Choosing the Right Option for Your Business in the UAE
Navigating Your Path to Success
The UAE is a popular destination for foreign investors due to its stable economy, pro-business government, strategic location, skilled workforce, and favorable business environment with low corporate income tax and no personal income taxes. Businesses can choose to set up in the mainland or a free zone, each with its own advantages and disadvantages. HSBM Global can assist you in determining the best option for your business.
Mainland Company Formation
The mainland is becoming the most favoured location for setting up a business in the UAE, offering several advantages:
- Large Market Access: As a significant trading hub, the UAE provides access to a vast market of over 2 billion people across the Middle East, Africa, and Asia.
- Skilled Workforce: The UAE boasts a highly skilled and English-proficient workforce.
- Favourable Tax Rates: The UAE offers a low corporate tax rate of 9% and there are no personal income taxes in the UAE. However, large multinational enterprises with consolidated global revenues exceeding AED 3.15 billion may be subject to a corporate tax rate of 15% once the Ministry of Finance implements the BEPS Pillar 2.0 legislation.
- Audit requirements: Under the New Federal Corporate Tax Law, Mainland UAE companies are only required to prepare and maintain audited accounts if their revenue exceeds AED 50 million or more in the relevant tax period.
However, setting up a business on the mainland also has its challenges:
- Complex Regulations: The mainland has more intricate regulations compared to free zones.
- Foreign Ownership Restrictions: Although 100% foreign ownership is possible under recent legislative changes, certain activities on the mainland can limit foreign ownership.
- Increased Costs: The expenses associated with setting up and operating a business on the mainland can be higher than in certain free zones.
Free Zone Company Formation
Free zones are designated areas within the UAE that provide several benefits to businesses, including:
- Tax Exemptions: Qualifying free-zone persons can benefit from 0% corporate income tax rate provided that certain conditions are satisfied. There are no personal income taxes in the UAE.
- Simplified Customs Procedures: Free zones feature streamlined customs procedures, saving businesses time and money.
- 100% Foreign Ownership: Foreign investors can fully own a business in a free zone.
Despite these advantages, there are some drawbacks:
- Limited Local Market Access: As free zones are not part of the UAE customs territory, businesses within them have limited access to the local market.
- Higher Costs: The setup and operational costs can be higher in certain free zones compared to the mainland.
- Audit requirements: Under the New Federal Corporate Tax Regime that will apply from 1 June 2023 or onwards, all Qualifying Free-Zone Persons are required to prepare and maintain audited financial accounts.
Choosing the Right Option
The optimal choice for your business in the UAE depends on your specific business needs. If local market access and budget constraints are your top concerns, the mainland may be your best bet. Conversely, if local market access is not a priority and you have a larger budget, setting up in a free zone could be more beneficial.
Remember, consulting with an experienced business advisor is crucial to ensure you make the most appropriate choice for your business.
How HSBM Global Can Assist You
Whether you opt for a Free Zone or Mainland Company, HSBM Global can guide you through the entire setup process.
Free Zone Company Formation: We'll help you choose a suitable free zone, decide on a business activity, apply for a licence, guide you on opening a corporate bank account, rent office space, apply for necessary visas for you and your employees, and register for business for taxes.
Mainland UAE Company Formation: Contact us today to learn more about setting up a company in a UAE free zone or mainland. Our experienced team will ensure a seamless and efficient setup process for your company in the UAE.