One of the most common issues encountered by business owners are entrepreneurs who wish to set up their business in Dubai is choosing between establishing a free zone or offshore company.
While both types have their own advantages and disadvantages, knowing the difference between each is crucial in deciding which option is a better fit for your business. Whether it's your first time to establish a business or you're new to this industry, here are some of the important details you need to consider about free zone and offshore companies for your business setup in Dubai.
Location of business operations
Free zone companies in Dubai and the UAE are allowed to conduct their business in the free zone if they meet the requirements for company formation in Dubai. They can be 100% owned by foreign investors and there is no need to have UAE nationals as shareholders.
Additionally, free zone companies are usually exempted from paying income and corporate taxes. These companies, however, are required to register with the Federal Tax Authority for the payment of Value Added Tax and other payments mandated by the law.
Offshore companies, while allowed to open bank accounts in the free zone or anywhere in Dubai, are not allowed to perform business activities or establish their office in the Emirate. Offshore companies may only operate outside the UAE. If you're considering a new venture in any of the emirates, you may enlist the help of business setup consultants in Dubai to discuss your options.
Residency and visas
Free zone companies and businesses may obtain residence visas for their shareholders and employees. Residency is sometimes included in the package to encourage investors and employees to join the company. The validity of visas may vary for different businesses in the free zone, but visa holders may process the renewal upon expiry.
Unfortunately, it is not possible for shareholders or employees to obtain residence visas under any offshore company. Since offshore companies are not allowed to do business in the emirate other than owning assets, you may need the help of a legal consultant in Dubai to know which type of visa you may apply for.
Costing
The cost establishing a business inside the free zone may vary depending on the location and reputation of the area or building. The number of UAE residence visas allocated, and other factors may also affect the cost of forming your company.
Establishing an offshore company is often cheaper depending on the area of incorporation. Aside from yearly corporate expenses, you may also investigate maintenance costs and other factors where you will need to allocate your resources.
If you need legal advice in setting up a business in Dubai or advice on obtaining residence visas for shareholders and employees, Motei & Associates can provide you with excellent legal services to meet the requirements of your business.
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