If you are thinking of setting up a branch of your company in the UAE, then it is important to familiarize yourself with the concepts of Free Zone and Offshore Companies. A business owner will need to understand the subtle differences that exist between these two types of company setups so that business transactions can proceed smoothly. Both of these company types offer certain liberties and restrictions to businesses to conduct their activities. You will have to take these into consideration when you register your company in the United Arab Emirates.
Free Zone Company
The Free Zone is a business concept that has been developed to promote the growth and development of the businesses within a country. Many countries across the world have free zones that operate as separate entities within the country. The Free Zones with the UAE follow the same business principle, primarily attracting companies that deal in trade and export or services and commodities.
When a company has a branch office inside the Free Zone, the branch is not considered to be an individual company but exists as an extension of the main company. Your office within the Free Zone can be either a physical office inside the designated area or a virtual office if a full scale office is not required.
An Offshore company is an entity that is part of the Free Zone concept and has many of the features of a Free Zone company. Offshore companies are registered within a Free Zone; however, it differs from regular Free Zone companies in many factors and cannot be used as a substitute for a Free Zone company.
The key difference between Free Zone companies and Offshore companies is that, Offshore companies are only allowed to conduct their businesses outside the United Arab Emirates. They are not in most part, allowed to have business activities inside the country. Offshore companies are however allowed to open and operate bank accounts with banks within the UAE, and own investments and real estate within the country.
An advantage of Offshore companies is that, unlike regular Free Zone companies, there are no limitations on the minimum capital required for company incorporation. An Offshore company requires a minimum of 2 directors plus shareholders who can be people or corporate entities.
Key benefits of an Offshore company are:
Offshore companies are exempted from paying local or corporate taxes for activities within the Free Zone.
100% Foreign Ownership:
Unlike businesses inside the UAE, companies that are setup in the Free Zone can be owned totally by foreign owners.
Most Offshore jurisdictions do not disclose information about directors or shareholders for all legitimate operations.
Low Start-up Cost:
Most Free Zones have premade office infrastructure that can be rented out. You can also operate from a virtual office setup.
UAE Bank Accounts:
Even if you are not allowed to conduct business in the UAE, you can own and operate bank accounts within the UAE without currency restrictions.
Registering an Offshore office for your company in a UAE Free Zone is sometimes a hassle for organizations based in foreign countries. In such cases, it is advisable to take the help of a registered company formation agent who can clear the way towards a speedy and efficient company registration process.