Offshore Company Formation

What Is An Offshore Company?

An offshore company is a legal entity that operates outside the location of its ultimate property. You relocate your business operations to another country to enjoy the tax advantages and relaxed regulations of the country.

Generally, these offshore companies are incorporated in countries that levy very little or no tax on a company’s capital gains.

The UAE is one such tax haven that has become a preferred offshoring destination for several companies. Incorporating an offshore company in the UAE is an ideal and cost-effective way to grow your international business without overwhelming administrative obligations.

Key Aspects Of An Offshore Company In The UAE

Offshore companies in the UAE are excellent for profiting from international markets.

But first, you must carefully familiarize yourself with the various characteristics of an offshore business entity. Here are three important aspects of UAE offshore companies to be aware of:

Access To A Corporate Bank Account

You can open both corporate and private bank accounts for offshore companies in the UAE. Creating an offshore bank account to secure a company’s operations or to manage personal wealth is very easy in the UAE. This will play a vital role in your business growth, especially if you wish to conduct international trade (outside the UAE) through your offshore company.

Must-Follow The Know Your Customer (KYC) Process

Offshore companies in the United Arab Emirates follow the Know Your Customer (KYC) process. For the KYC process, you need to submit documents such as a copy of your passport, proof of address, bank reference letter, and your investors’ bio details. You must present these documents to the authorities of your chosen offshore jurisdiction.

This helps refer to investors’ banking regulations and pursue unethical practices such as identity theft, financial fraud, and money laundering.

Provides Jurisdictional Benefits

There are only three jurisdictions in the UAE that can assist in the incorporation of offshore companies in a specific UAE emirate. Each offshore jurisdiction offers different benefits suitable for different types of businesses. Therefore, it is important to analyze all offshore jurisdictions before choosing one for your company.  

Pros Of Setting Up An Offshore Company In The UAE

Here are some advantages of forming an offshore company in the UAE:

International Market Expansion

Incorporating an offshore company in the United Arab Emirates could offer you an inexpensive entry point to grow your international business.

You could have an offshore Dubai company on paper without actually having the expensive physical infrastructure in Dubai.

This could open doors for new international business and collaborations. In addition, you can use a single UAE bank account to conduct transactions in different currencies. This saves you transaction costs and helps you navigate exchange rates.

Business Anonymity

Offshore companies in the UAE can offer you high confidentiality with limited liability.

You would not have to publicly disclose your company’s financial information or its ownership details. Such sensitive information is never disclosed to third parties unless the offshore company in question is suspected of criminal activity.

Multiple Tax Benefits

Tax avoidance and tax evasion are two very different things. And incorporating offshore companies in the UAE is a legitimate way to avoid (not evade) taxes. With an offshore UAE company incorporation, you would be exempt from paying various taxes such as corporate income tax, income tax, sales tax, inheritance tax, property tax, and personal tax. In addition, you could also avoid the dreaded practice of double taxation. Doing international business from the UAE means you don’t pay the same tax twice in another country. As of 2021, the UAE has signed double tax treaties with 117 countries. And since the UAE has minimal taxes, UAE-based offshore companies save a lot of money.

Simplified Procedures

The conditions for setting up a company in the UAE are among the most favorable in the world. Apart from the tax exemption, an offshore company is also exempt from the annual audit. This means that you do not have to file audited financial statements in almost all UAE emirates.

Have Access To Better Global Funding

The offshore scene in the UAE is well-positioned worldwide. Its impressive reputation would have a positive impact on how foreign investors will view your company.

In addition, the current economic atmosphere in UAE is charged and will help your business to succeed. The country’s economy is recovering from the contraction it faced during the pandemic. A steady growth of 2.5% is expected for 2021.

5 Challenges Of Operating As An Offshore Company In The UAE

Offshore companies in UAE can act as double-edged swords. While they have many advantages, they come with a fair set of challenges.

Let’s take a look at some of them:

No Access To A Business License

Offshore companies in the UAE are also known as paper companies. An offshore company is a wholly foreign-owned limited liability company. However, unlike an onshore company, it does not obtain a business or trading license to conduct business in the UAE. The lack of a business license has consequences in the UAE.

Here’s a look at some of them:

  • Offshore companies are not allowed to conduct any commercial and profitable activities in the UAE. For this reason, they are often used as holding companies.
  • UAE offshore companies cannot do business with UAE residents. This means they cannot hire staff in the UAE.

Note: An offshore company should not be confused with a free zone company. The latter obtain a commercial license to do business in some areas of the UAE Free Zone.

Limited Options To Buy Real Estate

Owning real estate in the Middle East is a lucrative business. On average, the gross rental yield is over 7%. Offshore companies are allowed to buy office space and other real estate on behalf of their companies. However, this is limited to only two jurisdictions in all UAE, RAK International Corporate Center and Jebel Ali Free Zone.

Limited Use For Businesses Outside Of UAE

For the businesses they conduct outside of the UAE, offshore companies can engage in a few commercial activities. Some deals are only permitted for an onshore company.

Here’s a breakdown of this:

Companies in which an offshore company may invest

  • International Trade
  • Property Holding
  • Intellectual Property (“IP”) Holding
  • Shipping Business
  • Online Advertising Business
  • General Trading
  • Distribution And Service Center Business​

Transactions in which an offshore company cannot participate

  • Insurance Business
  • Media Business
  • Aviation Business
  • Conducting Business With Companies In The UAE

Relatively Expensive When Compared To Other Tax Havens

With multiple global locations catering to the offshoring market, the prices have become very competitive.

Offshore company formation in locations like the U.K. can cost as low as $500.

An offshore company formation in the UAE would be relatively more expensive due to all its advantages. It could cost you well over $1000 to incorporate your offshore company in the UAE.

3 Key Jurisdictions Offering Offshore Companies In The UAE

The success of your offshore entity is purely based on the jurisdiction you choose to form it in.

But what’s a jurisdiction?

A jurisdiction is a state or territory over which a particular court and legal system have jurisdiction. In the UAE, the federation is made up of seven different emirates, and each emirate has its judiciary. Of these jurisdictions, only three have the authority to relocate companies in the UAE abroad.

Here’s a closer look at them:

RAK International Corporate Centre (RAK ICC)

Ras Al Khaimah (RAK) is approximately an hour’s drive from Dubai and is one of the

fastest-growing Emirates in UAE.

In 2006, the Ras al Khaimah government launched the RAK ICC, a corporate registry for offshoring companies. This allowed the formation of International Business Companies (IBC) in the UAE.

Here’s why it is regarded as one of the best in the UAE:

  • A RAK offshore company does not require any local shareholding.
  • While there is a general prohibition on conducting business within UAE, RAK offshore companies can buy shares of local UAE companies.
  • A RAK offshore company can hold a multi-currency offshore bank account in the UAE to perform routine international transactions.
  • A RAK offshore company formation doesn’t require you to file your annual audit report.
  • A registered agent would be a UAE national who can help you with your RAK offshore company registration. This means you don’t have to be physically present in the UAE for the company registration.
  • RAK offshore companies are incorporated within a week of applying.
  • RAK offshore companies are relatively more cost-effective.
  • You will require a minimum of one director and one shareholder for your RAK offshore company incorporation.
  • After a policy update in 2019, RAK Offshore companies can now buy real estate in UAE, even without a business license.

Jebel Ali Free Zone (JAFZA)

Jebel Ali is a major trading hub in Dubai and is an hour’s drive from Abu Dhabi.

The Jebel Ali Free Zone (JAFZA) was the first such free zone established in the UAE.

A JAFZA offshore company or a Jebel Ali Offshore Company has almost the same features as a RAK offshore company.

But some differences include:

  • A JAFZA offshore company formation can help you establish your business in the main business hub of the UAE.
  • A JAFZA offshore company incorporation is relatively more expensive.
  • A shareholder would have to visit the UAE to complete the offshore company incorporation process.
  • You would need to file an annual audit report to the JAFZA authorities.
  • A JAFZA offshore company would need a minimum of one shareholder, one secretary, and two directors for incorporation.

 

Ajman Free Zone

As the name suggests, it is situated in the Emirate of Ajman in UAE. This UAE free zone has created its offshore regime and can incorporate your offshore company at competitive prices.

The features of an Ajman offshore company are again similar to those of a RAK offshore company.

However, the below-listed features make it a preferred choice in the business community.

  • An Ajman offshore company is relatively cost-effective and requires a minimal budget for operational costs.
  • Any amendment to the structure of your business can be carried out easily. For instance, you can incorporate a change in a corporate shareholder within a week.
  • These companies require a minimum of one director and one shareholder for offshore incorporation. Plus, the shareholder and director can be the same person.

Requirements For Offshore Company Formation In UAE

Now that you have all the basic information about offshore companies in UAE, here’s a checklist of some final requirements for your UAE offshore company formation:

Name Of The Company

The name of your UAE offshore company must end with the suffix “Limited or Ltd” to denote its legal status as an offshore company.

Local Offshore Agent

A local offshore agent is registered under UAE Offshore authorities like the JAFZA Offshore Authority, RAK Offshore Authority, or Ajman offshore Authority.

You will require one of these registered agents to complete your UAE offshore company incorporation. Except for a JAFZA offshore company, where you will have to register the company in person.

Minimum Share Capital Required 

There is no minimum share capital requirement for anyone to set up an offshore company in the UAE.

Owing to an amendment to the Companies Law in 2009, offshore companies can now determine the share capital of their limited liability company. They must, of course, have enough capital to achieve their objectives.

Additionally, UAE offshore authorities will not ask to see a certain amount of capital in your bank before incorporating your offshore company.

Wrapping Up

Forming an offshore company in the UAE is a legitimate medium to help your business grow.

You can take advantage of the relaxed regulations and thrive in a tax-free business ecosystem. Offshore companies allow 100% foreign ownership and are great for protecting assets and privacy. However, as with anything, offshore company formation comes with its own set of challenges. Use the information in this article to plan your next step and take a critical step in growing your business.

Choosing the right place and choosing the best license for your business can be a difficult but very important task.

POPULAR INTERNATIONAL OFFSHORE JURISDICTION

RAKICC

Licensed by the Cyprus Securities and Exchange Commission under licence number 138/11 in accordance with the Markets in Financial Instruments Directive.

Ajman Offshore

We are a proud member of the Investor Compensation Fund which acts as a guarantor of last resort for our investors. IFC covers the maximum amount of 20.000 EUR for MiFID clients.

Jafza Offshore

Investor’s money is kept in segregated accounts with top-tier banks that cannot be claimed by creditors or used by us. Account base currencies are available in EUR, GBP, USD, CHF and JPY.

British Virgin Islands (BVI)

Through the use of an automated transaction monitoring and risk management system, a Consulting WP client’s account will never be allowed to reach negative balance.

Cayman Islands

Our Extreme Transparency Policy ensures that the client receives a transparent price feed, transparent liquidity, transparent historical data, transparent market information at all times.

Nevis, Belize

The total value of all of the client’s open positions combined (net open position) may not surpass USD 825.000.000.

BENEFITS - OFFSHORE COMPANY IN UAE

  •   Confidentiality and Privacy
  •   100% Asset Protection and Security
  •   No Audit Report required during Renewal
  •   Invoice International Clients
  •   Open International Corporate Bank Account
  •   100% Foreign Ownership and Repatriation of Profits
  •   No Public Register of Shareholders and Directors
  •   Easy Company Incorporation – 4 Working Days
  •   Tax-free Company Set up with no Capital requirements

WHY SET UP AN OFFSHORE COMPANY IN THE UAE?