Dubai free zone: Offshore vs Onshore
United Arab Emirates consists of 7 Emirates. Each of them has its own rules. Thus, company formation in Dubai will be different from company formation in Abu Dhabi.
Besides that there are different options for companies set-up:
- Free Trade Zone Offshore companies. If you do not run your business in Dubai, this will be the most cost efficient solution. This company can have bank account in Dubai. Restrictions: it cannot have physical office in Dubai; all business activities must be outside UAE; you cannot receive resident visa with such company.
- Free Trade Zone Onshore companies. The company will be registered in one of the UAE Free Trade Zones (there are about 30 of those).
- Local Non-Free Trade Zone companies – for business activities that will take place in Dubai. You will have to set-up your own office and wear house facilities. You need to have local shareholder and local sponsor
Note: It is not possible to change status of the company from Free zone offshore to Free zone onshore company. The companies have different legal status and regulations.
While the Local Non-Free trade zone companies are rarely demanded by the foreign investors, the two other types Free trade zone Offshore and Onshore companies both are highly requested. Thus, we will look at the main differences and similarities of these 2 types:
|Free trade zone Offshore||Free trade zone Onshore|
|Corporate income tax||0%||0%|
|Time for registration||3-5 business days|
|Can have bank account in Dubai? (personal visit is a must)||Yes||Yes|
|Can have bank account abroad? (possible to open remotely)||Yes.||Yes.|
|Can have 100% foreign shareholders?||Yes. Private persons or legal entities.||Yes. Private persons or legal entities.|
|Can do business in UAE?||No||Yes|
|Can have real office facilities in Dubai?||No||Yes|
|Can have resident visas to UAE?||No||Yes|
|Financial statement and audit||Not required||Required|
|Business license||Not required||Required|
|Costs||Less expensive||More expensive|
|Use of Double Taxation Treaties||No||Yes|
Setting-up company in UAE whether Offshore or Onshore is not harder than in other jurisdictions. Whether applying for license for Onshore companies or opening bank account in UAE bank for Offshore or Onshore, preparing audited financial statement – with professional approach any task is manageable in hands of experience registered agent.
Despite full tax exemption UAE companies are not commonly regarded as tax havens. They by far have solid reputation compared to classic offshores.
UAE banks have long standing reputation of confidentiality and stability.
Information of UAE companies owners is not public. Thus both types of entities – Offshore and Onshore – are valuable instruments in terms of confidentiality and assets protection.
HOW DARWIN TAX CAN HELP?
- Advise on structure and taxation opportunities - free of charge
- Introduce to UAE or non-UAE banks
- Prepare fixed fee proposal for both offshore and onshore UAE companies