What is a free zone company?
A free zone company, is a company which is registered under the free zones of a country and has the freedom to operate within the country. They have freedom to establish offices without a lease in the country and don’t require a sponsor for support. Such companies are often created in order to boost international trading companies and they are not subjected to custom duty on imports and exports.
What is an offshore company?
An offshore company is registered under the free trade zone and enjoys the same benefits as a free zone company in terms of the exempted taxes. Such companies operate and work outside their original countries where they are founded and administered from, and as much as they have an office address and registration in the country, they cannot operate their businesses directly.
What are the differences between free zone and offshore companies?
As much as an offshore company is registered under the free zone authorities, however it cannot perfectly fit in as a free zone country. There are several differences between a free zone company and one that is termed as an offshore company. This differences include
Both offshore and free zone companies that experience 100% expatriate ownership. However, an offshore company cannot trade within the region whereas, a free zone company can operate within the country. An offshore company is not limited to a required capital before its establishment. On the other hand, before a free zone company is incorporated in a country, there’s a certain amount of capital that is required to be met. While free zone companies are established so as to enhance international trading, offshore companies are founded for the purpose of enjoying financial, taxation and legal benefits.
Offshore companies are often incorporated in small countries that lack their own business and economic companies and are looking forward to lure other countries’ businesses to operate in their country by providing tax benefits. Free zone companies enjoy cheap and abundant energy as well as easy labor recruiting procedures and the workforce is inexpensive. Apart from tax exemption, free zone companies also enjoy personal income and corporate taxes day in day out whereas, for an offshore company, they are be exempted from taxes for some time.
In the company set up for a free zone company, they have the liberty of owning an office to work from whereas for the offshore company, they cannot own a working space inside the country and its shareholders and employees must have visas which is not the case for free zone companies.
As much as the free zone and offshore companies are related as free zone based companies, there are distinguishing differences between them. They both serve their own purpose in a company and play different roles as well as enjoy different benefits and experience different challenges. Therefore, before setting up one of this companies, at the back of your mind you should put the above into consideration and be sure of what you are getting yourself into.