With the exception of offshore companies, each of the forms of company listed below is eligible for residency in the United Arab Emirates.
To open a company, customers have several options, depending on their needs and sectors of activity. The legal form is important, and we’ll take all the parameters into account to optimize the operation and organization of your companies. In particular, there are significant differences between the various forms of organization in the short and long term.
Legal, contractual and financial issues will be taken into account to support you in your projects.
We propose opening up the following companies, and present the advantages and disadvantages inherent in doing so.
The typology of corporate legal forms requires us to differentiate between onshore and offshore companies.
Traditionally, the main difference lies in location: an offshore company is one that relocates from its country of origin in order to carry out operations in a different country, often out of financial interest, notably because of labor costs, or for tax reasons (to avoid being taxed in the country of origin). They can also be set up as a holding company to form a group of companies.
As far as the Emirates are concerned, the offshore company allows you to operate a company and enjoy the advantages that go with it, without doing business locally, but it does give you the possibility of operating companies in other countries, as well as owning real estate in the Emirates.
Onshore refers to companies that work and organize themselves on a local level, operating in the same country where they are registered. This type of company enables all kinds of activities to be carried out in the Emirates.
As a result, the legal rules governing these two forms are totally different.
We’d like to introduce you to the different ways of opening an Onshore company: Free-zone, Mainland and Free-lance. Finally, the possibilities of offshore companies.
The Freezone
These zones are located in the 7 Emirates, notably in Dubai (Dubai airport, Dubai design district, Dubai Healthcare city, international academic city, Dubai internet city, DIFC, Dubai knwoledge village, Dubai Media city, DMCC, Dubai silicon Oasis, Jebel Ali Free zone, Dubai world central).
As a result, the conditions for doing business in free zones are very attractive.
Benefits under the law
The first specificity of this zone is the application of the law. In fact, Freezones have their own rules of law to facilitate trade and business. While it appears that the law in the United Arab Emirates is closer to the Romano-civil law tradition (French, German or Swiss law), disputes in the Freezone are settled through Common Law.
As a result, the formalities involved in setting up a business are simplified, and there is no obligation to associate with an Emirati partner, ensuring independence and ownership of the company.
The same applies to employees working in the free zone, who are not subject to the labor laws applicable in the United Arab Emirates.
In addition, it is perfectly possible to hire employees, provided that they are residents or to obtain this status for them.
As far as customs law is concerned, the free zone also has its share of exceptions. Customs laws in free trade zones are different from those in the mainland. Certain types of goods are prohibited in free zones and duty-free zones, due to their nature or origin.
Prohibited goods are goods whose import or export is prohibited by the country concerned under the provisions of the GCC (Gulf Cooperation Council) Unified Customs Act or any other relevant law. Importing, storing or transporting any item classified as prohibited is an offence punishable by law.
Limits of freezone installation
The most inconvenient limit of the free zone is the restriction on doing business outside it. This limitation can be a major obstacle in some business sectors.
While the freezone offers certain administrative facilities and legal advantages, it is limited to certain business sectors, notably: industrial activities, commercial activities, consulting and services, import-export…
Media (print media, audiovisual, internet, ICT, etc.) In addition, companies located in free zones are required to obtain licenses depending on their sector of activity.
These two constraints may de facto prevent certain business sectors from setting up in freezones.
Another important aspect is, of course, that setting up a company in a free zone requires setting up offices in a free zone. In this respect, it is important to bear in mind the high prices, particularly in Dubai, where the majority of freezones are located. In addition, the initial share capital may vary depending on the freezone chosen.
Finally, due to the legal disparities and limitations mentioned above, it is more difficult to gain the trust of banks, although it is not impossible to qualify for a bank account.
Summary of advantages and disadvantages
We enable you to obtain the company’s opening speed (depending on the zone chosen)
A simplified administrative procedure
The number of major zones in Dubai (see above)
Legal advantages (specific legal zone, tax law, labor law)
Activity limited to the freezone (the same applies to the location of offices)
The price can be high
Licensing by activity
Banks less confident
The Mainland
The “Mainland” company is naturally opposed to the freezone from a territorial point of view. Indeed, the Mainland could be translated as the main territory, and as such, the main characteristic of this type of company is not to be limited: on the one hand from a territorial point of view, and on the other from the point of view of its zone of economic interaction.
As a result, the manager of a Mainland company can easily become a player in the local market. This alternative offers a number of non-negligible guarantees for business life. What’s more, this type of company gives you unrestricted access not only to the Emirates market, but also to the international market, in a wide range of commercial activities.
The benefits
Following a legislative reform in 2020, it is now possible for anyone opening a company under local law known as Mainland to no longer be associated with a local sponsor (depending on the sector of activity), consequently holding all the company’s assets.
This advantage is a major strength for many investors wishing to operate in the Emirates market. In particular, in certain areas where it is absolutely necessary to have a prime location within the Emirates (restaurants, commercial stores, local industry, service companies, the professions, etc.).
In addition to renting, this legal form also enables you to buy a property.
What’s more, this strength is proportional to the confidence the banking system has in this type of company, which provides certain guarantees.
As far as legal aspects are concerned, federal law or common law jurisdictions will apply depending on the case.
It should be noted that in contractual matters, the validity of agreements is subject to their being drafted in Arabic.
Employment law in the Emirates can deal with all kinds of conflict situations, such as questions relating to dismissal, length of contract and employment. Despite popular belief, employment law jurisdictions are protective of employees. Nevertheless, it must be assumed that residency status for an employee is highly dependent on his or her employer. Residency status can be revoked in the event of loss of work, whatever the cause.
Mainland is exempt from corporate income tax. On the other hand, since 2018 a value-added tax at the rate of 5% may be applicable, however, it is the end consumer who is responsible for paying it.
In the case of French expatriates setting up a Mainland company, the tax treaty between France and the United Arab Emirates applies, preventing double taxation.
Disadvantages
Mainly, Mainland has few disadvantages. However, it should be noted that the creation of this type of company is more expensive, which is a reflection of the advantages it offers – those mentioned above.
On the other hand, from an administrative point of view, registration takes longer, but does not exceed 3 weeks.
In some business sectors, especially local markets, a local partner is mandatory. This local sponsor is said to be “mute” and will not exercise any administrative, management or executive functions within the company, although an annual annuity will be paid. However, this relationship will be contractually sealed and therefore legally secured.
If necessary, we can work with potential sponsors to provide you with even greater security and legal guarantees.
Summary of advantages and disadvantages
Doing business in the Emirates
No longer requires an Emirati partner for the majority of companies
Freedom of territorial installation
Bank confidence
Application of United Arab Emirates federal law
Registration time
Cost
Offshore companies
The first is a form of company relocation for optimization purposes, notably through a holding company.
The second concerns the company’s actual operations. Emirati legislation does not allow this type of company to do business or trade locally, so activities are carried out outside the United Arab Emirates.
This can limit the range of activities that can be carried out by the offshore company.
The benefits
Offshore companies offer their users significant advantages.
Firstly, the creation and adoption of this form of company requires no physical presence, which is highly advantageous for certain types of business, such as consulting and trading. However, this type of company does not qualify for resident status.
This type of company is perfect for businessmen looking to expand into the international market.
The first interest is therefore tax-related, with no or very low taxation on corporate profits.
We offer you the possibility of registering your company remotely and quickly.
Secondly, the cost of formation is lower, with a lower minimum capital requirement than for a Mainland company. In addition, this type of company does not require the presence of a local partner.
Despite the impossibility of doing business within the territory of the United Arab Emirates, the offshore company allows you to own real estate in the country.
Disadvantages
From the outset, the offshore company has an obvious structural flaw. Indeed, the advantages of not having a physical presence (i.e. the impossibility of having offices in Dubai) are offset by the disadvantages. First and foremost, a lack of economic substance. This is generally assessed on the basis of factual criteria such as: the existence of human and material resources within the structure, its management autonomy, its legal status and, where applicable, the nature of its assets.
Since 2020, the United Arab Emirates have introduced a law concerning the economic substance of certain types of activity, particularly in the case of an offshore holding company entering into commercial relations with its Emirati subsidiary. As a result, a guide has been published to help offshore companies comply with economic substance requirements.
The lack of economic substance has led to a lack of confidence in this type of structure on the part of the French government, which does not provide for the possibility of offshore entities entering the tax treaty between France and the Emirates. On the other hand, this lack of confidence is also felt by Emirati banking institutions, which can be somewhat reticent when opening an account.
However, we will provide you with the administrative support you need to open a bank account for offshore companies. In addition, depending on the activity you choose, we can provide you with a compliant economic substance.
Summary of advantages and disadvantages
Rapid company creation
No physical presence required
Company expansion on the international market
No need for a local sponsor
Unable to obtain office space
No commercial and business relationships in the Emirates
Little economic substance
No application of tax treaty
Difficulty gaining the trust of banking institutions
Freelance license
The freelance license is a work permit in the Emirates, suitable for independent workers as it guarantees freedom to offer a wide variety of services. In particular, with the health crisis, the number of self-employed workers has increased. In Dubai, there are a large number of freelance licenses, and we’ve seen an increase in the number of licenses issued over the last three years.
In fact, the United Arab Emirates is attracting many independent consultants who can now take advantage of the quality of life in the Emirates through this work modality. This license, however, will be granted according to the sector of activity, which must correspond to the type of license requested, and therefore duly justified. The freelance license can only be obtained in a free zone.
The benefits
Allows you to work in Dubai with complete independence, perfect for remote work (at home) requiring only an Internet connection, for example.
As a result, the opportunity to work outside the Emirates has been lost. A physical office is not a necessity.
We make it easy and affordable for you to get your license quickly.
Although it differs from the regime for other companies, the license will enable you to obtain a residence visa in the Emirates.
As this scheme is not a company, it does not require an audit, but we do recommend that you monitor your accounts.
Finally, there is no requirement to have an Emirati partner.
Disadvantages
While this system allows total independence, it requires particular rigor in order to develop without structure.
It follows that it is not possible to have an employee under the license, which is not a company, and it also follows that the license does not allow you to obtain a physical office.
This license does not entitle the holder to a business bank account, but only to a personal bank account.
The license requested must correspond to a specific sector of activity, which may exclude de facto certain fields of activity.
However, this status requires a license in the free zone sector.
