In the United Arab Emirates there are different types of companies, which bring advantages as well as disadvantages. We present you the advantages and disadvantages of the two most common types of companies, namely a local LLC and a Freezone LLC.
What are the advantages of a local LLC?
- 100% ownership of the company*
- Ability to trade in all zones
- Limited liability (comparable to a limited liability company)
- No income tax
- No minimum share capital
- Obtaining an investor visa (valid for 2 years).
(*In certain industries 51% of the shares must be owned by a local sponsor)
What are the disadvantages of a local LLC?
- Office premises are required
- Subject to VAT (5% VAT)
- Annual profit above AED 375,000 must be taxed at a rate of 9%*.
Usually an agreement is made between the local sponsor and the company founder. This stipulates that the profits and control of the company remain with the company founder. It can also be agreed that the local sponsor will not have access to the bank account.
What is a Freezone?
A Freezone is a geographically defined economic zone where special rules and regulations apply.
What are the advantages of a Freezone LLC?
- 100% ownership of the company
- 100% repatriation of capital and profits
- No deposit of share capital required
- No corporate and income or VAT liability
- No need for office space
- Exemption from annual accounting
- Obtaining an investor visa (valid for 2 years)
What are the disadvantages of a Freezone LLC?
- Certain restrictions on selling products outside the Freezone
- "Physical" business can have the location only of the Freezone
Accordingly, if you want to open a "physical" business, then a Freezone LLC is not the right choice. Freezones are particularly suitable for consulting, IT consulting and the like.
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