Should I Register A Mainland, Freezone Or An Offshore Company?
When a business is registered with the appropriate authority, it creates a smooth and seamless path to enter the UAE market and then to grow without encountering any operational or legal issues. The authority with which your license has to be registered entirely depends on your business plan, your business activity, your target market, and your financial goals along with your initial budget.
In-depth knowledge is provided through the questions and answers below.
- If the customer has a business plan with a majority of customers and operations on the mainland, registering the company there is highly recommended.
- In order to rent or buy an office or shop within mainland geographical areas, the company must be registered on mainland. A restaurant can be opened in Karama, Business Bay, Sheikh Zayed Road, AL Barsha, Dubai Marina, Motor City or any of these mainland locations, but the company must also be registered as a mainland company.
- The company must be registered as a mainland company if the customer chooses an activity of business that is only approved by government authorities as a mainland activity. For instance, a real estate brokerage company (RERA), a custom clearing agent (CUSTOM), or a tourism activity (DTCM). After the mainland company is registered, it can open a branch company in the freezone.
- In order for a customer to import goods and store them in a warehouse on mainland, the trading company must also be registered on mainland.
- More than likely, the Government will participate in a government tender related to the customer’s activities if the customer is registered in an Emirate where the tender is announced.
- Whenever a customer wants to import goods and store them in a warehouse in a free zone and then re-export them out of the UAE, free zones are the best places to register a trading company.
- Free zones are the best choice for customers who are looking to open manufacturing units and then want finished goods to be exported out of UAE or to be sold on mainland through distributors.
- Free zones are the best option for customers who wish to conduct commercial activity and own 100% of their business. However, he/she cannot conduct operations directly on the mainland.
A special note: Free zone companies cannot directly operate on mainland .
A registered company may conduct its business under the jurisdiction of an authority under which it is registered. Therefore, a real estate brokerage company registered with DED Dubai cannot handle brokerage business for Abudhabi or Ajman properties, and a transportation company registered with RTA Dubai cannot do business with Abudhabi or Ras Al Khaimah. To register a branch company or to appoint a registered agent having its license in that particular jurisdiction, an approval, a permit, or a trade license must be obtained from local authorities.
- Whenever business activity will be conducted entirely outside of the UAE, an offshore company should be formed.
- To own shares, real estate, trademarks, or any other asset outside or inside UAE for structuring purposes.
- Visas for residence are not permitted under offshore companies. An offshore company cannot even rent an office in the UAE.
United Arab Emirates have seven emirates, including Abudhabi, Dubai, Sharjah, Ajman, Umm al Quwain, Ras al khaimah, and Fujairah. Each has its own Department of Economic Development (DED). Companies based in the Mainland are registered with the DED of an Emirate where the customer seeks to open a business.
UAE has several free zones. Each free zone has its own advantages. Free zones are governed by their own governing authorities which are responsible for registering licenses.
In the UAE, offshore companies can be registered in three jurisdictions. A JAFZA offshore company is registered with the JAFZA offshore authority, which is part of the JAFZA free zone. The RAKEZ offshore company is registered with the RAKEZ offshore authority, which is part of the RAKEZ free zone. The Ajman offshore company is registered with the Ajman offshore authority, which is part of the free zone in Ajman.
- A mainland company must be incorporated as a commercial LLC (Limited Liability Company) with UAE nationals owning 51% of the shares. As an internal agreement supported by two witnesses, the customer will still have 51% ownership by a UAE national with fixed annual fees regardless of its share in profit, loss, asset or liability.
- An expat can own 100% of a professional company on mainland, however. UAE nationals will act as service agents for the company in this case, without ownership equity.
- In a free zone company, foreign investors can own 100% of the shares regardless of the nature of the business.
- An expat can own 100% of the shares in an offshore company regardless of its nature.