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For any investor who is planning to enter the UAE market, it is essential to understand the difference between mainland, free zone, and offshore company. These jurisdictions have different rules and regulations regarding ownership, availability of business activities, and more. There are both advantages and disadvantages for all these three jurisdictions for investors with different priorities. Let us have a look at them!
Mainland companies are permitted to do business both inside and outside the UAE.
Mainland companies require a local Emirati sponsor or local service agent owning a minimum of 51% shares and the remaining 49% of shares must be allotted to the other shareholder in the company. However, a recent amendment to the Commercial Companies Law (CCL) allows 100% foreign ownership for many business activities across sectors, including trading and manufacturing. As a result, foreign investors can snow enjoy 100% ownership in the mainland and gain more flexibility in carrying out business operations.
Mainland companies should obtain permission from authorities such as the Department of Economic Development (DED), Ministry of Labor (MIL), Dubai Municipality, and Ministry of Interior (MOI).
When it comes to visa eligibility, UAE mainland companies do not have any kind of restrictions.
A minimum of 200 sq. ft physical office space is mandatory for a mainland company in the UAE. A free zone company does not mandatorily require an office. Such companies can operate without an office or even have virtual offices.
A Financial audit is mandatory for all UAE mainland companies. The Visa validity for employees is 2 years
All kinds of business activities are permitted for mainland companies.
Companies are allowed to do business within the jurisdiction of the particular free zone and outside the UAE.
Free zone companies can enjoy 100% ownership for all business activities. There is no need for a local service agent or sponsor.
Every free zone has its own license issuing authority that provides approval of any company inside its jurisdiction.
A free zone company does not mandatorily require an office. Such companies can operate without an office or even have virtual offices.
Certain Free zone jurisdictions are exempted from Audit preparation. However, there are some entities that require a mandatory audit of accounts.
Free zone companies have certain restrictions and Issuance of more visas demands leasing out additional work premises. Visa validity for employees is 3 Years.
Certain types of business activities are not allowed
Offshore companies are free to do business outside the Emirates. They cannot do any business activity in the UAE.
An expat can enjoy full ownership of an offshore company if it is located outside the UAE. An offshore company cannot have any physical presence in the UAE
Ras Al Khaimah (RAK) and the Jebel Ali Free Zone (JAFZA) offer offshore formation in the UAE. Their respective free zone authorities issue the approval for such companies.
An offshore company cannot open a physical office in the UAE. However, they can have it outside the UAE.
Offshore companies do not require mandatory financial audits..
As there is no requirement for office space, offshore companies are not entitled to residency visas for employees. We hope now you got a clear idea of the differences between a Mainland, Free Zone, and Offshore Company in the UAE. Polestar Advisory Services guide investors and entrepreneurs to set up their dream business dreams in all these jurisdictions of the UAE. Contact us to know more about our company setup services.