Before you set up a business in the UAE it’s important to know more about the different formation types you can use. Here we explain more about the difference between onshore and offshore companies in the UAE so you can make the right decision for your business.
What is an onshore company?
An onshore company is a business set up in the UAE that has a physical presence within the borders of the country. This type of business set up can trade with any other companies in the UAE as well as having the option to trade internationally. And thanks to changes in the law since 2020, foreign owners can now have 100% control of the business, along with full repatriation of profit and capital.
Onshore company set up
There’s a fairly simple process to follow when it comes to setting up an onshore company in the UAE:
- Company registration
A number of documents will need to be submitted through the Dubai Trade Register. This will verify your identity, financial status and legal right to set up the business. You will also need to secure a physical office and set up a bank account for your company.
- Tax and VAT
To trade in the UAE, you’ll need to apply for a licence (dependent on the type of business you run) and also register for tax and VAT. You may need to apply for a special permit or licence for certain industries.
- Business plan
The registration process also requires that you draw up and submit a detailed business plan, outlining the type of business you will run and how it will be maintained. This is something the team here at Charterhouse Lombard will handle on your behalf.
What are advantages of an onshore company?
Companies registering an onshore company will be able to enjoy benefits such as:
- No restrictions on trade
As an onshore company you can trade right across the UAE without restriction. You can also trade internationally, which offers a wealth of opportunities thanks to the country’s strategic location.
- Low taxation rate
The UAE has one of the lowest tax rates in the world. There is no capital gains tax or corporate tax in Dubai (corporate tax will be only 9% from 2023 for the rest of the country) and VAT is set at a low 5%.
- Flexible ownership
If you set up an onshore company as an LLC, you also have the option to partner with foreign shareholders, giving you more flexibility for your business.
- Fast registration
The registration process for an onshore company is very efficient, usually taking less than 14 days to be verified once all the relevant documents have been submitted and checks carried out.
What is an offshore company?
An offshore company is a business that is registered in the UAE that then conducts business outside of the country. This also means that an offshore company is not allowed to trade domestically. Offshore companies can be set up as limited companies, limited partnerships and limited liability companies.
Offshore company set up
To set up and offshore company in the UAE you will need to follow these steps:
- Choose the jurisdiction
This determines where your company will be registered in the UAE. There are several different factors involved in the decision, such as your business type, assets, where you live etc.
- Select a company name
There are some words you cannot use in a company name in the UAE. Pick a name that meets the requirements and doesn’t fall foul of the official unauthorised list. Charterhouse Lombard will provide you with a suitable company name.
- Submit your documents
You’ll need to submit a certified copy of your passport, utility bill, CV and a signed company application form as part of your application. There are also several company-related documents you will have to include, which Charterhouse Lombard will take care of for you.
What are the advantages of an offshore company?
If you are thinking of setting up an offshore company in the UAE, you should take into the consideration the following benefits:
- Tax exemptions
As an offshore company you will not have to pay any local VAT or capital gains, and you will be 100% exempt from import and export taxes.
- More privacy
You will not have to publish details about the shareholders or directors and do not need to disclose any of your financial details, giving your business far greater anonymity.
- Easy formation
In most cases you can set up an offshore company in less than 7 days and there are no minimum capital requirements involved. You also do not need to have a physical office in the country.
- Multiple bank accounts
An offshore company has the freedom to set up multiple bank accounts with local and international banks so you can manage your funds around the world.
Onshore vs. offshore – which one is better for me?
There are advantages to being both an onshore and offshore company, so the formation type you choose will depend on your company structure and commercial goals. Whatever you decide, the UAE offers an almost endless number of opportunities for entrepreneurs from around the world.
Charterhouse Lombard have years of experience helping people to set up both onshore and offshore companies. Our consultancy service offers key insight into the process so we can set up your company in the right way.
To find out more, contact a member of our team today.