The United Arab Emirates (UAE) has evolved as a global economic powerhouse, drawing entrepreneurs and investors worldwide. With its strategic position, tax breaks, and modern infrastructure, the UAE provides an ideal environment for company growth. However, this book digs deeper into the complexities of starting a business in the UAE, focusing on three main types of company formation: Mainland, Free Zone, and Offshore.

Understanding Company Formation in the UAE

Federal Law No. 2 of 2015 on Commercial Companies controls company establishment in the UAE. This law specifies the rules and procedures for starting a business in the UAE, which might differ greatly based on the type of organization and its location. It offers a flexible legal structure for a wide range of businesses, including Limited Liability Companies (LLCs), joint-stock companies, partnerships, sole proprietorships, and international branches.

Mainland Company Formation 

Mainland companies are those that are registered with the Department of Economic Development (DED) in the respective emirate. Companies formed on the UAE’s “mainland” are those that are not part of a free zone and can operate in a variety of industries. They can also conduct business with firms and individuals in Dubai and the UAE, as well as globally.

Key Features of Mainland Companies

• Unrestricted Market Access: Mainland companies can operate and trade freely throughout the UAE and internationally, unlike free zone companies which are often restricted to operating within their zone or internationally. 
• Flexibility in Business Activities: Mainland companies have the freedom to engage in a wide range of commercial activities without restrictions, allowing for expansion and establishing multiple branches.
• Eligibility for Government Contracts: Only mainland companies are eligible to bid on and undertake government tenders and projects. 

Real-World Example

Consider Emirates NBD, one of the Middle East’s largest financial firms. Emirates NBD, a mainland corporation registered with the Department of Economic Development (DED), runs several branches around Dubai and the UAE. This mainland registration enables businesses to service the local retail banking market, participate in government projects, and contribute to the overall UAE economy without the constraints that come with a free zone license. 

Free Zone Company Formation 

Free Zone Company is a limited liability company that is governed by the rules and regulations of the Free Zone in which it is established. The provisions of the UAE Commercial Companies Law (CCL) do not apply to these companies.                                                                                                                                                                  

Key Features of Free Zone Companies

• 100% Foreign Ownership: Free zone companies allow foreign investors to own 100% of the business without needing a local sponsor, providing full control. This is a significant advantage compared to mainland companies in some countries, which may require local ownership. 
• Tax Benefits: Many free zones offer zero or significantly reduced corporate income tax for a specific period, often 15 to 50 years. Businesses in free zones are typically exempt from import and export duties, lowering costs. Some free zones also offer exemptions from capital gains tax. 
• Repatriation of Profits and Capital: Free zone companies can repatriate 100% of their profits and capital outside the country without restrictions. This provides complete control over earnings and invested capital. 

Real-World Example

Google has a significant presence in the Dubai Internet City (DIC) Free Zone, leveraging the zone’s state-of-the-art infrastructure, tax benefits, and business-friendly environment to drive innovation and expand its operations in the Middle East and North Africa (MENA) region. Like Microsoft and Oracle, Google benefits from the Free Zone’s strategic location, connectivity, and access to a skilled talent pool, enabling it to focus on technology development and regional growth.

Offshore Company Formation

An Offshore Company is a business entity registered in a jurisdiction outside the country where its primary operations or owners reside. These companies are typically established in tax-neutral or low-tax jurisdictions to take advantage of favorable legal, tax, and financial regulations. 

Key Features of Offshore Company

• Tax Advantages:  Offshore companies often benefit from low or zero corporate taxes, making them ideal for tax optimization and reducing overall tax liabilities.
• Privacy and Confidentiality: Many offshore jurisdictions offer strong privacy protections, ensuring that the identities of company owners and shareholders remain confidential.
• Ease of Setup and Maintenance: Offshore companies typically have simple incorporation processes and minimal reporting requirements, making them easy to establish and manage.

Real-World Example

Ras Al Khaimah (RAK) International Corporate Centre (RAK ICC) is a tech entrepreneur from Asia who registers an offshore company in RAK ICC to hold intellectual property (IP) rights for software developed globally. The offshore structure provides confidentiality, tax efficiency, and a streamlined process for managing international IP assets.

Types of Business Structures in Dubai

• Limited Liability Company (LLC)
• Free Zone Company (FZC/FZCO)
• Branch of Foreign Company
• Representative Office
• Sole Establishment
• Requirements and ownership restrictions for each structure

Step-by-Step Company Formation Process

1. Choose your business activity
2. Select the appropriate jurisdiction
3. Company name reservation
4. Documentation preparation
5. Initial approvals
6. Office space lease
7. License issuance
8. Opening a corporate bank account
9. Visa processing

Documentation Requirements

• List of mandatory documents for different business types
• Authentication and attestation requirements
• PRO services for document processing

Why choose 1Tapbiz? 

1TapBiz distinguishes itself with its all-in-one digital platform for business setup in the UAE. The key features include:

• Competitive and transparent pricing.
• Fast, automated processes enable faster setup.
• Expert guidance on compliance and growth.
• Designed for SMEs and start-ups.
• Digital-first approach to facilitate online management.

It’s a tech-driven, cost-effective solution for entrepreneurs.

Frequently Asked Questions (FAQ)

1. Can foreigners own 100% of a business in Dubai?

Yes, foreigners can now own 100% of businesses in Dubai, including mainland companies, thanks to a 2020 law that allows for full foreign ownership in most sectors, with some exceptions for “Activities of Strategic Effect.

2. What is the minimum capital required to start a company in Dubai?

The minimum capital required to start a company in Dubai varies significantly depending on the type of business, location (Mainland or Free Zone), and specific activities, ranging from AED 1,000 to AED 300,000 or more.

3. Can I convert my free zone company to a mainland company?

Yes, under a new resolution, Dubai free zone firms can now expand their operations into the Dubai Mainland by getting a license from the Dubai Department of Economy and Tourism (DET), which allows them to open a branch or apply for permits for certain activities.