The United Arab Emirates is definitely a recommendable country for company establishment as it offers really stimulating business conditions, attractive tax incentives, excellent infrastructure, transparent laws, and the red tape is reduced to a minimum. In this post, we will take a look at three main company types available in the country and their peculiarities. If you need more information on the country in terms of the business opportunities it offers, go to a trusted portal before you decide to start your business in the Emirates. You will find a lot of information on UAE’s free economic zones there and practical recommendations on launching your undertaking in the Emirates.
UAE Company Types in Brief
There are three main company types in the UAE: local, onshore, and offshore entities. Both onshore and offshore companies can have 100% foreign ownership, but if complete tax exemption is a top priority for you, you should opt for an offshore company. Offshore companies are also called international corporations, and they are very popular with non-resident investors who wish to set up a business project in the Emirates.
If you choose the UAE as a country for your business incorporation, you should know the difference between the three kinds of companies. They vary by geographical coverage, licensing requirements, tax rules, business scopes, and legal and organizational structures, and the nature of your business may require a definite company form to succeed. What is more, you should know the restrictions for offshore companies in the UAE that we will discuss below as well.
Local, Onshore, and Offshore Companies: Comparison
Let’s look at the main differences between the three company types that will determine your choice:
- If you set up a local company, you are required to handle the reporting and undergo mandatory audits. Fortunately, this requirement does not apply to offshore (non-resident) entities. As for the companies established in one of the UAE’s free zones, they are in most cases free from this requirement as well.
- Tax benefits are available to all the three company types, but there are certain differences:
- Offshore companies enjoy complete tax exemption as they are not the country’s fiscal residents and have no sources of income in the Emirates.
- Onshore companies can pay zero taxes on the condition that they generate 100% of their income abroad.
- While the income tax imposed on the local companies equals 9%, they may be exempted from it if the profits they make annually do not exceed AED 375,000 (about 102,000 US dollars).
- Geography of the business:
- If you have an offshore company, you are only allowed to work with customers and partners from abroad.
- If your company is set up in a UAE free zone, it can engage in business activities in the zone of incorporation and across the globe without any restrictions.
- As for the local companies, they are only allowed to work in the free zones and within the UAE.
- Onshore and offshore companies may be fully owned by foreigners, while local legal entities have some limitations in this regard.
UAE Offshore Companies: Main Peculiarities
International businesses in the UAE are subject to special rules and enjoy particular benefits. Offshore (foreign, international, overseas) companies are entities that engage in business activities outside the jurisdiction of their establishment and/or the country of residence/location of their beneficial owners.
Managing a UAE Offshore Company: Main Challenges
International companies set up in the UAE do have numerous advantages, However, there are also certain drawbacks that a far-sighted entrepreneur should be aware of:
- You are not allowed to rent commercial spaces or offices in the UAE.
- You have no opportunity to receive a work visa or a UAE residence permit.
- You cannot engage in business operations within the country.
- You will need to make a considerable deposit to set up a business account with a local bank.
- Some companies need to show their economic substance in the Emirates, such as financial services, insurance, or banking.
Choosing the Best Location for the UAE Offshore Company
Here are some good places to set up your offshore company in the Emirates:
- RAK ICC (Ras Al Khaimah)
- Ajman Free Zone (Ajman)
- Jebel Ali Free Zone (Dubai)
Offshore companies are not allowed to carry out business operations with the residents of the country or certain free economic zones, they still are entitled to open accounts with local or international banking institutions.
Business Types of UAE Offshore Companies
Let’s look at the business types:
- Subsidiary
- Branch of an existing foreign company
- New company (an LLC in most cases)
The requirements for business licensing and authorized capital are to be confirmed with your registered agent. The matter is that you cannot set up a UAE company on your own: you will need a registered agent who will take care of the whole process in the country’s administrative and financial institutions.
Permitted Activities
Let’s look at the sectors where offshore and onshore companies can operate in the UAE:
- Logistics
- Manufacturing
- Scientific and technological activities
- IT industry
- Hospitality
- Construction (one of the most important sectors or foreign investors)
- Healthcare and education
- Food and drink industry
- Culture, arts, and entertainment
- All kinds of services
- Agriculture
Offshore companies usually choose specific sectors to get stable income.
Offshore Company in the UAE: Advantages
- You will find everything for efficient business operation in the country: in particular, it is free from bribery, corrupt patterns, or nepotism, and it does not create any artificial barriers for entrepreneurs.
- Foreign business people will not face any currency restrictions.
- UAE free zones have excellent infrastructure: warehouse facilities, comfortable office buildings, residential complexes, etc.
- You can run your company from home as you are under no obligation to create jobs for the locals.
- The level of confidentiality you will enjoy is quite high as the information about offshore company founders may only be disclosed upon order/request of tax, legal, or other authorities.
Interested in company registration in the Emirates? Please follow the above link to obtain more information or talk to an expert who will answer your questions and help you make a decision.
