Offshore Company
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Overview
An offshore company is primarily used as a holding company but can also be employed for international trading, contracting, consulting services, and asset/intellectual property protection. It is 100% tax-free, and you can keep 100% of the returns. There are no audit requirements, and the names of shareholders and directors are not available on public records. However, annual legal compliance requirements must still be fulfilled.
An offshore company may not conduct business within the UAE, nor does it provide residency visas for the UAE.
Definition of an Offshore Company
Also known as an International Business Company (IBC), an offshore company is registered in one jurisdiction but is generally exempt from taxation in that country. Offshore companies do not conduct business within the country of incorporation.
Why Incorporate an Offshore Company?
The benefits of utilizing an offshore corporate structure include:
- Providing a gateway for international market expansion
- Access to a stable and business-friendly legal system
- Access to a more flexible regulatory regime
- Offering tax neutrality on international earnings, including personal or company income, capital gains, and inheritance taxes (depending on the jurisdiction)
- Offering better access to global funding
- Providing a vehicle to separate or protect assets, such as intellectual property, from operating entities
What is the Legal and Business Status of an Offshore Entity in the UAE?
An offshore company based in the UAE operates under distinct regulations that differentiate it from other types of companies in the country. A key distinction is that an offshore company is prohibited from engaging in any business activities within the UAE. This includes restrictions on importing and exporting goods into the local market and renting or leasing physical premises. As such, offshore companies cannot grant residency status or visas to their stakeholders or employees.
Offshore companies are specifically designed to support international business activities, ensure asset protection, and offer advantages such as enhanced privacy, tax optimization, and flexible corporate structuring. They cater to specific international business needs while adhering to the regulatory framework established for their offshore status.
What Types of Activities Can Be Carried Out with an Offshore Company?
Offshore companies are Special Purpose Vehicles (SPVs) authorized to conduct a wide range of transactional activities, provided these activities occur outside the registered jurisdiction. They can engage in:
- Buying and selling goods and services
- Holding physical or digital assets
- Managing intellectual property
- Conducting regular business operations
This flexibility allows offshore companies to cater to diverse business needs and capitalize on global opportunities beyond the limitations of their registered jurisdiction.
Strategic and Business Advantages of Incorporating an Offshore Company in the UAE
Business Confidentiality
UAE offshore companies operate with a high level of confidentiality, as they are not subject to public information disclosure.
Regarding the maintenance of an accurate and updated Ultimate Beneficial Owner (UBO) register, a major amendment was made in 2020. The UAE Government passed Cabinet Resolution No. 58 of 2020, which came into effect on August 28, 2020. This legislation was introduced to enhance transparency, combat money laundering, and align the UAE’s regulatory framework with international standards.
The resolution aims to ensure compliance with international initiatives such as the Financial Action Task Force (FATF) recommendations and the UAE’s commitment to combating money laundering and terrorist financing. It emphasizes the importance of identifying the individuals who ultimately own or control offshore companies, thereby promoting transparency and preventing the misuse of corporate structures for illicit purposes.
Tax Advantages
Offshore companies in the UAE benefit from a favorable tax regime that significantly minimizes tax obligations.
Key advantages include exemption from income tax, allowing offshore companies to retain their earnings and allocate resources more efficiently. Additionally, offshore companies are exempt from customs duties, value-added tax (VAT), capital gains tax, and withholding tax. This tax exemption framework provides a competitive edge for businesses operating through offshore structures.
Furthermore, the UAE has established an extensive network of double taxation treaties with over 100 countries. These treaties protect businesses from paying tax on their UAE-sourced income in their country of origin, enhancing the UAE’s appeal as a tax-efficient jurisdiction for offshore operations. The combination of tax exemptions and double taxation treaties positions the UAE as an attractive destination for businesses seeking to optimize their tax liabilities and maximize financial efficiency.
Asset Protection
Offshore companies in the UAE can hold a diverse range of assets, including real estate, intellectual property, securities, and shares in local UAE companies.
One significant advantage of offshore company ownership in the UAE is the confidentiality it provides, safeguarding the company’s assets from creditors and other third parties. Additionally, provisions such as lawsuit protection ensure that the company’s assets remain shielded in the event of a legal judgment against the company. These protective measures contribute to the overall asset protection and security afforded to offshore companies operating in the UAE, offering peace of mind and a favorable environment for conducting business activities.
Simple and Straightforward Incorporation Process
The incorporation process for establishing an offshore company in the UAE is highly streamlined and straightforward. Unlike other jurisdictions, it does not require securing physical office space, nor does it stipulate a mandatory minimum share capital requirement. These features significantly reduce the regulatory burden typically associated with forming a corporate entity.
The fundamental requirements for the structure of the company are minimal, requiring just a single director and shareholder to set up an offshore company. This combination of flexibility, speed, and limited regulatory controls makes the UAE a prime location for offshore business incorporations.
The complete incorporation process for a UAE offshore company is straightforward. There is no requirement for physical office space, no minimum share capital requirement, and very few other regulatory obligations. The setup can be completed in as little as 7 working days, with only one director and one shareholder needed.
International Market Expansion
Utilizing a UAE offshore company is a cost-effective way to expand a business, encourage partnerships, and facilitate bilateral investments globally and within the GCC market
What Makes the UAE Unique and Attractive as an Offshore Jurisdiction?
The UAE offers several unique advantages that distinguish it from other offshore jurisdictions:
- Strategic Location: The UAE is strategically positioned in the Middle East, acting as a gateway between East and West. This location facilitates trade, and investment flows and provides access to a diverse range of markets.
- Political Stability and Government Support: The UAE offers political stability and strong government support, which enhances investor confidence.
- Robust Legal Framework: The UAE has a well-established regulatory system that boosts investor confidence and protects business interests.
- Legislative Amendments: In recent years, the UAE has introduced amendments to enhance transparency, combat money laundering, and align its regulatory framework with international standards. This includes compliance with international bodies such as the Financial Action Task Force (FATF).
- Strong Economy: The UAE boasts a strong economy, driven by a favorable business environment, tax incentives, and supportive government policies.
- Well-Developed Infrastructure: The UAE features state-of-the-art communication networks, world-class transportation facilities, and modern business centers. These factors contribute to the ease of doing business and make the UAE an attractive destination for companies seeking a regional or global presence.
- Offshore Company Formation Facilities: Several offshore company formation facilities are available in Dubai, Abu Dhabi, Ras Al Khaimah, Jebel Ali Free Zone, and Ajman.
As an offshore jurisdiction, the UAE attracts strong interest due to its favorable business environment, political stability, modernized infrastructure, and attractive tax incentives, positioning it as a highly competitive jurisdiction compared to other global offshore centers.
What Offshore Jurisdictions Are Available in the UAE?
There are three main offshore jurisdictions in the UAE:
- Jebel Ali Free Zone Authority Offshore (JAFZA Offshore) – Emirate of Dubai
Created in 1985, Jebel Ali Free Zone (JAFZA) is the largest free zone in the world, hosting over 9,500 companies. A well-defined compliance framework ensures that operations within the free zone align with local and international laws and best practices. JAFZA Offshore, established in 2003 and governed by the JAFZA Offshore Companies Regulation 2018, allows investors to set up 100% foreign owned offshore holding companies. Notably, it was the first jurisdiction in the UAE to permit real estate ownership in Dubai by offshore entities. This structure is cost-effective, tax-efficient, and provides access to the global market with minimal administrative work.
- Ras Al Khaimah International Corporate Centre (RAK ICC)
Launched in September 2006, RAK ICC was introduced by the Ras Al Khaimah government as part of the Ras Al Khaimah Free Trade Zone Authority International Companies Regulations 2006. Following a consolidation of two competing registrars, RAK ICC is one of the UAE’s premier offshore jurisdictions. RAK ICC offers:
- Lowest costs for UAE-based offshore companies
- Remote incorporation procedures
- A wide variety of business activities per ISIC standards
- The ability to own freehold real estate properties in Dubai and other emirates
- A proactive registrar responsive to global regulatory changes
- Streamlined company incorporation and renewal procedures
- Availability of non-traditional offshore solutions such as trusts, foundations, and segregated portfolio companies
Working with Us
At our law firm, we understand that setting up an offshore company in the UAE is a remarkably straightforward and efficient process compared to other jurisdictions. Our team excels in guiding clients to select the most suitable offshore jurisdiction, considering a blend of business, financial, and entrepreneurial factors.
With our dynamic approach, swift service, and profound understanding of the UAE’s regulatory framework, we stand as your foremost ally in facilitating offshore business incorporations in the UAE.
