Choosing the UAE as the country to set up a company might have been easy due to its strategic location, formidable infrastructure, and business opportunities. But choosing out of the 11 different licenses to get for setting up your business in the UAE can’t be as easy.
While Dubai and Abu Dhabi are generally more popular among investors, there are other opportunities to explore and consider.
There are three different business setups in the United Arab Emirates:
- Free zones
- On-shore companies
- Off-shore companies
In this article, we will deeply analyze each one with our team of legal experts, and name the benefits, process, and any other thing entrepreneurs need to know before taking this big step towards success in the UAE.
⚖️Note: The prices in this article are estimates, numbers mentioned on the websites of each authority. Depending on your requirements, they could change slightly or drastically.
Different Zones in the UAE
Each place has its benefits with an authority responsible for giving you the necessary licenses. The Department of Economic Development rules over the mainland (on-shore). In Free Zones, it’s the Free Zone Authority for that area. As for off-shore companies, the Off-shore Authority governs and handles the licenses.
Let’s see which authority works best for you:
| Company Type | Subcategory | License Types |
| On-shore Companies | LLC | Commercial, Industrial, Professional |
| Sole Establishment | Professional | |
| Branch Office | Branch License | |
| Representative Office | Representative Office License | |
| Off-shore Companies | IBC | Off-shore License |
| Off-shore Limited Liability | Off-shore License | |
| Off-shore Branch | Branch License | |
| Free Zone Companies | Free Zone Establishment (FZE) | Commercial, Service |
| Free Zone Company (FZCO) | Commercial, Service | |
| Branch Office | Branch License | |
| Representative Office | Representative Office License |
1. UAE Free Zone
Free zones are mostly known for being exempt from most taxes and customs duties. A free zone, also known as a free trade zone or free zone authority, is an economic area governed by its own specific regulations that do not apply to businesses outside the zone. Companies in Dubai free zones trade services and products, taking advantage of special tax and foreign ownership laws.
Company Structure
The most common free zone legal forms include:
Free Zone Establishment (FZE): A legal entity incorporated/registered by a single shareholder, who can either be an individual or a corporate entity.
Free Zone Company (FZCO): Similar to FZE, but registered with a minimum of two shareholders (up to 5 maximum), who can be either individuals or corporate entities.
Public Joint Stock Company (PJSC): A corporate entity with multiple shareholders where the capital is divided into equal shares and can be offered to the public for trading on the stock exchange.
Private Limited Liability Company (LLC): A private limited company is a corporate entity with limited liability, formed by a minimum of two and a maximum of 50 shareholders. Each shareholder holds a maximum of 50% share and is only liable for their individual shares of the company’s capital. This type of company is not open to public subscription or trading of shares.
Branch of a Local or International Company: An extension of an existing local or international company that does not engage in sales, services, or any type of commercial activity, but only promotes the activities of its parent company.
Licenses Given in Free Zones
1. Free Zone Establishment (FZE)
- Commercial License: For trading activities within the Free Zone.
- Service License: For service-oriented businesses.
2. Free Zone Company (FZCO)
- Commercial License: Similar to FZE but allows for multiple shareholders.
- Service License: For various service-related activities.
3. Branch Office
- Branch License: Allows foreign companies to operate within the Free Zone under their name.
4. Representative Office
- Representative Office License: Get this license if you have marketing purposes only. Remember that you won’t be able to engage in direct sales.
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Location and Geographic Restrictions
Free Zone companies must be physically present within the designated Free Zones boundaries across the UAE. Moreover, they can only trade within the Free Zone or internationally, not directly within mainland UAE unless special permission is granted
Foreign Ownership and Shareholding
✅Unlike the UAE Mainland, 100% foreign ownership for investors is allowed without needing a local partner.
Tax Implications
✅Free Zone establishments typically enjoy tax exemptions on corporate taxes and customs duties for a specified period. This means companies here are fully excluded from import and export taxes, as well as corporate and personal income taxes.
Benefits of Getting Established in the UAE Free Zones
- 100% Foreign Ownership
- 100% Exemption from Corporate and Income Taxes
- 100% Exemption from Customs Duty
- 100% Repatriation of Capital and Profits
- Fast Business Set-up Procedures
- Developed Business Communities
- 24/7 Operations
- World-Class Infrastructure
- Independent Laws and Regulations
- Global Market Access
Requirements for Physical Office Space
To get authorized and established in a free zone, you must have a physical office within the Free Zone boundaries but this can vary based on specific zone regulations.
Process of Establishment
Setting up a freezone company can mostly be done online, thanks to streamlined processes. Every free zone is different, so check your chosen zone’s specific requirements and timelines before starting.
Typical steps include:
- Registering the company, for which the owner needs to provide a copy of their passport, plus the original company documents if setting up a branch office in Dubai.
- Leasing business premises.
- Obtaining a business license, which takes, on average, 3-5 working days.
- Setting up additional business services, such as setting up a bank account and arranging visas for foreign employees.
Freezone Set-Up Costs
Costs can vary depending on your requirements, license, office space, and visa numbers.
Typical costs can range from AED 5,000 to AED 7,500 for a freelancer, AED 15,000 for a one-person operation, and from around AED 62,500 for a company with an office space for four people – although these can vary widely. Most free zones link visa quotas to the size of the space being rented, so make sure to factor this in.
All in all, a company can expect an estimate of the following digits:
Registration Fee
AED 9,000 to AED 30,000
⚖️Note: It is only natural that the nature of your business, the license you want to obtain, the number of personnel, and other factors change the final fee.
Here are some of the estimates:
Business License Fee
- Trading License: AED 10,000 to AED 50,000 per year.
- Service License: Generally lower, around AED 8,050 for certain free zones like Sharjah Media City
Office Space Costs
Renting office space is obligatory in most free zones, ranging from AED 15,000 to AED 20,000 annually for shared or serviced offices.
Visa Costs
Each visa for staff or residency motives can cost around AED 3,750, plus additional fees for establishment cards and e-channel registration.
Share Capital Requirement
Minimum share capital can range from AED 1,000 to AED 1,000,000.
Do not forget to consult a trusted financial advisor (link to tokenova-learn more) and verify with the free zone of your choice because costs can vary based on each entrepreneur’s needs and requirements.
2. UAE On-Shore
Company Structure
The most common on-shore legal forms include:
Limited Liability Company (LLC): The most common form, requiring a minimum of two and a maximum of 50 shareholders.
Sole Establishment/Professional License: For individual professionals providing services.
Branch Office: A branch of a foreign company that can operate in the UAE but must adhere to the parent company’s regulations.
Representative Office: Primarily for marketing and promotional activities; cannot engage in direct commercial activities
Licenses Given in The UAE On-Shore
Limited Liability Company (LLC)
- Commercial License: If you have a business that is involved in trading activities, including buying and selling goods, this license will be required.
- Industrial License: Necessary for manufacturing or processing activities.
- Professional License: For service-oriented businesses such as consultancy, healthcare, or education.
- Professional License: Individuals providing professional services (e.g., doctors, lawyers, consultants) must obtain this license.
Branch Office
- Branch License: This type of license allows a foreign company to operate in the UAE under its name but does not permit independent trading.
Representative Office
- Representative Office License: Permits marketing and promotional activities but prohibits direct sales.
Location and Geographic Restrictions
As the name suggests, on-shore companies can be established anywhere within the UAE mainland but must comply with local regulations and operate throughout the country. Don’t know which option to choose? Tokenova specializes in giving consultations that consider each and every aspect of your project.
Foreign Ownership and Shareholding
Traditionally required a UAE national to hold at least 51% ownership; however, recent amendments allow for 100% foreign ownership in certain sectors listed by local authorities (e.g., Dubai DED).
Tax Implications
Generally subject to corporate tax; however, many sectors benefit from zero corporate tax for a specified period. However, personal income tax for individuals is always zero.
Benefits of Forming a Company in the UAE On-Shore
- Access to the UAE market and the ability to engage in government contracts.
- Enhanced credibility with clients due to local presence.
- Potential for 100% foreign ownership in specific sectors.
- Trade directly with the local market and do this from anywhere.
Requirements for Physical Office Space
On-shore companies in the UAE must have a physical office space in the country. Naturally, the size and type depend on the business activity and local authority requirements.
Process of Establishment
Setting up a company in the UAE mainland is relatively easier than doing so in the Free Zone and the cost tends to be slightly less. Here is the process briefly explained:
- Identify a Sponsor, a local one. This person will own at least a 51% share in the company. But you will have the authority to run the company the way you want.
- Choosing your business activity from the DED list
- Choose and reserve your company/trade name.
- Gather the required documents.
- Apply for the Department of Economic Development (DED) license
- Apply for immigration cards and any additional visas (if necessary). Note that this will add up to the total cost of your establishment process.
On-shore setup costs
Similar to the Free Zone, your business nature, number of visas, etc. can increase or reduce the final fee. For a company, expect something between AED 14,500 and AED 25,000. To give you a more detailed look, read the following items:
Business License Fee
From AED 15,000 to AED 35,000, depending on the license type and business activity
Office Space
Costs vary widely based on location and size. But expect about AED 50 per sq foot per annum.
Initial Approval Fees: Approximately AED 235 (one-time cost).
Trade Name Registration: About AED 735 (one-time cost).
Memorandum of Association (MoA) Attestation: Around AED 1,200 (one-time cost).
Ministry of Economy Registration Fee: About AED 3,000 (one-time cost).
3. UAE Off-Shore
Unlike on-shore companies, off-shore companies are barred from conducting business activities within the UAE. Their main purpose is to facilitate international trade, asset protection, and wealth management.
Company structure
International Business Company (IBC): Commonly used for asset protection and tax planning.
Off-shore Limited Liability Company: To establish this type of company, a minimum of one manager and two shareholders are required Shareholders’ liabilities are limited to their unpaid capital investment.
Off-shore Branch: A branch of a foreign company that operates under off-shore regulations
Location and Geographic Restrictions
Off-shore companies are registered in specific off-shore jurisdictions like Jebel Ali Free Zone or Ras Al Khaimah and are not allowed to do business within the UAE mainland because they were established for international trade or asset protection.
Foreign Ownership and Shareholding
✅100% foreign ownership is permitted; no local partner is required.
Tax Implications
✅Operate under a no-tax jurisdiction, allowing for significant tax savings.
Benefits of Setting up a Company in the UAE Off-Shore
Complete confidentiality regarding financial matters.
- UAE off-shore companies are 100% tax-free.
- Flexibility in managing wealth without local taxation.
- Suitable for asset protection and international business operations.
- No currency restrictions
- No capital controls
Licenses Given in Off-Shore
International Business Company (IBC)
- Off-shore License: Allows for various international business activities but cannot engage in business within the UAE.
Off-shore Limited Liability Company
- Off-shore License: Similar to IBC; suitable for asset protection and international trade.
Off-shore Branch
- Branch License: Enables a foreign company to establish a branch without local ownership requirements.
Requirements for Physical Office Space
Entrepreneurs who wish to establish an off-shore company in the UAE Cannot own a physical office space in the country. Therefore, they must operate through registered agents or offices in off-shore jurisdictions.
List of Dubai’s off-shore companies
- Jebel Ali Free Zone (JAFZA) Off-shore
- Ras Al Khaimah International Corporate Centre (RAK ICC)
Process of Establishment
Getting established as an off-shore entity in the UAE is generally straightforward which requires registration with an off-shore authority. The process is normally not as quick as Free Zone, but it is often faster than on-shore company formation.
Here is a quick look at how to establish a company in the UAE off-shore:
- Choose a Company Name
- Identify the nature of your business activities
- Determine the number of shareholders and directors and the whole
- Prepare the necessary Documents
- Submit Application
- Draft Memorandum and Articles of Association
- Open a Bank Account for your transactions
Off-Shore Set-up Costs
For RAK Off-shore Companies, the estimated price starts at about AED 7,500, which includes essential documents such as incorporation certificates and MOA.
Ajman Off-shore Company Setup is subject to the same price and conditions as RAK off-shore companies.
Additional Costs
Annual renewal fees typically range from about AED 11,000 to AED 12,000, depending on the jurisdiction and services included.
Conclusion
Going forward with a jurisdiction that is less reputable can form a negative perception of your company. Although most authorities offer professional services and infrastructure, changing your license or your jurisdiction, you’ll be subject to penalties and legal fees. Also, this would disrupt your working process and stop your revenue stream for a while.
