When setting up a company in the UAE, the first major decision you must make is where to establish your business: within one of UAE’s many free zones, the mainland or offshore. It’s important to make an informed choice regarding company jurisdiction and to understand what each term means.
1. Mainland
a. Refers to the areas outside the free zones. Mainland company formation is regulated by the legal structure set by the government and needs to meet Government policies. They are located within the limitation of commercialized geographical areas that have been covered under the jurisdiction of the Emirati Government
b. In the mainland, foreign investors are permitted full ownership, according to the Federal Decree-Law No. 26 of 2020, which amended Federal Law No. 2 of 2015 on Commercial Companies. This means that foreign investors can have 100% ownership in more than 1,000 commercial and industrial activities. However, this excludes economic activities with a strategic impact which relate to certain specific sectors.
c. Businesses face a 5% Value Added Tax (VAT) and a 9% Corporate Tax, applicable to those with profits exceeding AED 375,000 (USD 100,000). The advantage is that there is no income tax for businesses in the mainland.
2. Free zones
a. They are specially designated areas, often sector specific. Each free zone operates under its own rules and regulations for licensing and registration.
b. Primarily focus on business activities outside the UAE. However, six specific free zones offer dual licenses, which allow businesses to engage in both onshore and offshore activities.
c. Foreign investors can have 100% ownership of all companies.
d. There are significant tax benefits for businesses that operate in the free zones. These include 100% exemptions from corporate tax, customs duty, VAT, and income tax. It also allows for repatriation of capital and profits from the business.
3. Offshore
An Offshore Company is a legal business entity that is set up with the intention of operating outside it’s registered jurisdiction and/or the location of it’s ultimate ownership.
It’s main advantages are:
- Tax free environment
- 100% foreign ownership
- Global business operations
General restrictions:
- Prohibited activities include insurance, banking, and financial services. Additions can be made based on the new cases.
- The UAE Offshore Company formation is not allowed entirely by the authorities to perform any commercial operations in the country.
- There are specific areas where you can invest in real estate while being considered offshore.
The principal jurisdictions offering Offshore Companies in UAE are:
- Ras Al Khaima (RAK)
- Jebel Ali Free Zone (JAFZA)
- Abu Dhabi Global Markets (ADGM)
- Dubai International Financial Centre (DIFC)
At VentureBoost, we guide and hold your hand through the entire journey which includes but not limited to:
- Selection of the right jurisdiction
- Obtaining the Trade license
- Getting office space
- Assisting with all corresponding legalizations & attestations
- Registration for Corporate Tax
- Registration for VAT
- Assisting in relevant visa application
- Assisting in opening a bank account
