The UAE, being a known business hub around the globe, attracts many investors and interested parties seeking business opportunities and global investments. Due to its strategic geographical trading position and competitive tax environment, it is a perfect location for a new business setup in UAE for various industries such as trade, commerce, services, shipping, manufacturing, and construction.
The following taxes apply in the country as of the date of writing: Value Added Tax (VAT), for which eligible companies need to register, Excise Tax, Corporate Tax in the UAE, customs duty and global minimum tax. As of writing, there is no personal income tax in the country.
Throughout the years, the UAE has attracted a lot of local and foreign investors from around the world and has been implementing new policies, numerous international treaties, and favourable licensing requirements to draw more commercial opportunities for stakeholders. It is imperative that before business setup in Dubai or the wider UAE, one must know the different business jurisdictions, the benefits, and limitations of opening a licence in each. There are three different jurisdictions when forming a company in the UAE: Mainland, Free Zones, and Offshore.
Establishing a company in the UAE can be done by either applying in person at the Department of Economic Development or visiting digital platforms of authorities. To save time and resources, and account for differences in legal requirements across economic zones, most aspiring business owners prefer engaging with professional companies offering business setup services in the UAE to make the process easier and straightforward. They can also guide you through the company registration process in the UAE.
Mainland
Setting up a business in mainland is a feasible option in terms of trading flexibility within the UAE market and internationally. With the ability to operate anywhere in the UAE without restrictions, mainland companies enjoy the full benefit of being a UAE-based entity.
Before 2020, a mainland license only allows up to a maximum of 49% ownership by foreign investors. However, based on the Federal Decree-Law No. 26 of 2020 amending the provisions of Federal Law No. 2 of 2015 on Commercial Companies, foreigners are now allowed to have 100% full ownership of mainland companies. With this significant shift in ownership laws, many foreign investors seek expert advice for mainland company formation UAE to ensure compliance with local regulations. Even if the mainland allows 100% full ownership, a local agent is still required to proceed with company formation for certain activities specified by the authorities.
As per the guidelines by Dubai Economy, 100% full ownership is applicable for foreigners for 1000+ commercial and industrial activities, excluding economic activities which relate to strategic sectors, making mainland business setup in UAE a preferred option for many investors. To ensure a smooth and compliant setup, seeking professional company formation services in UAE is essential for businesses looking to maximize their potential in the local and global markets.
Considerations
Emiratisation
Mainland entities must employ at least 2% of their skilled workforce as Emirati nationals. The ratio for employees is that for every 20 expats, there must be 1 local.
Physical processes
For certain services related to mainland companies, such as license renewal, liquidation, amendments, etc. (which require the signature of the business owner or authorized person), you will need to visit the relevant authorities in person. Unlike other processes, these services do not offer the flexibility of submitting applications through online digital platforms. Company registration UAE providers can help simplify these steps.
Lower-cost
In general, comparing to various freezones, mainland service charges are less costly.
Benefits
- Ownership: Since 2020, foreign investors are allowed 100% ownership except for some activities of strategic sectors.
- Business Activity: Mainland companies are allowed to trade locally within the UAE market as well as internationally, making mainland business setup in UAE an ideal choice for expanding operations.
- Address Requirement: A physical office is required with a minimum size of 200 square feet. Flexi- desk is also an option for those businesses who does not have any physical presence here in UAE like ecommerce companies or those who are running with remote work set-up. Professional business setup services in UAE can help you choose the right office solution.
- Visa Requirement: The initial number of visas approved is for 3 individuals, but this may increase depending on the requirements and subject to approval.
- Taxation: There is no personal income tax in UAE as of date. Mainland companies are however, subject to 5% VAT and 9% corporate tax on profits above AED 375,000. Working with UAE company formation services ensures compliance with tax regulations.
- Trade and Location Flexibility: Mainland companies have the flexibility to open a business and trade anywhere in UAE.
- Regulations: Processes and regulations are compared to other economic sectors.
Free Zone
The concept of free zones was first introduced in 1985, starting with the Jebel Ali Free Zone Authority, to generate foreign interest in the UAE market. This is a special economic area where foreigners have 100% ownership of their business. There is no personal income tax in free zones as of the date of writing and, in terms of VAT, free zone entities are subject to a 0% or 5% tax rate depending on their business transactions, which makes free zone company formation in the UAE an attractive option for entrepreneurs worldwide.
One key limitation of free zone companies is they are not allowed to trade freely in the UAE's local market. Free zone trade activities are limited to transactions with other free zone entities and international businesses.
Currently, there are 46+ multidisciplinary free zones in UAE intended for different industry categories where expatriates and foreign investors can have 100% ownership. Some of the free zone authorities for company incorporation in UAE include:- Dubai Multi Commodities Centre (DMCC)
- Dubai International Financial Centre (DIFC)
- Dubai Airport Free Zone
- Jebel Ali Free Zone
- Dubai Silicon Oasis
- International Free Zone Authority
- Sharjah Airport Free Zone
- Hamriyah Airport Free Zone
- Dubai World Central
- Dubai World Trade Center
- Ras Al Khaimah Economic Zone
Benefits
- Ownership: Expatriates and foreign investors can have 100% ownership of their newly established companies in UAE free zones.
- Business Activity: Free zone companies can trade within the free zone and internationally. A local agent or distributor is required in order to trade within the UAE.
- Office Requirement: A physical space is not mandatory. A lot of free zones have licences with virtual or flexi-desk addresses, making the free zone company setup in the UAE more flexible for entrepreneurs. At Excellence, we offer flexi-desk business assistance services to help businesses set up efficiently with flexible office solutions that meet these needs.
- Visa Requirement: The number of visas that can be applied for is contingent upon the size of the office space. Those with a flexi-desk set-up can get the standard employment quotas for 3 employees during company registration in a UAE free zone.
- Taxation: There is no personal income tax in the UAE as of the date of writing. However, for VAT, free zone entities are subject to a 0% or 5% tax rate depending on their business transactions. For Corporate Tax in UAE, there are also two tax rates for free zone entities depending on their applicability: 0% and 9%, which is an important consideration during company incorporation in UAE
Considerations
- Trade limitations: Trading in the UAE market is only possible through a local agent or distributor.
- Location Flexibility: Free zone companies can only open their offices within the designated free zone area.
- Location restriction: Operational address is only limited within the designated free zone.
Offshore
Offshore companies have the same benefits as a free zone company but are not a replacement for it. Unlike free zones, offshore companies are only allowed to trade or have business activities outside the UAE, not within it. This difference in business operations is what sets offshore companies apart from other options for business setup in UAE. In addition, an offshore company can only be opened with the help of a registered offshore agent.
Although offshore companies are allowed to open accounts with multiple currencies in the UAE, they are not allowed to carry out business within the UAE or have physical addresses in the UAE. Choosing the right partner for the incorporation of offshore companies is very important to help with the mentioned processes. Currently, there are two principal jurisdictions which offer offshore companies in the UAE: Jebel Ali Free Zone (JAFZA) Offshore and Ras Al Khaimah International Corporate Centre (RAKICC).
Benefits
- Ownership: Expatriates and foreign investors can have 100% full ownership for offshore companies.
- Taxation: Offshore entities enjoy the same tax benefits as free zone companies in terms of Corporate Tax. However, VAT is not applicable for offshore companies at all.
Considerations
- Agent Requirement: A registered offshore agent is needed for a company setup in UAE.
- Business Activity: Unlike freezone or mainland company setup in UAE, offshore companies can only trade internationally or outside the UAE.
- Trade and Location Flexibility: Offshore companies cannot have offices in the UAE, nor can they trade within the UAE.
- Visa Requirement: Unlike other UAE company setup models, there are no residency visa/s issued for offshore entities as it’s not required.
- Office Requirement: A physical office or residence in the UAE is not permitted for a new business setup in UAE for offshore companies.
- Banking restriction: Opening a local corporate bank account in the UAE can be challenging for offshore companies.
Why Choose Excellence
Our dedicated team of business consultants will guide you in selecting the most suitable jurisdiction to open your business in the UAE, giving you complete confidence throughout the process. We help you identify the most suitable legal structure for the company, pick the right business activities per the licence category, and ensure that your company complies with the UAE rules and regulations. Whether you are looking for Company Registration in a UAE Free Zone or mainland, we are here to assist you. From setting up your business to helping you focus on operating it, we are a one-stop solution for your business needs.
Affiliations & Accreditations
Our relentless pursuit of excellence, proven through our prestigious International and Local accreditations, sets us apart from others. This track record makes us the go-to consulting and business services provider in the UAE, with approvals from prominent free zones and mainland regulatory bodies. We deliver high-quality, reliable, and tailor-made entrepreneurial service packages that empower businesses to achieve their goals.
- International Standard Of Quality
- International Register of Quality Assessed Organisations (IRQAO)
- Global Trusted E-Network
Frequently Asked Questions
With our proactive and client-centric approach to financial and business services in the UAE, clients gain peace of mind knowing they are fully compliant and well-positioned for success in a dynamic regulatory landscape.
What are the benefits of setting up a business in the UAE?
The UAE offers a strategic geographical location, a low-tax environment, and no personal income tax, making it an ideal business place. The UAE’s commitment to new policies, international treaties, and favorable licensing regulations also makes it an attractive destination for investors. For a seamless experience, many businesses seek assistance from professional business setup companies in UAE.
What is the process for setting up a business in mainland UAE?
Mainland LLC company formation in UAE allows companies to trade freely within the country and internationally. The process includes securing a physical office or flexi-desk option, obtaining necessary licenses, and ensuring compliance with UAE regulations. Foreign investors can now have 100% ownership, excluding certain strategic sectors. Expert company formation services in UAE can help navigate this process efficiently. Excellence, a leading provider of business advisory services, offers expert guidance to help you establish the optimal setup and strategy for your organization’s success.
What are the tax obligations for mainland businesses in the UAE?
Mainland businesses in the UAE are subject to VAT (5%) and corporate tax (9%) on profits exceeding AED 375,000. For businesses seeking to stay compliant with local tax laws, tax compliance services are essential to manage these obligations accurately.
What are the benefits of setting up a business in a Freezone?
Freezone companies benefit from 100% foreign ownership, no personal income tax, and favorable VAT rates (0% or 5%, depending on business transactions). Applications can be tracked anywhere as freezones companies offers various digital platforms for the same. Many entrepreneurs rely on professionals to guide them through the process of company registration in UAE free zone.
What is the difference between mainland, free zone, and offshore company setups in the UAE?
Companies based on the mainland can conduct trade freely both within the UAE and globally, with 100% foreign ownership allowed for most business activities. Free zone companies benefit from full foreign ownership and tax incentives but are restricted from directly trading in the UAE market without a local distributor. Offshore companies, in contrast, are mainly utilized for international trade and asset protection, with no physical presence or operations allowed within the UAE. Choosing the right structure is easier with professional company incorporation UAE support.
What are the requirements for obtaining a UAE trade license?
The requirements for acquiring a trade license in the UAE vary based on the selected jurisdiction. Generally, they include selecting the business activity, securing office space, obtaining initial approvals, registering the company, and paying relevant licensing fees. Additional approvals may be required for specific industries or regulated activities. Engaging with professional company formation services in UAE can assist in optimizing the process and ensuring adherence to UAE regulations.
What is the corporate tax rate in UAE for mainland and Freezone companies?
Companies based on the mainland are required to pay a corporate tax rate of 9% on profits that exceed AED 375,000. Freezone companies may also be subject to a 9% corporate tax depending on their business activities. Both types of businesses can benefit from expert tax compliance service providers who also offer mainland and freezone company setup UAE, helping them navigate these tax regulations effectively.
How can company formation services assist in setting up a business in the UAE?
Company formation services in the UAE help guide investors through the complexities of establishing a business, ensuring compliance with local regulations. These services include assistance with choosing the right jurisdiction (mainland, freezone, or offshore), suggesting business activities, obtaining necessary licenses, and fulfilling tax and legal requirements. Working with the best business setup company in UAE can streamline this entire process.
What are the benefits of working with freezone approved auditors in the UAE?
Companies specializing in freezone company setup UAE often have a dedicated team of freezone approved auditors who can help freezone companies comply with UAE regulations and maintain accurate financial records. Their services ensure your business stays compliant with local laws and financial reporting standards.
Do offshore companies need to pay VAT in the UAE?
Offshore companies in the UAE are exempt from VAT. However, they are required to comply with the corporate tax regulations - same as freezone companies. As offshore companies cannot trade within the UAE, company incorporation services can help ensure they are set up properly according to the applicable laws.
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