Free zone vs offshore company in the UAE

The two structures look similar from a distance, since both are registered outside the mainland and both can be 100% foreign owned. In practice they do different jobs. A free zone company is an operating business with a licence, a desk or office and, if you need it, residence visas. An offshore company is a holding or international vehicle that sits in the UAE on paper.

Most people who ask about offshore actually want one thing: either a UAE residence visa, which an offshore company cannot provide, or a place to hold assets or run international trade, which it can. This page sets out what each structure does so you can match it to your plan.

Free zone and offshore side by side

Quick rule: Choose a free zone company if you will live in the UAE, need a residence visa, rent a desk or serve clients from here. Choose an offshore company if you only need a holding or international trading vehicle and will not trade with the UAE market or need a UAE visa. If you are unsure, the visa question usually decides it.

Can an offshore company operate in the UAE?

Not with UAE customers. Jafza's guide to its offshore companies says an offshore company is authorised to operate internationally and cannot conduct commercial activity with persons within the United Arab Emirates. It receives a certificate of incorporation rather than a business licence, so it cannot take an office lease or sponsor staff on the strength of that certificate.

If you later want to trade locally, the usual route is to open a licensed free zone or mainland company alongside it.

What is an offshore company used for?

Jafza lists international trade, holding companies, owning real estate, registering copyrights and patents, and international consulting. The registrar decides which lawful activities are allowed, and Jafza refers readers to its Offshore Companies Regulations for the full terms. Property rules are set by the emirate where the asset sits, so check them separately.

• Jafza and IFZA both list an offshore option
• Shareholders can be individuals, companies or a mix, with no stated maximum at Jafza
• Liability is limited to the company's paid-up capital

Free zone vs offshore company tax in the UAE

This is general information, not tax advice. Older guides describe offshore companies as tax-exempt, but Jafza's own page is dated 2021 and predates the UAE Corporate Tax Law. The Federal Tax Authority's registration guide treats juridical persons incorporated in the UAE as resident persons that register for Corporate Tax, and every free zone person must register too. Get written advice on how the rules apply to your structure before you rely on any exemption.

Which one is cheaper to set up?

Registration alone is similar: typically AED 6,500–15,000 for a free zone and AED 8,000–13,000 offshore. The free zone adds a desk and, if needed, visas at typically AED 3,400–6,500 each. The offshore structure adds a registered agent. Compare the full year-one and year-two costs rather than the headline.

How to decide between free zone and offshore

1. 1

   Decide whether you need a UAE visa

   If yes, an offshore company will not work.

2. 2

   Decide whether you will trade with UAE customers

   If yes, you need a licensed company.

3. 3

   Define what the vehicle will hold or do

   Property, intellectual property, shares or international contracts point to offshore; day-to-day operations point to a free zone.

4. 4

   Ask for written advice on tax and banking

   Both depend on your facts and on the bank's own rules.

Things to weigh up

• An offshore company does not give you residence in the UAE
• Banks apply their own checks to both structures, so account opening is never certain
• Rules and fees differ between offshore regimes, so confirm with the registered agent
• Jafza's published guidance on offshore companies is dated 2021, so re-check fees and rules