There can be a lot of confusions about company formation in Dubai, UAE especially when one is not familiar with this kind of matter and is not updated with the rules and regulations of the land of the UAE.
Some people mistake onshore companies as free zone companies and the latter as offshore companies and vice versa because they seem to function the same when in fact they have big differences. Although they have almost the same benefits that they offer, they still stand out distinctly from each other.
It is essential that businessmen who are planning to establish an organization in the UAE to be familiar with its laws regarding business and the things that one should be familiar of in order to not be confused with it. This article shall discuss about the meaning of both and their differences as well in order for people to be guided.
In the United Arab Emirates (UAE), an onshore company is located in the mainlands. This means that before one can establish a company, a local sponsor is needed by their side to be contacted. It is a requirement that when investors plan to have a company formation in UAE, they need a local sponsor who will get 51% of the shares of the business that they plan to establish and will also have to be paid a fixed amount annually.
In each location in the mainlands, there are benefits that business owners can find helpful. One of them is that having a business set up in Dubai mainland or any UAE mainlands will give them the advantage of having the opportunity to operate all over and outside the country.
When onshore is chosen, an office is a requirement to be acquired. Along with this is the residence visas of the owners and their employees.
The free zones are generally made for business owners who are looking to operate internationally by trading and exporting at the same time. These companies usually cater to their clients in the UAE, in the neighbouring countries, and other nations that are easily reached because of the easy access to airports and seaports in the free zones.
Basically, free zones attract investors that want to operate same as the above-mentioned details. This is also why industry-centric free zones are available for businessmen to choose from as this will be a good help for them since these free zones are made for the type of industries that they are designed for. In this way, the needs and requirements of the businesses will be properly met, ensuring that they operate in the best way that they can. However, in every free zone in the UAE, the authorities still have certain activities that they do not allow to be conducted in their locations.
The businessmen have the choice of having a physical office or a virtual office, lest the former is not a requirement for the business or the owners themselves.
Offshore in Simple Terms
An offshore company is a company established in another jurisdiction while its parent corporation in another country. This is not a branch company since there is no physical office that is required. They are not physically present in the country that they choose to be registered as an offshore company. Furthermore, they are allowed to open a bank account. The main reason of having a company be registered under a different country’s jurisdictions is mostly for tax purposes.
Offshore companies in the UAE are not allowed to have business licenses, and because they are not physically present, the shareholders are not required to have resident visas. Their information is also kept in confidential.
Some more advantages are the following: unlike some free zones and onshore locations, there are no minimum capital requirements to start an offshore company; there is also not much costs that will be incurred; investments can be owned inside and outside of the UAE; real estate can be purchased in specific areas in the UAE, and its gains can be deposited into the bank account that they have in the country, and an office space is not a requirement. Basically, they conduct their business outside the country but they cannot do so inside.
Basically, the difference between onshore, free zone, and offshore companies is their location. The first one is in the mainlands, the second is in a free zone that is usually industry-centric, and the last one does not have any physical presence in the country.
FAR Consultants is one of the leading business setup consultants in UAE that handle business setup in Dubai mainland and UAE mainlands, free zone setups, and offshore setups. We have been helping investors with their needs for more than 30 years and have successfully done so, not just in the UAE but in the neighbouring countries as well.