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A Guide to the Different Legal Forms of Offshore Companies in the UAE

In the UAE, you will find three main company types, namely, local, onshore, and offshore ones. Please mind that although onshore and offshore businesses may be fully foreign-owned only offshore companies are completely tax-free. Offshore businesses are also referred to as international companies, and they are popular with non-residents who want to start a business in the UAE in 2023.

Forms of business in the UAE

To launch your business in the UAE, you need to know the differences between the three types of companies. They have different legal and organizational structures, business scopes, tax rules, licensing requirements, and geographical coverage. This is important for choosing the best option for your UAE business. You also need to know what offshore companies are allowed to do in the UAE. In the article below, we will explain all this in full detail.

Comparative analysis of offshore, onshore, and domestic business structures in the UAE 

Below, we will explain the main differences between mainland, free zone, and offshore companies in the UAE:

  • Non-residents may own 100% of their UAE company, yet you should keep in mind that local (mainland) companies have some limits in this regard, while onshore and offshore companies face no such restrictions. 
  • Geographical business focus:
    • Local companies may operate only within the country and in free zones.
    • Free zone companies have the flexibility to run business both within the free zone they are incorporated in and internationally. 
    • Offshore companies may only work with panthers and customers from abroad as far as client geography is concerned.
  • Tax incentives relating to business income in the UAE are available for all company types, though certain variations do exist:
    • Local firms may be exempt from the 9% income tax if their annual profits are below AED 375,000 (approximately USD 102,000).
    • Onshore businesses pay no taxes if their income originates from abroad.
    • Offshore companies are not subject to UAE taxes as they are non-residents with no income sources in the country. 
  • For local companies, financial audits and reporting are obligatory, while for non-resident (offshore) ones, no such requirements exist. Free zone companies often don’t face the said requirements either.

FYI: In the UAE, you can acquire a residency visa and a residence permit valid for up to 10 years through various programs, with the most widely sought-after options being the work visa and the real estate investor visa (NB: Here, the matter concerns local real estate in the region).

Offshore companies in the UAE: what makes them special

In the UAE, they have special rules and benefits for international businesses. Offshore (a.k.a. international) companies are legal entities that operate outside their incorporation jurisdiction and/or their beneficial owner’s location or residence state.

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Challenges of running an offshore company in the UAE

In addition to their numerous advantages, international businesses in the Emirates also come with certain limitations:

  • You need a large deposit to open a local bank account.
  • You are not allowed to do business in the UAE.
  • You cannot obtain UAE residency or a work visa.
  • You aren’t permitted to rent offices or commercial spaces in the Emirates.
  • Some companies have it even harder as they are obliged to demonstrate their economic substance in the UAE, such as those in banking, insurance, financial services, intangible assets, shipping, etc.

For more information, please read how to Choose foreign bank accounts together with professionals. Book free expert consultations.

Picking the best location for your UAE offshore company

This is where you may establish your offshore company in the UAE:

  • Jebel Ali Free Zone (Dubai)
  • Ajman Free Zone (Ajman)
  • RAK ICC (Ras Al Khaimah).

While offshore companies may not be allowed to conduct business with the residents of the UAE or certain free zones, they enjoy the right to set up accounts with both local and international banks.

Offshore companies and their business types in the UAE

Take a look at what business types you may establish in this jurisdiction:

  • new company (which is most often an LLC)
  • branch of an existing foreign enterprise
  • subsidiary.

As far as the requirements for the authorized capital and licenses for these business entities are concerned, please confirm them with your registered agent. NB: Foreign owners are not permitted to independently open an offshore company in the UAE. The entire process is facilitated through a resident registered agent who advocates for the entrepreneur’s interests in the administrative and financial institutions of the country.

Permitted activities

Offshore and onshore companies with 100% foreign ownership are allowed to do business in many sectors in the United Arab Emirates:

  • agriculture
  • services (administrative and ancillary)
  • arts, culture, and entertainment
  • food and beverage industry
  • education and healthcare
  • construction, a key sector for foreign investors
  • hospitality
  • IT industry
  • scientific and technological activities
  • manufacturing
  • logistics, etc.

To enjoy steady profits, offshore firms usually target specific sectors only.

How to register an offshore company in the UAE

Offering foreign entrepreneurs a world of opportunities, international planning is highly popular in the United Arab Emirates. However, to launch your own business in the UAE, you need to carefully study all legislative nuances of the jurisdiction and its free zones, and this is where expert advice comes in highly handy.

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