You can fully own a mainland company in the UAE. Of course, with certain exceptions.
This change came into effect following the amendments to the UAE’s Commercial Companies Law (CCL) by the Federal Decree-Law No. (26) of 2020, which altered some provisions of the Federal Law No. (2) of 2015 on commercial companies. These amendments, effective from June 1, 2021, allow foreign investors and entrepreneurs to establish and fully own onshore companies in the UAE, eliminating the previous mandatory requirement to have a majority Emirati shareholder or agent.
Before this change, expatriates were required to find a local sponsor who would hold 51% of the total shareholding of the company. This local sponsor would also have additional duties and rights, or sometimes, parties would enter into a side agreement ensuring the foreign expat retained full operational control. However, since June 1, 2021, a foreign entity or individual may invest in and own up to 100% of the total shareholding in a company in the UAE, thus removing the necessity for a local sponsor.
It’s important to note that this 100% foreign ownership is approved for certain business activities under commercial and industrial licenses, with over 1000 activities falling into this category. For instance, in Abu Dhabi, the Department of Economic Development identifies 1,105 registered commercial and industrial activities for which non-citizens can own economic licenses and establish companies with 100% or less ownership. Similarly, in Dubai, the Dubai Economy permits full ownership for foreign investors in more than 1,000 commercial and industrial activities, excluding economic activities with a strategic impact, which relate to seven sectors.
However, 100% foreign ownership is still not permitted for ‘professional licenses’ in the UAE. This means that for certain businesses, such as opening a salon or a restaurant in a mainland area, complete foreign ownership is not allowed.
Mainland company advantages over a Free Zone Establishment (FZE)
There are several advantages of a fully owned mainland company compared to a Free Zone Establishment (FZE) in the UAE:
Broader Business Scope: Mainland companies can operate anywhere within the UAE, including all free zones and mainland areas, providing greater flexibility in terms of location and business reach.
Access to Government Contracts: Mainland companies are often eligible to bid for government and semi-government projects, which are typically not accessible to free zone companies.
No Restriction on Business Activities: Unlike free zones, which often have specific focuses or limitations on the types of businesses they can accommodate, mainland companies can engage in a wider array of business activities.
Local Market Access: Mainland companies can directly trade in the local UAE market without the need for a local service agent or distributor, which is a significant advantage for businesses focusing on the local market.
Ease of Visa Processing: Mainland companies may have a more straightforward process for obtaining employee visas and can potentially apply for more visas compared to a free zone company, depending on the business size and nature.
No Currency Restrictions: Mainland companies face no currency restrictions, allowing more flexibility in financial transactions.
FZE have advantages too; consider carefully
However, the choice between a mainland company and an FZE should be based on the specific needs, business activities, and strategic plans of the business. Each has its unique set of benefits, and the right choice depends on the business model and market focus.
Several unique benefits of the Free Zone Establishments (FZEs) in the UAE include:
Tax Exemptions: They usually offer exemptions from import and export duties, corporate taxes, and personal income taxes.
Ease of Setup: The process for setting up an FZE is typically more streamlined and less bureaucratic compared to mainland companies.
Customs Benefits: FZEs benefit from customs duty benefits, making import and export activities more economical.
Repatriation of Capital and Profits: FZEs allow for the full repatriation of profits and capital, without any currency restrictions.
Strategic Locations: Most free zones are located strategically near ports or international airports, facilitating easy logistics and international trade.
Clustered Industries: Free zones often focus on specific industries, providing an ecosystem with similar businesses, which can be beneficial for networking, collaboration, and industry-specific services.
Reduced Paperwork: Generally, free zones require less paperwork for business setup and operations, making it more straightforward to start and run a business.
These benefits make FZEs particularly attractive to foreign investors and entrepreneurs looking to establish a presence in the UAE with certain specific business activities and market focuses. Carefully consider if your business activities fit into these categories. Consult an expert if you are in doubt.