If you have a plan to set up a business in Dubai, you must first know about the three types of entities you can incorporate. The three business setup options in Dubai are Mainland, Free Zone and Offshore. Foreign investors should also determine which of the three options is appropriate for their proposed company in Dubai.
Each company formation option in Dubai has unique benefits, limitations and challenges. Selecting the wrong option could completely derail your business operations. Consulting with business setup consultants is advisable before making your move into Dubai.
They can guide you on the differences between mainland, free zone and offshore company formation. In this blog post, you can learn about the business incorporation requirements for mainland, offshore and free zone companies.
What Is Mainland, Free Zone, and Offshore Companies?
Mainland: A mainland company is considered an onshore company (as opposed to offshore) regulated by the Dubai Economy and Tourism (DET, formerly DED). A mainland company set up in Dubai permits trading in any part of the UAE and outside the UAE.
Free Zone: A free zone is an economic area regulated by a free zone authority in the UAE. Companies registered in free zones are governed by rules imposed by the free zone authority that do not apply to entities outside of the zone. As opposed to the mainland, free zone companies can conduct business only within the free zone area or outside the UAE.
Offshore: Offshore companies are international businesses registered with an offshore registry in the UAE such as JAFZA offshore, RAK ICC, or Ajman Offshore. Offshore companies are not allowed to conduct any business activity in the UAE. Offshore companies are set up in Dubai to get tax incentives, protect assets or hold properties.
Difference Between Mainland, Free Zone and Offshore Companies
Ownership: Free zone companies, offshore companies and mainland companies allow 100% foreign ownership. There is no need to have a local sponsor (UA national) for setting up a business in Dubai.
Geographic Restrictions: Mainland companies can conduct business both within and outside the UAE.
Free zone companies are only allowed to conduct business within the free zone or engage in import or re-export activities. Offshore companies are not allowed to do any business activity within the UAE.
Tax Implications: Mainland companies are subject to a corporate tax rate of 9% levied on Taxable Income exceeding AED 375,000. Taxable Income below the threshold rate will be subject to the 0% rate.
Free zone companies can enjoy 0% tax corporate subject to certain conditions (maintain an adequate substance in the UAE; derive ‘Qualifying Income’; have not made an election to be subject to the 9% rate and comply with transfer pricing requirements). Moreover, free zone benefits include 100% repatriation of profits and 0% customs duty.
Offshore companies are not subject to the UAE corporate tax at present.
Visa Requirements: The visa allocations for mainland companies in Dubai are based on the size of the office space. For free zone companies, the Visa packages differ from free zone to free zone. Offshore companies are not allowed to have any visas.
Business Setup Requirements: Business setup in Dubai mainland involves obtaining approvals from government authorities or ministries.
Company formation in Dubai-free zones is rather easy as the rules are not stringent and approvals are minimal.
Setting up an offshore company in the UAE is not challenging as registered agents can help you with the process.
Cost Differences: The cost of a mainland company set up in Dubai can go high depending upon the activities and visa requirements. The cost of free zone company formation is lower compared to the mainland. Offshore company registration is the most cost-effective among the three forms of business setup.
Dubai Business Setup: Talk to OUR Consultants
All three options for business setup in Dubai offer different perks and you require an expert’s advice to choose the right one. Jitendra Business Consultants (JBC), one of the leading business setup consultants, can help you choose the most appropriate structure for your Dubai business.
Our highly qualified company formation experts can advise you on UAE visa processing, immigration requirements, document drafting etc. JBC is a one-stop solution for all your requirements such as Corporate Tax, accounting & bookkeeping, VAT, audit etc. We also help you comply with regulations such as Anti-Money Laundering (AML), Economic Substance Regulation (ESR), Ultimate Beneficial Ownership (UBO) etc.
