What's the Difference Between Offshore, Free Zone and Mainland Incorporation?

Once you’ve taken that first step and decided to incorporate your company in the UAE, you’re going to face a big choice. Should you choose to incorporate your company in a tax free zone? Or offshore or in a free zone? What about mainland incorporation? In this article, we’ll break down your options so you make the best choice for both you and your company. 

Offshore Incorporation

What does Offshore Incorporation entail? 

Offshore companies are companies that are incorporated in a jurisdiction different from where the owner resides. Usually, this means that the company is incorporated in a foreign country and offshore companies can trade, hold assets and conduct business outside of the jurisdiction where it is incorporated. 

In many areas, like Dubai, offshore companies are not allowed to operate “onshore” or in the local market; however, there are some countries where such operations are permitted. Offshore company structure can vary as well; you can choose to register your company as an offshore foundation, an LLC, an IBC or a trust.

What are the Advantages of Offshore Incorporation?

Many choose offshore incorporation because of the benefits associated with it, such as tax exemption, asset protection, privacy, and financial advantages. In addition, as it is incorporated in a jurisdiction separate from that of its owner, it is recognized as a separate legal entity and therefore actions, debts, and/or liabilities are not placed on the owner(s). 

Offshore Incorporation in the UAE

The UAE boasts twelve offshore jurisdictions from which to choose with the following benefits:

• 100% foreign ownership

• Operational freedom

• Low setup costs 

Free Zone Incorporation

What does Free Zone Incorporation entail? 

Free zones are economic areas with advantageous tax and economic policies where goods and services can be traded within that area. In the UAE, each individual free zone has a specific focus on one or two commercial categories, such as creative and media companies. Although free zone companies are not allowed to trade outside their free zone, you can work with a distributor who can put your goods or services into the local market. 

What are the Advantages of Free Zone Incorporation?

Free zone incorporation is very straightforward and simple in many cases, with limited paperwork and documentation required. These companies are exempt from corporate, personal and VAT taxes, in addition to import and export taxes. It is also possible to obtain a residence visa or permit, depending on the company’s qualifications. 

Free Zone Incorporation in the UAE

The UAE has 45 free zones, all with unique and advantageous qualities. Here are some of the biggest benefits awaiting you with company incorporation in Dubai’s free zones:

• 100% foreign company ownership

• No local partner or service agent required

• No UAE national required on company’s Board of Directors

Mainland Incorporation 

What does Mainland Incorporation entail? 

Mainland companies are incorporated in accordance with the Department of Economic Development’s regulations and are permitted to do business within the UAE, free zones and offshore. However, if the company is established by a non-UAE national, they can only hold 49% of the company’s shares; the rest must be held by a local sponsor. The company is also required to have office space and receive government authorisation to incorporate. 

What are the Advantages of Mainland Incorporation?

The biggest advantage of Mainland company incorporation in the Dubai is the ability to trade and do business without restrictions. This wider scope allows for more business opportunities and the chance to work on government projects with less competition. 

Mainland Company Incorporation in the UAE

Mainland Incorporation in the UAE opens the door to more opportunities and higher profits. Here are a few of the benefits that await mainland companies:

• No trade restrictions

• No minimum capital requirement

• Residence visa possible 

If you know which company incorporation or formation option is best for you or if you are still unsure or would like expert advice, don’t hesitate to contact us. We’d love to help you get started on the registration process and clear up any doubts you may have. 

Written by
Adrian Oton

CEO, Europe Emirates Group