Setting up a business in the UAE
When starting a business in the United Arab Emirates (UAE), it is essential to understand the distinctions between “mainland,” “free zone,” and “offshore” jurisdictions. Each offers unique advantages and challenges, catering to different entrepreneurial priorities.
Mainland business setup
Mainland companies, also known as onshore companies, are licensed by the Department of Economic Development (DED) of the respective emirate. These entities can operate freely in the local UAE market and conduct business internationally without restrictions.
Advantages of choosing Dubai mainland
- Complete foreign ownership
International companies can retain 100% ownership without needing a local Emirati sponsor, except in specific strategic sectors. - Freedom to operate
Businesses can conduct operations throughout the UAE and expand into other GCC countries. - Prime geographic position
Convenient connectivity to regional and global markets via land, sea, and air.
- Unlimited visa allocation
Unlike some jurisdictions, businesses face no restrictions on the number of visas they can obtain. - Tax benefits
Enjoy personal income tax exemptions and corporate tax relief of up to $100,000, particularly advantageous for small and medium enterprises (SMEs). - Access to government projects
Companies are eligible to bid on and secure UAE government contracts, enabling participation in public sector projects.
Freezone business setup
Free zone companies operate within specific jurisdictions known as free zones, with over 40 located across the UAE. Businesses in free zones benefit from tax incentives and various operational advantages but are restricted to conducting business within their designated zone or internationally, unless partnered with a local distributor.
Key benefits of a Dubai free zone business setup
- Tax exemptions
No corporate or personal income tax, allowing businesses to retain more profit. - Full foreign ownership
Companies can be fully owned by foreign investors without requiring local partners. - Import/export duty exemptions
No customs duties on goods imported and exported within the free zone, facilitating global trade. - Business support services
Free zones often provide access to business support services like networking opportunities, industry expertise, and administrative assistance.
- Employment flexibility
Ability to hire foreign employees without restrictions, allowing for diverse talent acquisition. - Modern infrastructure
Well-developed infrastructure with excellent communication systems. - Industry-specific zones
Dedicated zones catering to specific industries like technology, logistics, and healthcare, facilitating focused operations.
Offshore business setup
An offshore company is registered in a UAE jurisdiction while its parent company remains abroad. These entities do not require a physical presence in the UAE and are primarily designed for international business operations. Offshore companies differ significantly from onshore entities in terms of legal structure, documentation, and regulatory frameworks. Note that offshore companies cannot be converted into onshore or free zone companies.
Key benefits of offshore company formation in the UAE
- 100% foreign ownership
Investors can establish and fully own their offshore company without requiring a local partner or sponsor. - Tax advantages
Offshore companies are exempt from corporate tax, income tax, capital gains tax, and withholding tax on dividends or interest. - Limited liability protection
Shareholders’ personal assets are safeguarded, as their liability is limited to the company’s obligations. - Confidentiality assured
Shareholder and director identities are kept private, ensuring sensitive business information is not publicly disclosed.
- Stable currency
The UAE Dirham’s peg to the US dollar ensures monetary stability. - Global market access
The offshore license is internationally recognized, facilitating global operations. - Robust legal structure
The UAE provides a strong legal framework specifically designed to support offshore businesses. - Opportunities for international financing
Offshore entities can easily access global funding sources.
A detailed comparison
Mainland
Up to 100% foreign ownership for most activities.
Some companies may require an Emirati partner
Operate within and outside the UAE, including the local market
Full access to the UAE local market
Subject to UAE’s corporate tax policies
Broad range of activities allowed, subject to licensing
Governed by UAE government regulations
Higher setup and operational costs due to local compliance needs
Local and international banking options available
Eligible for UAE residency visas for owners and employees
Freezone
100% foreign ownership without local sponsors
Limited to operating within the designated free zone
Local market access requires hiring a distributor or agent
Tax-free incentives within the free zone
Restricted to approved activities for each free zone
Governed by specific free zone authorities
Moderately priced; costs vary by free zone
Banking limited to UAE-based or free zone-approved accounts
Residency visas are available, limited to free zone operations
Offshore
100% foreign ownership
Focused on operating international business activities
No direct access to the UAE local market
Tax-efficient, depending on jurisdiction
Cannot engage in business activities within the UAE
Governed by offshore jurisdiction laws
Generally low-cost setup and maintenance
International banking is the primary option
Not eligible for UAE residency visas
Dubai offers unparalleled opportunities for UK-based entrepreneurs, welcoming individuals, startups, and established enterprises.
Dubai offers unparalleled opportunities for UK-based entrepreneurs, welcoming individuals, startups, and established enterprises.