The United Arab Emirates is one of the most business-friendly countries in the world, and this is not an exception. Thus, a large number of companies and organizations continue to locate in this area. Over time, business owners may have become too familiar with the term “offshore company,” and the challenges of establishing an offshore operation typically remain front of mind.
Using the term “offshore” denotes a place beyond a particular country’s authority. An offshore company is a legally recognized legal entity that is headquartered outside of the country in which it is based and is owned by both individuals and corporations.
A non-resident firm is one that does not have its headquarters in the country where the majority of its operations are based. Offshore businesses do not have the legal authority to do business in the UAE. However, Free Zone companies may do so while retaining a physical presence in the nation, unlike Offshore enterprises, which only have a UAE location and registration.
In 2003, the UAE began using an offshore company structure to enhance its business and economic profile. Many factors should be taken into account by investors and businesses when determining where to set up an offshore organization.
Offshore jurisdictions provide a range of benefits to a growing number of business participants, including tax efficiency and asset protection, and privacy. These kinds of offshore corporations play an essential part in the global economy. It is possible to cut operational expenses by setting up an offshore company. Still, most people choose to doso because they don’t like the tax regulations of their current location.
Large corporations and small firms are registering offshore companies in the United Arab Emirates to access the global commercial arena, becoming more popular. All UAE states, including Dubai, Abu Dhabi, Ras Al Khaimah, the Jebel Ali Free Zone, and Ajman, provide offshore company formation services.
Benefits of Offshore Company Formation in UAE
There are several reasons and benefits, because of which people from all over the world tend to form offshore companies in the UAE.
1. Minimum Tax
Personal income tax, corporate tax, and the majority of other forms of taxes are not collected on offshore businesses in the UAE. Furthermore, to the most significant degree practicable, offshore firms are exempt from all import and export taxes. Offshore firms are exempt from value-added taxes (VAT), capital gains, and withholding taxes. An offshore business will allow the company to benefit from a foreign country’s taxation policy, which will help to improve the company’s earnings while minimizing its tax burden.
When two or more nations sign a DTAA, they agree to avoid paying double taxes on the exact source of income. This agreement applies when a person has a residency in one country but gets income from a source in another. The UAE has signed and negotiated the Double Taxation Avoidance Agreement (DTAA) with over 80 countries across the world, making offshore company formation more profitable.
2. Anonymity
The identities and addresses of an offshore company’s directors and shareholders, as well as its financial information, do not need to be made public. Suppose there is a suspicion of criminal or terrorist conduct.
In that case, such information about the company is often not provided to any other party, strengthening the anonymity of such a corporation’s commercial activities.
3. Acquiring Multiple Investors On Board
The total number of shareholders when founding an offshore firm in Dubai or Abu Dhabi might range from one to fifty, depending on the kind of company being founded.
Only a tiny percentage of developers will allow for more than one owner of a piece of real estate.
4. Cheapest Offshore Company Formation
The procedure of establishing an offshore company in the UAE takes between 3-7 working days, and there are no minimum capital requirements. An offshore company must have one director and one shareholder, and the citizenship of the director or shareholder in issue is unrestricted.
An offshore company is not required to establish a physical office in the United Arab Emirates; instead, it may opt to employ a virtual office. An offshore firm is not subject to audit requirements and is only required to comply with a few regulatory requirements.
5. Perks and Facilities
An offshore firm may access a variety of auxiliary services, including communication facilities, state-of-the-art infrastructure, accessible incorporation services, and flexible legislative services, among others. Such services enable an offshore business to establish a strong foothold in the ground.
6. Multiple Bank Accounts
Offshore businesses may open bank accounts in various currencies, which helps international commercial activities while also protecting client cash. Your offshore company formation expert will guide you in picking the best multi-currency financial services provider in the UAE and opening the required bank accounts in the nation. This is beneficial because it gives multinational firms and international corporations greater flexibility in managing their money in different parts of the world.
Rules and Regulations of Forming and Offshore company in Dubai
In contrast to nations such as Monaco, Liechtenstein, Panama, and Hong Kong, where the registration of offshore corporations has been a long-standing practice for many years, the United Arab Emirates started establishing offshore businesses in 2003, when the Dubai Regulation 2003 “On Offshore Companies” was issued. Under the rules of Regulation 2003, the Jebel Ali Free Zone Right was granted the authority to create offshore firms in Dubai. Later, in 2007, two more Ras Al-Khaimah Free Zones, the Ras Al-Khaimah Free Trade Zone (RAKFTZ) and the Ras Al-Khaimah Investment Right (RAKIA) were given the authority to establish offshore firms.
As previously noted, UAE offshore enterprises are not authorized to conduct direct economic activities in the UAE. In contrast, an offshore company may become a shareholder in any UAE Mainland and Free Zone business, enabling it to enter the UAE market and perform allowed commercial activities via these subsidiary firms.
Which two Free Zones offer offshore Company Formation?
The United Arab Emirates Ras Al Khaimah (RAK) and Jebel Ali Free Zone (JAFZA) are the principal jurisdictions for offshore company establishment (JAFZA). Neither country has personal income tax nor corporate tax, making them “tax-free” governments that enable 100 percent foreign ownership of businesses. More than 40 countries have signed Double Tax Treaty agreements with the United Arab Emirates.
Multi-currency accounts may be opened by offshore corporations in the United Arab Emirates and used to undertake international commercial transactions. They are not allowed to do business or establish a physical presence in the United Arab Emirates.
Both RAK and JAFZA have their own set of benefits and drawbacks that are unique to each other. RAK is the most cost-effective alternative. However, JAFZA is the only Offshore Company that may legally own real estate in the UAE. It is essential to distinguish between UAE Offshore Companies and UAE Free Zone Companies, which are both situated in the United Arab Emirates. Free Zone Companies in Dubai are onshore organizations that have been granted permission to do business in the city and are subject to particular rules. However, they are permitted to provide their owners, directors, and employees with the possibility to seek residency in the United Arab Emirates while still paying no corporate tax.
JAFZA – Jebel Ali Free Zone
In 1985, the Joint Administrative Free Zone Authority (JAFZA) was founded. Located in the neighborhood of the Jebel Ali Port, one of the world’s busiest shipping ports, it is a free-trade zone that allows multinational firms located in the area to make use of the free Zone’s unique advantages. Jebel Ali is a city in the United Arab Emirates, located just outside Dubai and roughly an hour from the country’s capital, Abu Dhabi.
Benefits of Offshore Company Registration in JAFZA:
- The JAFZA Offshore Companies Regulations do not require the corporation to have local ownership.
- In Dubai, local real estate may only be held by JAFZA Offshore Businesses, the only authorized offshore companies.
- The authorities permit offshore firms to hold shares in both free Zone and onshore (LLC) businesses, notwithstanding a general prohibition on offshore entities doing business with UAE residents (UAE).
- The registrar has the power to appoint inspectors to undertake an examination of an Offshore Limited Liability Company’s affairs. There is a potential that the owner of the business may be held liable for all inspection costs.
- An offshore corporation may create multi-currency bank accounts in the United Arab Emirates to do routine international business.
RAK – Ras Al Khaimah
Ras al Khaimah, roughly an hour’s drive from Dubai, is one of the seven emirates of the United Arab Emirates and one of the country’s fastest-growing areas. RAK has the highest level of industrialization in the UAE, with manufacturing accounting for 26% of the country’s gross domestic product. It has built a reputation for delivering a business-friendly investment environment as well as reasonable pricing. Conducting business in RAK is 25 to 50 percent less expensive than doing business in the rest of the UAE, allowing enterprises to maximize their return on investment.
Benefits of Registering an Offshore company in RAK:
- A general ban on Offshore Companies doing business with UAE residents does not prevent Offshore Companies from owning shares in both Free Zone and Onshore (LLC) Companies, For usage in the United Arab Emirates, Bahrain, Saudi Arabia, and Qatar, documents do not need to be authenticated.
- The RAK IC business registration process usually takes one week from the time all application materials and due diligence papers are received.
- There is no need for shareholders’ and directors’ identities to be public.
- Bank accounts in the United Arab Emirates are available to Offshore Companies for ordinary international transactions.
Which Documents are Required to Start an Offshore Company in UAE?
Following is a list of documents required to set up an offshore company in the UAE:
- Application in the requisite format
- Address proof
- Documents from Bank indicating the details and bank reference letter
- Copies of passports of owner and shareholders
- Copy of passport of the designated manager
- Notarized Memorandum of Association (MOA)
- Business plan
- Curriculum Vitae indicating the owner’s professional data
The Difference between UAE Offshore Companies (RAK and JAFZA)
Other than the already mentioned differences above, The significant differences in setting up offshore companies in these two respective states can be comprehended easily with a detailed table given below:
| Jebel Ali Offshore Company | RAK Offshore Company | |
|---|---|---|
| Company Formation Cost | 17,400$ | 11,870$ |
| Annual Costs | 7,550$ | 4,470$ |
| Types of Company | LLC | LLC |
| Bearer shares Allowed | No | Yes |
| Documents To be Legalised by client | Yes | No |
| Investing In UAE Real Estate | No | No |
| Restriction on Activities | Yes | No |
| Audit | Yes | No |
FAQs about Offshore Company Formation
How can I register my offshore company in the UAE?
- Application in the requisite format
- Address proof
- Documents from Bank indicating the details and bank reference letter
- Copies of passports of owner and shareholders
- Copy of passport of the designated manager
- Notarized Memorandum of Association (MOA)
- Business plan
- Curriculum Vitae indicating the owner’s professional data
What is an offshore license in UAE?
Entrepreneurs and investors who wish to keep their transactions and assets confidential often use an offshore organization. Non-resident companies, sometimes known as offshore businesses, are not permitted to do business in the UAE. Offshore Companies may be formed in two jurisdictions in the United Arab Emirates. RAK and JAFZA (Jebel Ali Free Zone Authority) are also two of the most influential organizations in this field (Rasal Al-Khaimah).
What is the difference between offshore and onshore companies?
Onshore refers to commercial activity that takes place in your home country, whether it be operating a firm or keeping assets and investments. By contrast, offshore indicates that these operations occur in a different nation, region, or jurisdiction.
Is an offshore company in UAE Illegal?
Setting up an offshore company in the UAE is legal, as that company has the status of a legal business entity that has been set up with the intention of operating in its registered jurisdiction.