Types of companies in the UAE
BUSINESS
COMPANY REGISTRATION
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There are three types of companies in the UAE: Mainland, Free Zone, Offshore. Each type of company has certain features that are important to consider before starting to register a legal entity. This article has covered the key points that are important to understand.
Free Zone Company (FZ) is a company registered in a special free economic zone. There are more than 45 such zones in the UAE. Each zone has its own regulation and rules and requirements for company registration. Some freezones are not subject to the UAE legislation. Likewise the DIFC Free Zone, for the instance, is not subject to the regulations of the Federal Virtual Assets Act, as it has its own virtual asset and cryptocurrency regulations.
Free Zone companies' features
- Exemption from income tax. This exemption also applies to the new income tax legislation, which will come into force in June 2023.
- 100% foreign participation is allowed. The founders may be either individuals or legal entities.
- Registration of the company is usually done entirely remotely.
- Some freezones are designated free zones. This means that no import or export duties or taxes need to be paid. For example, this is the DAFZ.
- Free zone companies are free to do business within the free zone or in foreign markets.
- Usually Free Zones cannot directly access the UAE market. For example, selling goods to UAE customers directly. However, free zone can provide services to Mainland companies. In certain cases, double licenses can be obtained in a number of freezones so that the company can conduct business within the UAE.
- The FZ office can only be located within the free zone area.
A company registered with the government authority of a particular emirate. In Dubai it is the DED (Department of Economy & Tourism) which issues the certificate of registration and business license. Mainland companies are subject to federal and specific emirate laws.
Mainland company features
- Can operate throughout the UAE.
- Will pay income tax at a rate of 9% from June 2023.
- 100% foreign ownership is possible for most activities. However, a number of important activities require a founder with UAE nationality whose share will be at least 51%. In addition, for companies with a service license, a local agent is required with whom a contract is concluded, but he is not included in the share capital.
- The company registration requires the shareholders to be present in person at the notary to sign the incorporation documents. Instead, a notarial power of attorney can be executed for the representatives of the shareholders. The power of attorney can be done remotely by video link with the notary.
- For incorporation, a company office of 13 sq.m. or more is required. However, for some types of activities a virtual office is possible. The company office, warehouse or production facility can be located anywhere.
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A company incorporated in a special UAE offshore zone and conducting business generally outside the UAE. There are currently 2 offshore zones: Ras Al Khaimah (RAK) and Jebel Ali Free Zone (JAFZA). Offshore companies are usually registered for holding purposes (owning shares and interest in other companies) and for owning real estate. Thus, JAFZA is the only zone that enables offshore companies to own real estate in Dubai. RAK companies do not have this option, but RAK is a more budget-friendly option.
Offshore company features
- Exemption from income tax as the company is not considered a resident of the UAE.
- No office requirement.
- Closed shareholder register: the details of the founders are not publicly disclosed. However, the company is obliged to submit information to the register of beneficial owners and to update it. Such information is not publicly disclosed.
- It is not possible to issue shareholder or employee visas.
- It is possible to open a bank account with UAE banks.
- Company registration usually requires a special agent who represents the interests of the company before the offshore administration.
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