Mainland vs Freezone vs Offshore Company

When doing business in the UAE, it is crucial for the company to understand the concepts of free zone, mainland, and offshore. To conduct business smoothly, an organisation must understand the distinction between these three types of businesses.

Each of these types can provide the organisation with certain liberties while conducting business. When an organisation attempts to register in the United Arab Emirates to conduct business, it must specify the type of setup it desires within the country. The restrictions imposed on free zone companies will differ from those imposed on offshore companies. These liberties and constraints will need to be considered ahead of time.

Mainland vs Freezone vs Offshore Company – Differences

Mainland

A mainland company allows you to conduct trade or commercial activities onshore without being restricted to free zone districts – you can have clients from anywhere in the UAE as well as international clients. A mainland company is registered with the government body of the Emirate in question. If you want to form an LLC, you’ll need to find a UAE sponsor who owns at least 51% of the company’s shares. This means, you cannot have full ownership of the company.

Free Zone

A free zone company is formed within a specific Emirate’s special jurisdiction. The UAE has over 40 free zones in operation. The Free Zone Authority is a government regulatory body that has its own rules and regulations for free zone jurisdictions. A business licence in Dubai is issued by the authority.

Companies in free zones benefit from 100% foreign ownership and tax breaks. Companies in free zone jurisdiction are only permitted to conduct business within the free zone and outside of the UAE.

Offshore

An offshore company formation in Dubai entails establishing a company in another jurisdiction while the parent company is located in another country. This is not a branch company because there will be no physical office required or allowed under this facility. When it registers as an offshore company, it has no physical presence in the UAE. Before engaging in any offshore venture, it is critical to understand that converting an offshore or free zone company into an onshore company is not possible under any circumstances. 

Ownership – Mainland vs Freezone vs Offshore Company

Mainland

A company based on the mainland is free to conduct business throughout the UAE. They are also permitted to conduct business within any free zone in the emirates.

Free Zone

One of the primary advantages of establishing a business in one of Dubai’s free zones is complete ownership of your company. A local sponsor or service agent is not required to start a business.

Offshore

An offshore company can be fully owned, but it cannot have a physical presence in the UAE.

Office Space – Mainland vs Freezone vs Offshore Company

Mainland

Any mainland company in the UAE must have at least 200 square feet of physical office space.

Free Zone

A free zone company is not required to have office space. Such businesses can operate without an office or through virtual offices.

Offshore

They are not permitted to have a physical presence in the UAE.

Business Scope – Mainland vs Freezone vs Offshore Company

Mainland

A company established on the mainland has no restrictions and can conduct business anywhere in the UAE, whether in a free zone or on the mainland.

Free Zone

When it comes to the Free Zone setup, it is usually not permitted to conduct business (both manufacturing and selling) outside of the free zone.

Offshore

Offshore companies are not permitted to conduct business within the UAE but are permitted to conduct business outside the UAE.

Audit – Mainland vs Freezone vs Offshore Company

Mainland

At the end of each fiscal year, mainland companies must conduct an audit.

Free Zone

Auditing is not required for all FZ companies. However, certain types of entities must deal with a mandatory audit of accounts. This includes free zone establishments (FZE) and free zone companies (FZCO) 

Offshore

The audit is not the responsibility of the offshore company. They can do one if they want to keep their finances up to date.

Visas – Mainland vs Freezone vs Offshore Company

Mainland

The number of residency visas issued is determined by the size of the leased office space. In general, one visa is issued for every 80 square feet.

Free Zone

Setting up your business in a Dubai-free zone automatically qualifies you for a visa. Visa fees vary by free zone.

Offshore

Visas would not be issued under offshore conditions because physical office space is not permitted.

Capital requirement – Mainland vs Freezone vs Offshore Company

Mainland

The legal structure of a UAE mainland company determines the minimum capital requirement.

Free Zone

The Emirate in which a free zone company is formed determines the minimum capital requirement.

Offshore

There is no minimum capital requirement for an offshore company in the UAE.

The distinctions between Mainland, Freezone and Offshore discussed above will assist you in determining which jurisdiction is best for your company.

By Mr Stew

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