Mainland vs Free Zones in Saudi Arabia: Which Is Best for Your Business Setup?
Saudi Arabia’s transformation under Vision 2030 is opening exciting new doors for local and foreign investors alike. Whether you’re launching a startup, expanding a regional HQ, or entering a new market, choosing the right business structure is critical—and one of the first major decisions you’ll face is: Should you set up in a Free Zone or the Mainland?
This guide breaks down the differences, advantages, and limitations of both Free Zone and Mainland setups in Saudi Arabia, helping you choose what’s right for your goals. And if you’re looking for expert support, Marshal is here to simplify the entire process—end to end.
What Is a Mainland Company in Saudi Arabia?
A Mainland (onshore) company is licensed by the Ministry of Commerce (MoC) and operates anywhere within Saudi Arabia. These companies are free to trade with the local market and bid for government contracts. Key features:- Can do business across all of Saudi Arabia
- Can serve private and public sector clients
- Eligible to open offices, warehouses, or branches in any city
- May be subject to Saudization and VAT
- Full ownership allowed for many activities by foreign investors
What Are Free Zones in Saudi Arabia?
Free Zones are designated areas with special economic rules aimed at boosting foreign investment and innovation. These zones offer streamlined regulations, tax benefits, and sector-specific infrastructure. Popular Free Zones in Saudi Arabia include:- King Abdullah Economic City (KAEC)
- King Salman Energy Park (SPARK)
- NEOM (for futuristic technologies and innovation)
- Riyadh Integrated (RIZ) and Jazan Economic City
- 100% foreign ownership
- Tax and customs incentives
- Sector-specific infrastructure
- Often limited to doing business within the Free Zone or internationally
Mainland vs Free Zones: A Side-by-Side Comparison
| Feature | Mainland | Free Zone |
|---|---|---|
| Market Access | Full access to Saudi market | Mostly within zone or export only |
| Ownership | Up to 100% foreign ownership (in many sectors) | 100% foreign ownership guaranteed |
| Tax Benefits | Subject to VAT, Zakat, income tax (as applicable) | May enjoy tax exemptions or reductions |
| Saudization Requirements | Mandatory | Often relaxed or phased in gradually |
| Location Flexibility | Can open in any Saudi city | Must operate within the designated zone |
| Eligibility for Government Contracts | Yes | Usually no |
| Setup Speed | Moderate to fast (with right guidance) | Generally faster and more streamlined |
So, Which One Is Right for Your Business?
Choose Mainland if you:
- Want to serve the local Saudi market directly
- Plan to bid for government projects
- Need flexibility in where you open offices or warehouses
- Want to hire large teams and scale locally
- Operate in regulated sectors like construction, logistics, healthcare, or retail
Choose a Free Zone if you:
- Operate in technology, innovation, manufacturing, or energy
- Plan to focus on exports or international clients
- Want to benefit from customs duty exemptions
- Are setting up a regional HQ or R&D facility
- Want simplified ownership and operational structures
Important Legal and Compliance Notes
- License Activity Matters: Whether you set up in a Free Zone or Mainland, your business activity determines which ministries and certifications apply (e.g., MoC, SFDA, SEEC).
- Saudization Applies Differently: Mainland companies must comply with Saudization immediately. Free Zones often have a grace period—but this is changing as the government aligns zones with national employment goals.
- ZATCA Compliance: Free Zone businesses involved in trade may still need to comply with VAT or e-invoicing based on activity and client location.
- Identify the best setup option based on your goals
- Register your company with the relevant authorities (MoC, GAZT, SEZ authority, etc.)
- Handle licensing, GRO tasks, Saudization, and certification
- Ensure your business is legally compliant and ready to operate
- Offer ongoing support for growth, hiring, and financial compliance