Offshore and Free Zone Company
It's understandable why people confuse Offshore with Free zone company and vice versa. Registered and licensed by Freezone Authorities, an expat can have the full ownership of the company without a local sponsor. However, both are set up for different purposes.
Investors planning business in Dubai need to learn the differences between these two to avoid business hurdles along the way. The business activities are some of the factors why these companies vary on benefits and imposed limitations.
Offshore Companies
Though offshore companies enjoy the same ownership benefits that a free zone company does, they can't be a direct substitute for a free zone company.
Let's get deeper into offshore and learn that one of the most obvious differences between them. Notice the availability of company information upon the request of free zone companies while the offshore companies are allowed to maintain their anonymity.
These companies can invest in and out of the United Arab Emirates. They are free to open an account in a bank based in the country. Offshore companies are also allowed to purchase pre-demarcated lands and keep profit by themselves in their bank accounts. Offshore companies are legal with a purpose to operate outside the jurisdiction or out of the ultimate ownership location where it is registered.
If you are planning to invest in this type of company, expect no minimum capital threshold.
Moreover, these companies are used as holding or asset companies for organizations that operate within or outside of UAE.
The setting up costs for your company is less and does not require a qualification to own real estate or even lease office space. All you need to do is register in the UAE, acquire an office address without the entitlement for operating business directly in the UAE. Shareholders are also not qualified for residency visas.
UAE Laws
UAE Laws state that Offshore companies won’t be considered doing business if they maintain records of their business within the UAE and hold meetings about their business in the said country. They are also not allowed to hold a bank account within the country that will support operational transactions or if the company owns real estate property in free zone areas. Also, they are prohibited in leasing a property as their registered office.
Free Zone Companies
If you are looking to get your company in trade and export, you belong in the free zone.
You don't need to worry if a branch of your company is in a Free Zone as it will still be treated as an extension of the company. Here, you need to show that the company is a solvent Free Zone entity. Requirements must be met to register in a Free Zone, including the initial share capital. The requirements differ depending on the Free Zone and it’s also dependent based on the company's purpose. The company has a choice to either have a physical or virtual business as necessary. However, UAE has set some restrictions for Free Zone Companies.
What to expect in Free Zone Companies?
Investors will not only own 100% of the company with no tax or worry of a local sponsor getting 51%, but the shareholders and employees of the company will also qualify for residency visas in UAE. The company will also have fewer worries on the location of operations since they are allowed options for a 25-year lease.
As an entrepreneur and investor, knowing what to expect before diving on investment opportunities will equip you in handling the business operations better in Dubai. Offshore and Free Zone companies will have their benefits and setbacks depending on the type of business investment you want to make.
