Offshore vs Free Zone vs Mainland in the UAE
Before choosing a jurisdiction, choose the right type of company. The wrong one is the single most expensive mistake international founders make. Here’s how the three differ on trade rights, visas, ownership, tax and cost.
Last reviewed: 2026 · UAE rules change – confirm current details with us
Quick answer. Choose an offshore company to hold assets, shares or IP and trade outside the UAE with minimal cost and no need for an office or visas. Choose a free zone company to run an actual business and get UAE residence visas with 100% ownership. Choose a mainland company to sell directly into the UAE local market. Offshore does not give you a visa or the right to trade inside the UAE – that single fact decides most cases.
Full comparison table
| Offshore | Free Zone | Mainland (LLC) | |
|---|---|---|---|
| Primary purpose | Operate outside the UAE | Operate within a free zone / internationally | Operate in the UAE local market |
| Trade inside the UAE | No | Within zone; onshore via distributor/branch | Yes |
| Residence visas | No | Yes (quota-based) | Yes |
| You receive | Certificate of incorporation | Trade licence | Trade licence |
| Foreign ownership | 100% | 100% | Up to 100% (most activities) |
| Physical office in UAE | Not permitted | Required (flexi-desk to office) | Required |
| Corporate tax | Register; often 0% if passive/no UAE income* | 0% on qualifying income / 9% on non-qualifying (QFZP)* | 0% to AED 375k, 9% above* |
| Local bank account | Possible, stricter KYC | Yes | Yes |
| Own UAE real estate | Only JAFZA (Dubai), with approvals | Generally yes (designated areas) | Yes |
| Audit / accounting | Records required; filing varies by zone | Often required | Required |
| Relative setup cost | Lowest | Medium | Higher |
| Best for | Holding, asset protection, int’l trade, SPV | Operating business + residency | Local UAE business & government contracts |
*Tax treatment depends on the company’s activity, income type and substance, and changes over time. See the tax section and our Corporate Tax guide. General information, not tax advice.
What each type actually is
Offshore company
RAK ICC · JAFZA · Ajman
- Designed to operate outside the UAE
- Gets a certificate of incorporation, not a licence
- No UAE office, no staff, no visas
- Cheapest to set up and maintain
- Ideal for holding, IP, asset protection, SPVs
Free zone company
JAFZA, DMCC, IFZA, RAKEZ, etc.
- Onshore entity with a trade licence
- Operates within its zone and internationally
- Grants residence visas + 100% ownership
- Requires at least a flexi-desk/office
- 0% on qualifying income if QFZP conditions met
Mainland company
Onshore LLC
- Trades directly in the UAE local market
- Trade licence + residence visas
- Up to 100% foreign ownership (most activities)
- Can take government/local contracts
- 9% corporate tax above AED 375k
How tax differs
Since UAE Corporate Tax took effect for financial years beginning on or after 1 June 2023, all three structures interact with it, but differently.
Offshore
Offshore companies are generally expected to register for Corporate Tax even when their treatment is 0%. A purely passive holding company with no UAE-sourced business income often falls outside the 9% charge, but this depends on activity and substance.
Free zone
A free zone company that satisfies the conditions of a Qualifying Free Zone Person (QFZP) pays 0% on qualifying income and 9% on non-qualifying income. Non-qualifying income must stay within a de-minimis limit (broadly the lower of 5% of total revenue or AED 5 million) to retain QFZP status.
Mainland
A mainland company pays 0% on taxable income up to AED 375,000 and 9% above that threshold.
Cost & effort, at a glance
As a rule of thumb, offshore is the lightest (no office, no visas, low renewal), free zone is mid-range (licence + office + optional visas), and mainland is the most involved (licence, office, and broader compliance). Exact fees depend on jurisdiction, activity and package – we provide a fixed quote once we understand your goals.
Which one should you choose?
Choose offshore if…
You want to hold assets/shares/IP, protect assets, run international trade, or build an SPV – and you don’t need UAE residency or to sell inside the UAE.
Choose free zone if…
You want to run a real business with 100% ownership, get residence visas for yourself/staff, and trade within your zone and abroad.
Choose mainland if…
You need to sell directly to UAE customers, open retail locations, or bid for local and government contracts.
Still unsure which type fits?
Tell us your goals and we’ll recommend the right structure – offshore, free zone or mainland – and handle the setup end-to-end.
If offshore is right for you
FAQ
What’s the difference between offshore and free zone?
Offshore companies operate outside the UAE, get a certificate of incorporation, can’t trade onshore, and don’t grant visas. Free zone companies are onshore, hold a trade licence, operate within their zone, and can sponsor residence visas.
Can an offshore company get a UAE residence visa?
No. Offshore companies don’t grant visas. For residency you generally need a free zone or mainland company.
Which is cheaper?
Offshore is usually cheapest (no office, no visa quota). Free zone is mid-range; mainland is typically the most involved to run.
Do free zone companies pay corporate tax?
A Qualifying Free Zone Person pays 0% on qualifying income and 9% on non-qualifying income. Mainland pays 0% up to AED 375,000 and 9% above.
Can I convert an offshore company into a free zone one later?
They’re different vehicles, so it’s usually a matter of setting up the appropriate entity rather than a simple conversion. We can advise on the cleanest path for your situation.