When you are planning business ventures or new business expansions, there are ample possibilities to explore beyond business setup in Dubai. Ras al Khaimah is another emirate that has recently emerged as a popular location for businesses looking to set up. In Ras al Khaimah (RAK), the choice of jurisdiction becomes of utmost importance. Irrespective of whether you choose RAK Offshore, RAK Free Zone, or RAK Mainland, it is a decision that will shape your access to markets, your tax exposure, and your overall expenditure.
Here’s why the structure you choose matters:
Before getting into the details, it is important to understand that each jurisdiction differs in structure and ownership rights, market access, cost and compliance, visa and local presence and list of permitted activities. The jurisdiction you choose should ideally reflect whether you intend to operate within the UAE, overseas or if you want to have the flexibility to operate across both choices. In very broad terms, foreign investors are entitled to own Free Zone and offshore companies. Mainland rules have also been reformed to allow 100% ownership for foreign investors in multiple sectors.
RAK Offshore
Scope and advantages:
A UAE Offshore company like RAK Offshore, registered under the Ras al Khaimah International Corporate Centre (RAK ICC) or similar offshore vehicle, is structured primarily for international trade, asset holding, corporate structuring, and intellectual property handling. A RAK ICC-registered company does not have jurisdiction to conduct business activities within the UAE.
Key features include:
- 100% full ownership with no requirement for a local sponsor.
- Zero corporate tax and zero personal income tax.
- No requirement for physical office space, thus reducing costs and expenditure
- Permission to hold or own property in certain approved jurisdictions.
Some limitations:
No permission to conduct operations or trade in the UAE.
No permission to sponsor UAE residence visas for yourself or for your employees.
Some business activities, like banking and insurance-related businesses, cannot be carried out.
RAK Free Zone
Scope and advantages:
A Free Zone entity located in Ras al Khaimah, like RAKEZ (Ras al Khaimah Economic Zone), is a domestic-registered company but with a jurisdiction that offers competitive incentives. It allows you to cultivate a physical presence since it lets you build warehouses and office spaces, while also providing many tax and operational incentives.
Key features include:
- 100% full ownership with no requirement for a local sponsor.
- Zero corporate tax and zero personal income tax.
- Provision to apply for the UAE residency visa for employees, managers, and owners.
Some limitations
Limited ability to conduct trade or operations in the mainland. May require a separate distributor to facilitate trade with the mainland. You may also be able to trade with the mainland by obtaining additional permits.
Like most Free Zone licenses, the RAK Free Zone license is activity-specific with a limited list of allowed operations.
It is mandatory to hold a physical presence within the Free Zone. This can be done by means of holding an office, desk spaces or a warehouse.
RAK Mainland Jurisdiction (Onshore / DED Jurisdiction)
Scope and advantages
A mainland license is usually issued by the Department of Economic Development (DED) of the specific Emirate. With a RAK Mainland license, you can trade anywhere in the United Arab Emirates, bid for contracts, and interact directly with UAE clients.
Key features include:
- Complete access to the UAE markets, with no requirements of intermediaries or middlemen (suppliers/distributors)
- Ability to bid for government orders, tenders, and contracts.
- Possibility to apply for visas, hire staff, and rent out commercial spaces.
Limitations:
Higher overhead costs: You’ll be shelling out on a physical office front and on ensuring full compliance.
It is mandatory to comply with stringent regulations and be willing to be subject to audits and regular inspections, which are standard DED protocol.
Certain activities may still require a UAE-based partner or special permission, depending on the nature of the activity.
So how do you choose which structure works best for you?
Before you decide on how to proceed with the best company structure for you, it may help to ask yourself a few questions.
What is the geographical location of your clients?
If your clients are primarily based outside the UAE, then RAK Offshore or Free Zone may be a good option for your business. But if you need access to the mainland market, a RAK Mainland license may be better suited for you.
Does your business need a strong local presence?
In this case, a mainland license, which requires that you have a physical presence in the market, may complement your services better.
Would you need to make provisions for visas and hiring local staff? In this cas,e a mainland or Free Zone license may be better suited for you.
What are your cost considerations? Offshore is the least demanding on your financial resources. A Free Zone will give you a fair middle ground in terms of costing and compliance. A Mainland license is typically more expensive.
New reforms and final considerations:
Interestingly, RAKEZ now offers a mode of dual-licensing, where even a Free Zone company is permitted to operate in the mainland under certain conditions. This hybridized approach may further bridge the gap for businesses looking to get a larger share ofthe UAE market access, along with the benefits of a Free Zone.
That being said, it is important to note that choosing a structure for your company formation is not a ‘one-size-fits-all’ approach. The decision to choose between RAK Offshore, RAK Free Zone, and RAK Mainland should ultimately be a strategic decision that not just aligns with your current strategic outlook but one that does justice to your long-term vision for the company.
