The United Arab Emirates welcomes businesses and companies to start operating within their country. However, a company needs to be registered so that they can be considered legitimate business. There are many kinds of registrations available for businesses in the UAE. A company should be registered with the correct license according to the requirements or they can suffer avoidable restrictions while conducting businesses.

Offshore Companies

This registration is perfect for those companies who wish to dabble in the international trading but also need access to the local bank accounts. These companies also get the ability to own real estate inside the United Arab Emirates.

This is the cheaper option for the companies and they can only have international business activities. Inside the UAE, these companies can hold shares or other offshore companies or free zone companies. Trading can also be conducted inside the UAE but with other offshore companies only. Offshore companies cannot enjoy the tax benefits of UAE tax treaties. Additionally, the owners or managers of these companies are not entitled to a UAE Residents Visa. The offshore companies do not need a designated office space inside the UAE but can own real estate and have bank accounts in UAE banks.

UAE Local Free Zone Companies: Limited Liability Companies

Companies registered under this license allow them to have local trading activities in the as area which is designated as Free Zone. They can even trade internationally. These companies are allowed to own real estate inside the UAE. Companies with license can enjoy each and every benefit that offshore companies enjoy but there are a few differences. They have certain advantages as well.

There are a few specific license types available under this broad category. A company will only be allowed to deal in activities that are allowed under their specific license. The activities of the company will be restricted to a particular kind like trading. These companies need to have a designated office inside the Free Zone. Each investor of the company will be entitled to an investor visa that is valid for 3 years and an Emirates ID will be provided for the spouses and also the dependents.

These companies are given a status of onshore tax resident which allow them access to the benefits of UAE tax treaties. Trading is permitted with other companies in the Free Zone and also the international companies but not inside the other companies in the UAE.

Onshore Limited Liability Companies

According to the UAE law, these companies can only be created as a joint venture between an UAE National, also called the local sponsor and an expatriate. The UAE National must have the controlling majority of shares in the company. However, it is also possible to make a UAE government agency act as the UAE national in order to set up the company. This eliminates the need to risk working with the unknown parties.

Additionally, in this type of arrangement, the local sponsor will not have any control over the shares. Moreover, the sponsor will not have the right to claim the dividends from the shares. In return for these benefits, a fee or a percentage of returns need to be paid to the government agency.

These companies can get access to the local market of the UAE and can freely conduct the trade activities inside the country. Certain conditions, dependent on the size or activities of the companies, will be imposed on them. Be that as it may, these conditions can be easily managed and are generally quite reasonable.

There are various fees associated with the registration process and licenses which need to be paid before the company can get registered in the UAE as an entity.

While conducting business in the United Arab Emirates, it is important for a company to be familiar with the concepts of free zone and offshore. An organization will need to understand the difference between these two types of companies so that the business can smoothly proceed.

Each of these types can offer certain liberties to the organization while conducting business. When an organization is trying to get registered in the United Arab Emirates to conduct business activities, they need to mention which kind of setup they want inside the country. The limitations imposed on free zone companies will be different from offshore companies. These liberties and limitations will need to be taken into consideration beforehand.

Free Zone Company

The free zone is a concept that was developed to help the promotion, growth and development of the businesses. Many countries have similar models and this concept is well known in the international business community. The United Arab Emirates had established Free Zones in order to attract companies that dealt in the trade and export. So far, this model has been extremely successful at its purpose.

A company can have one of its branches inside the free zone. In this scenario, the branch office is not considered to be an individual company but is simply an extension of the main company. When a company wishes to incorporate itself as a free zone entity, it will need to showcase its solvency. The procedure is quite simple. A bank account will need to be opened in the name of the company in any bank that is licensed to the United Arab Emirates. The share capital will have to be deposited in the account. The bank statement will be required to make the Free Zone Authority. After the setup of the company is satisfactorily completed, the capital will be released and can be used by the company.

There are certain requirements with regards to the initial share capital that is required to be registered in the Free Zone. These requirements vary between the various Free Zones and are dependent on the purpose of the company. Companies in the Free Zone need to construct a physical office inside the designated area. Virtual offices can be rented if a full scale office is not required. A free zone company will have certain restrictions when conducting business inside the United Arab Emirates.

Offshore Company

An offshore company is a concept that is used to denote a corporate entity that is flexible enough to have a mixture of features. An Offshore company is also registered in a free zone and enjoys many benefits that an average Free Zone company gets. However, it cannot be used as a substitute for a Free Zone company.

The major difference between a Free Zone company and an offshore company is that offshore companies are allowed to conduct their business outside the United Arab Emirates. They cannot have business activities inside the country.

An Offshore company is allowed to open bank accounts with the banks based in the UAE and operate them as needed. It will also have the ability to own investments inside the United Arab Emirates and also outside it. An offshore company can purchase and own real estate in certain pre-designated areas inside Dubai. Any income that the company gains from its investments can be kept with the bank account operated by the company.

Offshore companies do not have any requirements for the minimum capital that needs to be deposited before incorporation unlike a Free Zone company. Offshore companies are usually used as holding or asset companies for other business organizations which operate inside or even outside the United Arab Emirates.