Difference Between Mainland, Freezone & Offshore Companies in UAE – Choose Best Option For You
You must understand the terms “mainland,” “freezone,” and “offshore companies in UAE” before beginning a business in the United Arab Emirates (UAE). All three jurisdictions have advantages and disadvantages, as well as commercial prospects for entrepreneurs with various agendas. The type of corporate entity, the company’s commercial activity, and your anticipated trading partners can all influence your priorities.
As a result, in order to conduct business in the UAE, you must have a thorough understanding of these jurisdictions in order to make informed decisions
Let us begin by learning some fundamental facts about each jurisdiction.
What is a Mainland Company in UAE?
An onshore company in the UAE is also known as a mainland company. The process of mainland company formation in UAE has been granted a license by the Department of Economic Development (DED) of the relevant emirate, allowing it to operate freely in the local market as well as outside the UAE.
What is Freezone Company in UAE?
In the United Arab Emirates, there are more than 40 free zones. It is incorporated in an emirate’s specified jurisdiction where the company is permitted to conduct business inside the same free zone. Most entrepreneurs who want to save money on taxes choose to form a free zone since the government provides numerous perks and incentives to businesses that set up shop in the zone.
What is Offshore Company in UAE?
Offshore companies in UAE are one that is incorporated in one jurisdiction but have their parent firm in another. There is no need for a physical office, hence this is not a branch firm. They have no physical presence in the nation which they have chosen to incorporate as an offshore corporation.
Before you go in, keep in mind that converting a free zone offshore corporation to an onshore company is impossible. Offshore Free Zone Company has a completely new legal position, legal paperwork, and laws to follow.
Let’s have a look at the differences between the three jurisdictions now:
1. Ownership
a. Mainland
If an expat starts mainland company setup in UAE, they can own 100 percent of the company.
b. Freezone
An ex-pat can own 100 percent of the company’s shares if they start a business in any of the freezones.
c. Offshore
Until and unless the company is based outside the UAE, an ex-pat can have full ownership. An offshore business is not permitted to have a physical presence in the United Arab Emirates.
2. Office Space
a. Mainland
Any mainland firm in the UAE must have at least 200 square feet of real office space.
b. Freezone
A free zone corporation does not require office space. These businesses can work from home or have virtual offices.
c. Offshore
They are unable to open a physical office in the UAE. They are free to have it outside of the country.
3. Business Scope
a. Mainland
A corporation that wants to establish as a mainland company formation in Dubai is permitted to conduct business throughout the UAE. They are permitted to conduct business in any of the emirates’ free zones.
b. Freezone
A free zone firm structure is not normally allowed to conduct business (producing and selling) outside of its free zone, unlike on the mainland.
c. Offshore
They have complete freedom to conduct business outside of the emirates. They are unable to conduct business in the UAE.
4. Audit
a. Mainland
At the end of each financial year, mainland enterprises must prepare an audit.
b. Freezone
Auditing is not required for all FZ enterprises. However, some types of companies are required to undergo a mandatory audit of their finances. Free zone corporations (FZCO) and free zone establishments are included (FZE).
c. Offshore
The audit is not prepared by an offshore business because it does not have the authority to do so. They can do one if they wish to stay on top of their finances.
5. Visas
a. Mainland
The size of the office/work premises determines whether or not a resident visa is granted.
b. Freezone
The size of the office/work premises determines whether or not a resident visa is granted.
c. Offshore
A residency visa is not issued to an offshore company setup because there is no need for office space.
6. Capital Requirement
a. Mainland
The minimum capital requirements for forming a mainland corporation vary depending on the legal structure of the business.
b. Freezone
The minimum capital needed for forming a free zone firm varies based on the emirate.
c. Offshore
There is no minimum capital requirement for an offshore business in the UAE.
7. Privacy/Secrecy
a. Mainland
On request, the details of mainland firms are made available to the general public.
b. Freezone
On request, the details of a free zone corporation are made available to the general public.
c. Offshore
The names and identities of offshore company owners, directors, and shareholders are not made public.
8. Govt Authorities for Company setup
a. Mainland
When starting a mainland company setup in UAE, they must obtain approval from authorities such as DED, the Ministry of Labor (MIL), Dubai Municipality, and the Ministry of Interior (MOI), among others.
b. Freezone
Free zones have their own approval standards for every corporation operating within their jurisdiction, and they do not require clearance from authorities outside the free zone.
c. Offshore
Offshore formation is available in Ras Al Khaimah (RAK) and the Jebel Ali Free Zone (JAFZA). Their approval is handled by the jurisdiction’s free zone authority.
9. Cost of Company Set up
a. Mainland
The cost of company setup is high.
2. Freezone
The cost of company setup is medium.
c. Offshore
The cost of company setup is low.
There are a few areas where all three jurisdictions or any two jurisdictions are similar, but their roles and goals in doing business are very different. A free zone’s taxes is identical to that of an offshore business. In contrast to a free zone, mainland and offshore residents can have bank accounts in the UAE and overseas. But, at the end of the day, there is no one-size-fits-all solution for establishing a firm in any of these jurisdictions. There is no such thing as a “better” free zone, offshore, or mainland configuration; it all depends on what works best for your company.
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In matters like mainland company formation in Dubai, people tend to get confused and get in chaos due to several rules, regulations, and multiple requirements. This is the time when people tend to look for an expert. A lot of chaos can be avoided if guidance is taken from the initial state of the commencement of the business. Every venture may have unique requirements like location, customer convenience, logistical feasibility, and banking services.
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