UAE Free Zone and Onshore Company Formation in Dubai, Abu Dhabi & UAE

The UAE market offers great incentives to companies looking at establishing a presence in the region. Depending on the planned business activities, companies can choose from onshore, free zone and offshore business structures. While an onshore set-up allows companies to conduct business across the UAE, freezone company formation has emerged as the preferred option for entrepreneurs or larger companies who wish to make the UAE a hub for their global business. The decision of choosing between these options can be problematic and not as straightforward as it would appear to be.

A clear understanding of what each jurisdiction has to offer, and making the choice based on your requirements can prove to be the key to successfully launching and operating a business in the UAE. Getting it right at the beginning can help you save time, energy and money as you progress on your business journey.

PKF UAE has an efficient team of company formation specialists, having a strong knowledge of the requirements of local government departments and of the various Free Zones in the UAE. Hence, we can be your ideal advisers for providing you with the best guidance on your entry strategy as you embark on freezone company formation and onshore company setup in Dubai and across the region. We also provide complete assistance for registration procedures, which enables you to focus on launching your business in the UAE and making it a success.

FAQs – Company formation & structuring services

Q1. I need to set up my business in the UAE. How can I go about it?

Setting up in the UAE is dependent on various factors including nature of business, target market/customers, office requirements and manpower/visa requirements. We have a team of experts led by our Managing Partner, who can advise on the correct approach for setting up in the UAE. We are uniquely placed, as we advise clients on the most appropriate method and structure for setting up in the UAE and assist clients in the actual formation / set up process.

Q2. What are the different modes of incorporation in the UAE?

There are three broad modes of incorporation in the UAE – mainland, free zone and offshore.

  • Mainland – It is possible to incorporate in mainland UAE as a Limited Liability Company (LLC), branch or representative office of a foreign company. A range of activities from manufacturing, trading and professional services can be carried out in the mainland.
  • Free Zones – There are various free zones in the UAE which may be chosen for their taxfree status and 100% foreign ownership attraction. Certain zones are meant for specific type of activities.
  • Offshore – Offshore companies may be formed in a few UAE based free zones like the Jebel Ali Free Zone (JAFZ), Ras Al Khaimah International Corporate Centre (RAKICC) and Ajman Free Zone. Modelled after the International Business Companies in popular offshore jurisdictions like the British Virgin Islands, Isle of Man, etc.

Q3. Is there any difference in where I can conduct business, based on my mode of incorporation?

  • Mainland entities are primarily used for conducting business within the UAE. However, mainland entities are also freely allowed to transact business within or outside the UAE (including with the free zones in the UAE).
  • Free Zone companies are meant for conducting business within the free zone, between free zones or outside the UAE. These companies can do business in the mainland through an authorized distributor.
  • Offshore companies cannot conduct business within the UAE. However, they can conduct international business outside the UAE.

Q4. Is my activity and area of operating my business relevant to the location of my entity in the UAE?

  • Yes. Generally, LLCs are used for carrying on commercial activities like trading or manufacturing within the UAE. Branch offices are considered extension of their parent companies and are allowed to carry out activities similar to those of their parent entity (subject to local activity definitions and other restrictions). Representative offices are cost centres that are meant to serve as a liaison office for their parent company.
  • Most Free Zones in the UAE are specific activity hubs. For e.g., Jebel Ali Free Zone in Dubai is popular as a trading and manufacturing hub, as well as, for entities requiring use of port facilities for international trade; Dubai Multi Commodities Centre is popular among commodity trading entities and jewellery businesses, etc.
  • Offshore companies in JAFZ are used as special purpose vehicles for investing in real estate in Dubai. RAKICC companies are popular as international holding companies.

MAINLAND

Q5. What is a Mainland entity?

A mainland company is an onshore company licensed by the Economic Development Department of the respective emirate, which is permitted to do business in the local market as well as outside UAE without any restriction.

There are various structures available for the mainland set up viz., LLC, civil company, sole proprietary, branch of foreign company, etc

Q6. Is corporate or income tax applicable to companies in mainland UAE?

The UAE does not levy income tax on individuals. There is no corporate tax on entities except for oil companies and branches of foreign banks.

Q7. What is the minimum capital required to form a company in mainland UAE?

Companies must have sufficient capital to achieve the purpose of their incorporation and the capital consists of shares equal in value. In practice, investors maintain a capital in the range of AED 100,000 onwards depending on their business requirements. Some activities related to contracting and insurance may require higher capital. To ease the licensing process the authorities do not insist on deposit of the share capital to complete the licensing process [for most activities].

Q8. How many shareholders are required to form an entity in mainland?

Shareholders can be either individuals or corporate depending on the structure chosen. The number of shareholders/partners shall depend on the structure chosen. In case of an LLC the number of partners shall be least two (2) but shall not exceed fifty (50). A single natural or corporate person [UAE or GCC national], may incorporate and hold an LLC.

Q9. What are the three main types of licenses allowed in mainland UAE?

The nature of activities plays a pivotal role in deciding the appropriate type of licenses for the mainland setup. The three main categories as defined by licensing authorities are mentioned below:

  • Commercial License – trading activities
  • Industrial License – manufacturing / assembling / production
  • Professional license – service providers /professionals – accountants, artisans, beauty salon, etc.

Q10. Can a foreign investor obtain a license without a UAE national local partner or local service agent in mainland UAE?

A foreign investor requires a UAE national local partner or local service agent to obtain a mainland license depending on the structure of the entity, viz., LLC, Civil Partnership Company, Foreign Branch Office, etc. However, the recently amended UAE Commercial Companies Law (CCL) allows for existing companies in certain sectors to be held 100% by foreign expatriates without a UAE national as a partner

Q11. What is the difference between UAE national local partner and local service agent required for mainland setup in UAE?

A UAE national local partner in LLC shall own 51% equity and the balance 49% can be held by foreign investor. An appropriate agreement may be executed between the expatriate partner and the UAE national which endeavours to vest the beneficial ownership of the shareholding with the foreign shareholders. Whereas, the local agent is required in case of branch of foreign company or professional license. The local service agent has no role, interest or right in the business, or the assets of the setup.

The UAE national local partner / Local Service Agent is paid a mutually agreed annual fee for providing such services.

Q12. Is a manager required for LLC or a foreign branch office in mainland?

The management of an LLC can be undertaken by one or more Managers as determined by the shareholders or the parent company in case of foreign branch. The manager can be of any nationality except for sanctioned countries.

Q13. Where can I rent office spaces for mainland setup?

An investor is free to rent office spaces anywhere in mainland depending on the Emirate chosen for the setup. It is pertinent to note that a mainland set up will not be able to lease office space in any free zones like JAFZA, DMCC, etc.

Q14. How many visas can be obtained in case of a mainland license?

Normally, the visa entitlement is 1 visa for every 8-10 square metre of office space. However, it is also dependent on the business plan of the entity. If more visas are needed, the authorities may insist that bigger office space is leased.

Q15. Whether it is mandatory to maintain and submit Audited Financial Statement to the authorities?

As prescribed by the relevant Federal Law, every company shall maintain accounting records showing its transactions to accurately reveal at any time the financial position of the company. However, in practice, so far, mainland entities are not required to submit the audited financials to any authorities, except for branch of foreign companies which needs to submit the same to the Ministry of Economy at the time of renewal of the entity

FREE ZONES

Q16. What is a Free zone?

  • A free zone is an area where business can be conducted without the usual restrictions that apply to foreign companies in the UAE, such as requiring a UAE national partner, or being liable for corporate or income tax [Many free zones have given an exemption from corporate or income tax for up to 50 years], etc.
  • Free Zone companies can be registered as an Individual, Branch, and/or Subsidiaries of Local UAE, or Foreign Companies
  • Single shareholder entities are called Free Zone Establishments (FZEs), Multiple shareholder companies are called Free Zone Companies (FZCs).

Q17. Do I need to be a UAE Resident to form a Free Zone Company?

You are not required to be a resident or to live in the UAE if you own a Free Zone Company.

Q18. Can I open a UAE Bank Account for a Free Zone Company?

Yes. Investors can choose from a wide variety of local and international banks.

Q19. What are the mandatory corporate requirements to form a free zone company?

  • Shareholders – Minimum 1; maximum 50 (differs from zone to zone)
  • Directors – Minimum 1; maximum differs from zone to zone
  • Manager – 1; Same person can assume all 3 roles.

Q20. What is the minimum share capital required to form a company? Am I required to physically deposit the share capital into a bank account?

There is no minimum share capital in most free zones, although some free zones might indicate share capital for specific activities [e.g., JAFZ requires AED 10 million capital for holding companies]. However, if share certificate is required, the physical deposit of capital into the company bank account is mandatory.

Q21. Do I need to have a physical address to acquire a company in a Free Zone?

It is mandatory to acquire a facility before issuance of the license. One can either rent or buy a flexi desk, serviced office, physical office, retail space and warehouses or open land for industrial units.

Q22. How many employees can I hire in my Free Zone Company?

The number of employees one can hire depends on the office space leased. The general rule of thumb is 8-10 square metre per visa. If more visas than the allocated number are required, additional fees are applicable.

Q23. Are there any restrictions on importing and exporting of goods?

One must request for a custom code from the free zone authorities issued to all ports in UAE, to permit import or export of goods by following the procedures of respective Port & Customs authorities.

Q24. Am I allowed to own companies in other Emirates using a free zone license?

You can open a branch or subsidiary subject to the approval of relevant Authorities.

Q25. How long does it take to setup a Free Zone Company?

Company formation in Free Zones take a minimum of 3-6 weeks. The speed of approvals will depend on the chosen activity, overseas company attestation requirements and special approvals required, if any, which may need additional time.

Q26. Is a free zone company required to appoint auditors and submit audited financial statements?

Yes. Each free zone company must appoint an independent auditor that is registered and licensed in the UAE. Audited financial statements must be submitted annually.

OFFSHORE

Q27. What is an offshore company?

Offshore companies may be loosely defined as companies that conduct an insubstantial or zero volume of business within their jurisdiction of incorporation. Principally, offshore companies have the following characteristics:

  • They must be registered as an entity within the jurisdiction of incorporation.
  • The “incorporators” cannot be domiciled within the jurisdiction of incorporation. The entity can only transact business outside the jurisdiction of incorporation.

Q28. Is it legal to set up an offshore company?

Legally speaking, an offshore company is just like any other company. It is what the company is used for that determines its legal status. Millions of offshore companies are being used globally for a variety of business purposes. Whether it’s for owning property or other personal investments, acting as a holding vehicle, conducting international business, or owning intellectual copyrights, all these activities are done within the legal framework that is known and established by respective authorities.

Q29. Do I need a physical office to set up an offshore company?

No. Offshore companies cannot have their own physical office. PKF is a registered agent for setting up offshore companies in JAFZ and RAKICC. Our office serves as a registered office for our offshore clients.

If you intend to set up an offshore company outside the UAE, PKF can assist in the formation and maintenance of these companies, while our associates in the appropriate jurisdictions can act as the registered agents.

Q30. Can I get a residency when I register an offshore company?

Offshore companies are not eligible to apply or to obtain the residency visa in the country where the company is registered

Q31. What are the common uses of an offshore company / Who can use an offshore company?

An offshore company is versatile and can be of interest to a cross section of people and businesses and can be utilized for a variety of activities:

  • Businessmen – An offshore company permits one to quickly create a structure with a simple administration and enjoy all the benefits of an offshore jurisdiction.
  • E-Commerce – It might be ideal for online businesses. One may choose to incorporate the registered office of the company in an offshore jurisdiction to take advantage of the various benefits offered by specific jurisdictions.
  • Consultants – One can also conduct consultancy through an offshore company. It is easier to manage an entity when registered in a stable jurisdiction.
  • Holding IP rights – Any kind of intellectual property right (a patent or trademark) may be registered in the name of an offshore company. The company may also buy or sell this type of right. It may also grant rights of use to third parties against payments.
  • Holding movable and immovable properties – Offshore companies are used to hold both movable property (such as yachts and aircraft) and immovable property (such as luxury houses and buildings).
  • Inheritance – An offshore company that never dies (provided all running costs are paid up) may, be used in relation to inheritance tax laws. The offshore structure could be combined with a trust or foundation.

Q32. What services are provided by the PKF UAE’S company formation and structuring services division?

Our services under this division include:

  • Devising corporate structures
  • Preparing concept note (evaluation and advising on possible options for set up)
  • Incorporation / Amendment / Liquidation / Renewal of companies
  • Notarization of corporate documents (like power of attorney, resolutions, etc.)
  • Assisting with visas (New/Change/Renewal)
  • Identification / Recommendation of professional UAE national partner/local agent
  • Obtaining Tax Residency Certificate (Company/Individual)
  • Real Beneficiary Regulation compliances for covered licenses
  • Golden 10 Year Visa and 5-year Property Visa
  • Assisting clients in making application for obtaining 100% ownership under new FDI regulations

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