Free Zones, Onshore, Offshore: What are the Differences?
The United Arab Emirates has long been an attractive destination to have a business. Aside from its strategic geographic location, the UAE is home to some of the world’s largest and fastest emerging markets due to its modern infrastructure and continuous development.
When it comes to company incorporation in the United Arab Emirates there are multiple choices available to benefit from and to suit your business needs.
What is a Free Zone company?
Free zones in the UAE were created by the region to allow 100% foreign ownership and come with many other advantages. There are 40+ free zones in the UAE, all offering a business environment where goods and services can be traded.
The main benefits of a free zone company in the UAE include:
- 100% foreign ownership
- No currency regulations
- No import or export duty
- No income or corporate tax
- Access to skilled professionals
- Low start-up and operational costs
- Stable and transparent laws
All these benefits promote international trade and encourage foreign investment.
UAE free zones also cater to specific industries, presenting their own benefits to specific businesses. For example, the Jebel Ali free zone and Dubai South are directly linked to the largest ports in the region and is favored by those in the import/ export trade.
Setting up a free zone company is straight forward however the exact application process varies depending on the business activity and chosen free zone. Once your free zone company has been established you and your family are eligible for UAE residency visas.
Our full list of free zones:
Click on the freezone area you want to learn more about, or visit our freezones page for a full comparison:
What is an Onshore company?
An onshore or mainland business entity in Dubai is a company that is established anywhere within the limitation of commercialized geographical areas of Dubai. These areas come under the jurisdiction of the Emirati Government, which have a mandatory requirement of a UAE national to hold at least 51% of the total equity of any commercial business registered as a Limited Liability Company (LLC), making the maximum foreign shareholding allowed for a foreign national to be 49%.
On the 23rd of November 2020, a new Federal Decree-Law No. (26) of 2020 has been introduced to amend foreign ownership restrictions and allowing foreign investors to own up to 100% of the share capital for the majority of commercial companies. This new Decree is expected to come into force during 2021.
The new Commercial Company Law also allows foreign companies to establish a mainland branch in Dubai without it needing to be a separate legal identity. Although this is possible, this does not enable the parent company to be entitled to limited liability legal protection and onshore branches are restricted to carry out the same activities as their parent company.
A mainland company in Dubai is registered under the UAE Department of Economic Development and there are multiple licenses types a business can obtain after the formation is complete.
The main benefits of a mainland company in the UAE include:
- The freedom to choose a premise in any area of Dubai
- The ability to conduct a wide range of business activities
- The freedom to trade internationally, including inside the UAE
- Residential visa for you, family members and employees
- Access to skilled professionals
- Stable and transparent laws
What is an Offshore company?
These offshore companies are often set up as acting or holding companies aiming for the consolidation of a group of entities in the UAE and internationally. These companies are as well allowed to carry commercial and professional business activities. Offshore companies registered in Dubai (JAFZA) / RAK (RAKICC) do not have permission to engage in business operations within the UAE and they are restricted to carry certain activities. You may find more information here.
The main benefits of an offshore company in the UAE are:
- No taxes
- Confidentiality of director names and financial information
- No accounting or auditing requirements
- Simple incorporation process
- Asset protection
- Stable and transparent laws
While registering an offshore company in the UAE, you are not eligible to apply for a residence visa contrary to Freezone and Mainland companies.
SFM offer two offshore locations in the UAE. Find out more about Ras Al Khaimah and Jebel Ali.
UAE offshore companies can also open a domestic bank account locally or in any other country.
SFM have specialized in Free zone, offshore and onshore company formation for over 15 years. For more information on company formation in the UAE contact us today.
