cOMPANY fORMATION IN UAE
The UAE is a premier destination for entrepreneurs and businesses seeking a strong international presence. With 0% corporate tax in Free Zones, no capital gains tax, and no personal income tax, setting up a company in the UAE is an excellent way to optimize profits while benefiting from a well-regulated and business-friendly environment.
Why Choose Company Formation in UAE?
- Strategic Location: Positioned between Europe, Asia, and Africa, providing unmatched global connectivity.
- Global Business Hub: Well-regulated jurisdictions with access to international markets.
- Tax Advantages: No personal income tax, no capital gains tax, and 0% corporate tax in Free Zones (subject to conditions), while Mainland companies are taxed at only 9%.
- 100% Foreign Ownership: Available in Free Zones and certain Mainland sectors.
- Ease of Doing Business: A liberal regulatory framework with investor-friendly policies.
- Ideal for Holding and Investment Companies: Many businesses set up holding structures in the UAE for efficient asset management and long-term financial planning.
Selecting Right Jurisdiction
The three types of jurisdictions have their differences along with their own benefits and drawbacks; it’s important to understand the main attributes of each to gather a proper understanding of registering your business.
Mainland Setup
Mainland companies benefit by having access to the local market and outside the UAE. To get registered as a Mainland LLC company, you must obtain a licence by the Department of Economic Development (DED) of the respective emirate.
Freezone Setup
UAE accommodates more than 40 free zones to accelerate economic growth, and these unique jurisdictions pose their own regulations and governing bodies. Generally, you are only able to engage in business activities inside the Free Zone and outside of UAE. Enjoy 100% repatriation profits and 0% customs duty.
Offshore Setup
The company is located in an international location in another country with a different set of regulations and conduct of business than that of the UAE. Even though offshore companies operate outside of UAE, the company has the obligation of being a shareholder of a free zone or mainland business.
What's Difference?
| Criteria | Mainland | Free Zone | Offshore |
|---|---|---|---|
| Ownership | 100% foreign ownership allowed in most sectors (some activities may require a UAE national as a local partner holding 51% ownership) | 100% foreign ownership allowed | 100% foreign ownership allowed |
| License Issuance | Issued by the Department of Economic Development (DED) of the respective emirate | Issued by the Free Zone Authority of the chosen Free Zone | Issued by Offshore Authorities (JAFZA, RAK ICC, Ajman Offshore, etc.) |
| Application Process | Shareholder presence required for signing the MOA; POA possible if notarized & legalized | Shareholder presence often not required; most free zones allow remote incorporation | Shareholder presence not required; can be incorporated remotely through agents |
| Business Scope | Can operate within UAE, Free Zones, and internationally | Can operate within the Free Zone and internationally (Mainland requires permit or distributor) | Restricted to international trade and holding activities; cannot operate within UAE |
| Business Activities | Suitable for retail, trading, services, industrial, consulting | Ideal for e-commerce, tech, media, logistics, consultancy | Best for holding companies, asset protection, investment structuring |
| Business Suitability | Best for companies that need full UAE market access | Great for startups, international trade, tech firms | Ideal for wealth management, international business |
| Cost Considerations | Higher setup & operational costs | Moderate costs depending on Free Zone | Lowest cost, minimal operational expenses |
| Taxation | 9% corporate tax (profit above AED 375,000) | 0% corporate tax (if Free Zone qualifying conditions met) | 0% corporate tax; ESR may apply |
| VAT Registration | Mandatory above AED 375,000 revenue | Mandatory above AED 375,000 revenue | Not required (offshore cannot operate in UAE) |
| Office Requirement | Mandatory physical office | Office/flexi-desk required in Free Zone | No physical office needed |
| Visa Eligibility | Eligible; number depends on office size | Eligible; depends on Free Zone policies | Not eligible |
| Bank Account Opening | Easier for both corporate & personal accounts | Depends on Free Zone & compliance | More challenging; strict compliance |
| Regulatory Compliance | Must follow DED, Labour & other local laws | Follows Free Zone Authority rules | Must satisfy ESR, AML, UBO rules |
