1. What advantages does an offshore company in Dubai or Ras Al Khaimah offer over the Free Zone company in UAE?
Both these types are allowed 100% foreign ownership, can be used for invoicing and receiving money and can own a Dubai bank account.
However an offshore company scores over a Free Zone company in following respects.
1. It is faster to form.
2. Lesser paperwork than in some free zones.
3. More confidential.
4. Share transfers are easier.
5. Costs less because the registration is cheaper, there is no requirement to take an office address of your own.
6. Offshore authorities may not insist on personal presence of shareholders.
2. How are UAE Free Zone company and an Offshore company different?
A Free Zone company is a special category of company allowed to be formed with certain benefits when compared with inland local company. Being in a special segregated zone a free zone company can be owned 100% by expatriates, but must do the trading outside the local area i.e. internationally or within the Free zone. The offices can be located only inside the free zone. Otherwise all other facilities – such as trade license, office, tax residency status, residence visa in UAE are available to a Free Zone company.
An offshore company even though registered by a UAE jurisdiction cannot operate inside UAE. A bank account is however possible. Invoicing, money transfers, property ownership, shareholding in local companies are allowed. Offshore companies will however not be entitled to visa, renting offices in UAE or homes or import, export goods in their names.
An offshore company is cheaper and quicker to set up or sell when compared to Free Zone company.
3. What is the procedure to open a company for commodities and metal business?
The Dubai Multi Commodity Centre also called the DMCC is a Free Zone that issues trade licenses to trade in commodities and metals. The procedure starts with submission of a name reservation form that also specifies the type of business activity the company will perform. Passport copies of shareholders and directors must also be submitted. In case they hold a UAE resident visa that must be attached.
Upon approval the application form with KYC for all shareholders and directors- Passport copy, Proof of address, NOC letter from existing sponsor (if the shareholder is a resident of UAE) and license fee cheque are submitted.
An appointment is made to sign the specimen signature form and the shareholder resolution. Minimum capital is AED 50,000 per shareholder.
The DMCC will then make an appointment with the shareholders to sign the Memorandum of Association(MOA). This completes the first part of the procedure. The DMCC will then issue a letter to a bank of your choice to open a bank account for you to deposit the capital.
DMCC will then ask you to submit the Tenancy contract since it is mandatory to have an office before the license is issued. An undertaking to fit out the office must also be submitted.
DMCC will process all the papers and then issue the license in about a week after all papers are submitted.
4. Can I have an office in Dubai for my Free Zone Company?
An office for any company in UAE must be located within the prescribed area of the jurisdiction. If your company is registered in the free zone in Dubai then the company office must be inside the limits defined for that Free Zone. Usually free zones provide offices built by them from which you may select. You cannot have an office outside in any other part of Dubai.
If your Free Zone is outside Dubai say in Ajman, Ras Al Khaimah, Fujairah, Sharjah then you must take up an office there. Not in Dubai. You may however live in Dubai or any other Emirate if you have a UAE visa issued by any Free Zone.
5. What is Tax Residency Certificate ?
Companies in UAE Free Zone and mainland can get a Tax Residency Certificate issued by the Ministry of Finance of UAE.
A tax residency certificate in effect states that your company is a resident of UAE for tax purposes. This is particularly useful when double taxation treaties are in place between your country and the UAE. In a double taxation treaty UAE and other country agree that the other country will not deduct income tax on the income generated in the UAE registered company.
This certificate helps you when you file your tax return in your home country. It may also help you when you receive your money from customers into your bank account in the UAE. Some customers who remit the fund may be required to deduct tax at source before they send money. Such a deduction can be avoided by showing the tax residency certificate.
The cost can be found out from your agent and the requirements are audited books of accounts for your UAE company for the last financial year. You must also consult your tax lawyer about the acceptability of the TRC.
6. Which of the UAE Free Zones is the cheapest?
There are more than 27 Free zones in the UAE. Some of them are for special types of businesses e.g. Dubai Internet City is meant for software related businesses only. Some Free Zones are general and provide licences in almost all business categories.
Any comparison to name a Free Zone as chepaest would be misplaced. The packages provided by the free zones vary significantly. In some free zones the licence costs are cheaper but office costs are higher. In some others visa costs are more expensive though other costs are lower. Then there is the cost of renewal of the licence to consider. Some free zones offer lumpsum packages with standard office and visas. You must also consider the overall suitability of the Free Zone location to your plans apart from the costs.
To arrive at the most economical option you must compare the costs and benefit of total package. A Free Zone company package cost consists of-
a. License and Registration
b. Office space
c. Visa – Total number allowed and costs
d. Other benefits such as chamber of commerce registration
e. Document attestation required and its cost
f. License renewal fees each year
g. Additional fees if you have more than one shareholder.
Once this data is available for the free zones you are considering for your company, then the comparison becomes more accurate and meaningful.
7. Is it necessary for me to occupy my office in Free Zone regularly?
Taking office space is compulsory for registering your free zone company in the UAE free zones. This space is most of the times provided by the Free Zone as a part of the standard package to form a company.
Free zones do not insist that you occupy the leased space. You must renew the lease every year though. However in some free zones visa issuing authorities may ask for an inspection of the premises to check if the space has the bare minimum furniture to accommodate the staff.
8. What is a Free Zone in the UAE?
UAE offers two types of companies to potential investors to do their businesses. A local company and a Free Zone company.
Unlike a local company a Free Zone company does not need a local citizen as a sponsor. It can be owned 100% by you. There are about 27 freezones in the UAE. Some of them are meant for specific types of businesses and others are general for almost all types of businesses. Some types of businesses are not normally licenced in the Free Zone like building and construction licence.
Each emirate except Umm Al Quwain has atleast one Free Zone. Some Free Zones are attached to a sea port or to an airport. These free zones have customs boundaries so that goods can be stored inside the customs area without payment of duties.
The business office or the shop must be located inside the Free Zone. The offices are provided on lease by the Free Zone authorities. The company registration and licencing and Visa are all provided by the Free Zone authorities. The trading companies can import or export goods out of the Free Zone without having to pay customs duties. Like a local company no taxes of any kind apply in the Free Zone.
The Free Zone company can bring the goods inside the mainland of UAE by paying customs duty. This needs a local company in the mainland to act as the importer.
A Free Zone company cannot open an office or a shop outside the Free Zone. However the owners and employees of Free Zone company are free to live any where in the UAE.