Your Guide to the 3 Main Jurisdictions in the UAE

as of 17 January 2023

Your Guide to the 3 Main Jurisdictions in the UAE : MAINLAND, FREEZONE & OFFSHORE

Businesses in the UAE can take advantage of multiple jurisdiction options, each with its unique benefits and distinct features. The three main jurisdictions are Mainland, Free Zone, and Offshore, where companies can establish their presence in the United Arab Emirates (UAE).

Mainland companies have the widest range of over 3,000 business activities, the majority of which can be 100% foreign owned without any limitation on where they can conduct their business activities. On the other hand, Free Zone companies can be 100% foreign owned but have restrictions in conducting activities on the mainland without a proper branch license or agent. Offshore companies have complete ownership but are not allowed to conduct business within the UAE. In addition, mainland and free zone companies can issue visas for investors and employees, whereas offshore companies cannot.

While each jurisdiction has pros and cons, businesses can take advantage of the flexibility multiple jurisdictions provide. Entrepreneurs, owners, and investors alike should consider each objective before deciding on the type of company to set up in the UAE. A business setup consultant can help on this matter. They should understand not just the nature of your business but the direction your business will grow. Below is EZONE’s comparative guide on the three kinds of jurisdictions in the UAE in terms of business setup, registration, and other requirements.

Description	Mainland	Free Zone	Offshore
Type of Company	Onshore companies are registered under the government authority of the Emirate. Legal Forms of companies: Sole Ownership, Civil Company, Limited Liability Company (LLC), Branch of a Foreign Company/Free Zone Company, Private/Public Joint Stock Company.	Free zones are formed within special jurisdictions under a specific Emirate. Legal Forms of free zones – Free Zone Establishment (FZE) has a single shareholder, Free Zone Company (FZCO) has multiple shareholders, a Branch of a Foreign Company, and depending on the free zone, it can also be an LLC-FZ or LLC.	Established in a foreign jurisdiction to operate outside their original location of registration. Offshore entities are usually established as Company Limited by Shares (CLS), or Company Limited by Guarantee (CLG). The name of a limited company shall end with the word “Limited” or “Incorporated” or the abbreviation “Ltd” or “Inc”. Most recently, Unlimited Companies (UC) were introduced.
Registration Authority	A trade license is issued by the Department of Economic and Tourism (DET) in Dubai and the Department of Economic Development (DED) of the other six (6) emirates. Additional approvals from other external government authorities may be required depending on the business activity.	Free zones are established under a special decree passed by the Ruler of the Emirate in which the free zone is created. They have rules and regulations that oversee the license and visa issuance regulatory and administrative processes. Additional approvals from other external government authorities may be required depending on the business activity.	Offshore entities are subject to the Federal Laws of the United Arab Emirates (UAE) and the local laws of the Emirate in which the offshore entity was incorporated. A registered agent can help with the process of incorporating the entity.
Trade Restrictions	Free to do business anywhere in the UAE - both inside and outside the UAE, including Free Zones. There are no restrictions of any kind in different parts of the Emirate.	Free zone companies can only legally trade only within the free zone, with other free zones, and outside the UAE.	Offshore companies in Dubai are only allowed to conduct international trade outside of the UAE and purchase/manage real estate within the UAE. They are not allowed to conduct business activities or hold offices inside the UAE.
Ownership	100% foreign ownership for businesses in the mainland is allowed on over 2,000 approved business activities. There are only a limited number of business activities that require 51%-100% local ownership.	The investor/s enjoys 100% foreign ownership of the company.	The investor/s enjoys 100% foreign ownership of the company.
Location and Office Space	No restriction on where the company can rent or buy the offices/warehouses/retail spaces as long as it is on the mainland. Free Zones can issue NOCs for mainland companies to lease in a free zone area.	Renting or buying offices/warehouses/retail spaces should be within the registered free zone and a variety of options are available for workspaces which include offices, Flexi-desks, and virtual offices.	No specific location or physical office requirement. The registered agent will provide a registered address.
Shareholders	Minimum of one individual or corporate shareholder is allowed.	A minimum of one individual or corporate shareholder is allowed.	Minimum of one individual or corporate shareholder is allowed.
Capital Share Requirement	The minimum share capital requirement starts from AED50,000 to set up a business in the UAE. There is no paid-up capital requirement unless stated by the Emirate or due to business activity.	The minimum share capital requirement starts from AED50,000 to set up a business in the UAE. There is no paid-up capital requirement unless stated by the Emirate or due to business activity.	The minimum share capital requirement starts from AED50,000 to set up a business in the UAE. There is no paid-up capital requirement unless stated by the Emirate or due to business activity.
Capital Repatriation and Profits	100% repatriation of profits and capital are done by the company without any restrictions on the county of origin of the investors.	100% repatriation of profits and capital are done by the company without any restrictions on the county of origin of the investors.	Offshore companies are void of any capital requirement.
Activities	Mainland companies can combine up to 10 business activities that belong to the same activity group. Combining unrelated business activities will require special approval.	Depending on the free zone, you can usually combine 3-5 business activities and others would be at an extra cost.	It is mandatory for offshore companies to operate outside of the UAE to start their business activity.
Corporate Tax	From June 1, 2023, a 9% corporate tax will be introduced with exemptions for taxable income up to AED 375,000.	Free Zone entities can enjoy tax holidays provided they maintain adequate economic substance, comply with regulatory requirements of the respective free zone, ensure audited books of account, and, most importantly, do not earn income from Mainland entities and only derive service income within the Free Zone or from other Free Zones.	Offshore Companies are subject to 0% Corporate Tax.
Value-Added Tax	For tax-registered businesses, a 5% VAT is applied at every step of the taxable supply of goods and services.	Free zones are applicable to VAT except for designated zones.	Offshore companies are 100% tax-free and are not subject to paying taxes in their home jurisdiction.
Withholding of Taxes, dividends, and Capital Gains	No withholding of taxes on domestic, and international payments. Exemptions are granted to dividends and capital gains.	No withholding of taxes on domestic, and international payments. Exemptions are granted for dividends and capital gains.	No withholding of tax on income, payments, and other transactions.
Tax Residency	Tax Residency Certificate is granted to mainland companies that have been active in the UAE for two years or more. This certificate can be used in other jurisdictions under the double tax treaty.	Tax Residency Certificate is granted to free zone companies that have been active for two years or more in the UAE. This certificate can be used in other jurisdictions under the double tax treaty except for companies with a virtual office.	Granted investment protection since UAE has signed a double taxation avoidance agreement which allows offshore companies to have monetary benefits in terms of tax exemptions.
Duration	This can range from one week to 4weeks depending on the additional external approvals required.	1 day to 6 weeks depending on the free zone authority.	1 to 4 weeks depending on the compliance requirements.
Physical Presence in the UAE	If the shareholders have previously been to the UAE, signing can be done via an online notary and the incorporation process can be done remotely.	If the shareholders have previously been to the UAE, the incorporation process can be done digitally and remotely.	The incorporation process can be done digitally and remotely.
Visa	No restrictions on visa eligibility but the number of visas issued is dependent on the size of the workspace.	The number of visas allocated depends on the free zone license package which can range from 0 to 6 but can be increased depending on the size of the office.	Not permitted to grant UAE residence visas.
Visa Duration	2-year validity for investors and employees	2-year validity for investors and employees	Not permitted to grant UAE residence visas.
Bank Account	Flexibility to open multi-currency bank accounts in the UAE and do business locally and globally as long as the authorized signatory is a UAE resident and can provide proof of address in the UAE.	Flexibility to open multi-currency bank accounts in the UAE and do business locally and globally as long as the authorized signatory is a UAE resident and can provide proof of address in the UAE.	Flexibility to open multi-currency bank accounts in the UAE and do business globally if the authorized signatory is a UAE resident and can provide proof of address in the UAE.
Audit Requirement	An annual financial audit is federally required however, it is at the discretion of the DET/ DED authorities or external government authorities if they will require submission.	Audit requirements vary from each free zone and most of them don't require an annual financial audit which is subject to change once the corporate tax is introduced.	No annual audit requirement.
Import Duties	No exemption on import duties.	Permitted to import goods to free zone from other countries with no payment of customs duties. However, customs dues of 5% are due once the goods are taken out of the free zone.	No import and export tariffs as no business can be conducted locally.
Approvals	Depending on the business activity, mainland companies may or may not have to seek external approvals from government bodies.	Depending on the business activity, free zone companies may or may not have to seek external approvals from government bodies.	Not Applicable as no business can be conducted locally.
Applicable Laws and Courts	UAE adopts three levels of courts for litigation: The Court of First Instance, the Courts of Appeal, and Federal Supreme Court, and the Courts of Cassation.	All free zones have their own regulations, falling under the federal Commercial Companies & Commercial Transactions law. There are two autonomous free zones that follow the common law system with its independent courts which are Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM).	Laws dependent on the jurisdiction in which offshore companies are established which are Jebel Ali Free Zone (JAFZA), Ras Al Khaimah Economic Zone (RAKEZ) and Ajman Free Zone.

When it comes to setting up a business in the UAE, you have three vital options – each with its own unique benefits. Whichever jurisdiction you choose, ensuring that it is best suited to your corporate goals is essential. Make sure no stones are left unturned and that your plans match perfectly by considering which jurisdiction is good for you and your business. Taking the time to understand what’s on offer not only simplifies decision-making but makes navigating this journey so much easier and smoother.

Don’t waste another minute wondering where to start your business in the UAE. EZONE is here with years of expertise guiding you through every step. From picking the right jurisdiction that fits your needs best, our knowledgeable team can provide accurate information on setting up a successful endeavor. Contact us today at 800-EZONEUAE or hello@e.zone for valuable assistance! Take advantage and set up your business now!