannot supply their services to the B2C sectors. Each structure has specific tax implications and licensing requirements.
What are the hidden costs of UAE company setup mistakes?
Common hidden costs include re-registration fees, penalty charges for non-compliance, additional licensing costs, and unexpected sponsor fees. Dahhan Business Services helps clients avoid these by providing accurate setup cost estimates upfront.
Why is a local sponsor required for mainland companies in the UAE?
Mainland businesses need a UAE national sponsor holding 51% ownership, except in certain services sectors. Free zones offer 100% foreign ownership but limit business activities to specific jurisdictions. The requirement protects local economic interests.
Which is better for startups: free zone or mainland UAE?
Free zones typically suit startups prioritizing cost efficiency, and investors use this option for invoicing., However, the selection of freezone vs mainland depends on the nature of your business. Dahhan Business can analyse your business plan and guide you to choose the right jurisdiction.
What tax implications should I consider when setting up in the UAE?
Mainland companies face 9% corporate tax, while free zones maintain tax benefits if not conducting business with mainland UAE. VAT registration applies to both taxable supplies over AED 375,000 annually.
Can I change from free zone to mainland company later?
Yes, but it involves a complete re-registration process including new licensing and possible sponsor arrangements. Dahhan Business Services recommends getting professional advice before initial setup to avoid costly transitions.
