Author- Kimaya Dalvi
Difference between On-Shore and Off-Shore Companies in Dubai
| Basis for Differentiation | On-Shore | Off-Shore |
| Legal Structure: | On-Shore companies are registered with the Dubai Department of Economic Development (DED) and are governed by the UAE Companies Law. They are also required to have a UAE national as a shareholder or sponsor who will own 51% of the company’s shares. This requirement is waived in some free zones. | Off-Shore companies are registered with the Jebel Ali Free Zone Authority (JAFZA) or the Ras Al Khaimah International Corporate Centre (RAKICC). They are governed by the laws of their respective free zones and are not required to have a local partner. |
| Taxation: | On-Shore companies are subject to UAE corporate tax, which is currently set at 0% for most types of businesses. However, certain industries such as oil and gas and banking are subject to tax. | Off-Shore companies are exempt from all UAE taxes, including corporate tax, income tax, and value-added tax (VAT). |
| Business Activities: | On-Shore companies can conduct business activities within the UAE and are required to obtain a license from the DED or the relevant free zone authority. They can also operate outside the UAE but may be subject to restrictions and regulations in other countries. | Off-Shore companies are primarily used for holding assets and investments outside the UAE. They cannot conduct business activities within the UAE and are not allowed to have a physical office or staff in the country. |
| Company Formation: | On-Shore companies require a physical presence in the UAE and must adhere to certain procedures for company formation, such as obtaining a trade license, registering with the Chamber of Commerce, and obtaining visas for employees. | Off-Shore companies can be formed remotely, without the need for a physical presence in the UAE. The registration process is usually simpler and faster than that of On-Shore companies. |
`Free Zone in Dubai
Free Zones, also known as free trade zones, are designated areas in Dubai that are governed by their laws and regulations, and separate from the rest of the UAE. These zones are established to promote international trade and attract foreign investment by providing a business-friendly environment, tax incentives, and streamlined procedures for company setup.
Here are the key features and benefits of Free Zones in Dubai:
- Legal Structure: Free Zones have their legal framework, which allows for 100% foreign ownership and control of businesses. They offer a variety of legal entities, including limited liability companies, branches, and subsidiaries, which can be tailored to suit the needs of different types of businesses.
- Taxation: Free Zones provide attractive tax incentives, including zero corporate and personal income tax, no customs duties, and no restrictions on the repatriation of profits or capital. This makes Free Zones an ideal location for businesses looking to minimize their tax liabilities.
- Business Activities: Free Zones offer a wide range of business activities, including trading, manufacturing, logistics, media, healthcare, education, and technology. Each Free Zone has its own set of permitted activities, and businesses are required to obtain a license from the relevant authority.
- Infrastructure: Free Zones offer state-of-the-art infrastructure, including modern office buildings, warehouses, and logistics facilities, as well as access to world-class transportation and communication networks. This infrastructure is designed to support businesses in their operations and enable them to compete globally.
- Simplified Procedures: Free Zones offer streamlined procedures for company formation, with minimal paperwork and fast turnaround times. Businesses can complete the entire setup process online, from registration to obtaining visas for employees, without the need for physical visits to government offices.
- Strategic Location: Dubai is strategically located at the crossroads of Asia, Europe, and Africa, making it an ideal location for businesses looking to access global markets. Free Zones provide businesses with a gateway to the Middle East and North Africa (MENA) region, which is home to more than 400 million consumers.
Advantages of having a free zone in Dubai
Dubai is home to many Free Zones that offer a wide range of advantages for businesses. Here are some of the key benefits of having a Free Zone in Dubai:
- 100% Foreign Ownership: One of the most significant advantages of having a Free Zone in Dubai is the ability to have 100% foreign ownership and control of your business. This means that you do not need to have a local sponsor or partner, which can be a significant advantage for many international investors.
- Tax Incentives: Free Zones in Dubai offer attractive tax incentives, including zero corporate and personal income tax, no customs duties, and no restrictions on the repatriation of capital or profits. This can result in significant cost savings for businesses operating in Free Zones.
- Business-Friendly Environment: Free Zones in Dubai provide a business-friendly environment with streamlined procedures for company formation, minimal paperwork, and fast turnaround times. This allows businesses to set up quickly and efficiently, without the bureaucratic delays that can occur in other parts of the world.
- World-Class Infrastructure: Free Zones in Dubai offer state-of-the-art infrastructure, including modern office buildings, warehouses, and logistics facilities, as well as access to world-class transportation and communication networks. This infrastructure is designed to support businesses in their operations and enable them to compete globally.
- Strategic Location: Dubai is strategically located at the crossroads of Asia, Europe, and Africa, making it an ideal location for businesses looking to access global markets. Free Zones in Dubai provide businesses with a gateway to the Middle East and North Africa (MENA) region, which is home to more than 400 million consumers.
- Access to a Skilled Workforce: Free Zones in Dubai provide businesses with access to a skilled and diverse workforce. Dubai is home to many international professionals, and Free Zones offer a platform for businesses to recruit talent from around the world.
- Business Support Services: Free Zones in Dubai offer a range of business support services, including legal, accounting, and consulting services. These services are designed to help businesses navigate the regulatory environment and achieve their goals.
Conclusion
In summary, Free Zones in Dubai offer numerous advantages for businesses looking to establish a presence in the region. These advantages include 100% foreign ownership, attractive tax incentives, a business-friendly environment, world-class infrastructure, a strategic location, access to a skilled workforce, and business support services. These benefits make Dubai an attractive destination for international investors and businesses seeking to expand their operations globally. Overall, Free Zones in Dubai provide a platform for businesses to succeed in a highly competitive and dynamic global marketplace.
