Offshore Companies in United Arab Emirates
Offshore Companies in UAE
An offshore company in the UAE means a company that is incorporated in a jurisdiction in the UAE and which does not carry on business in onshore. Offshore companies in the UAE, for instance Jebel Ali Free Zone Offshore Company (JAFZA Offshore), help organizations to operate under the laws of the free zone and at the same time enjoy low or no taxes at all and simple corporate structure. One of the biggest advantages of offshore company registration is anonymity; offshore jurisdictions often provide more privacy for directors, shareholders and company funds. However, an offshore entity is not permitted to engage in commercial activities within the UAE territory.
Free Zone Companies in UAE
Free zone companies are different from normal offshore companies in the United Arab Emirates. They are formed in special economic free zones, including the Dubai International Financial Centre (DIFC), Dubai Multi Commodities Centre (DMCC), Ras Al Khaimah Economic Zone (RAKEZ), or Dubai Airport Free Zone (DAFZA), which allow businesses to have 100% foreign ownership, pay no corporate taxes (subject to certain conditions or time limits) and have simplified procedures for employment and repatriation of capital.
While an offshore company is unable to operate within the UAE mainland, a free zone entity can operate within the free zone and may, with permission, carry out some business on the mainland. They are also physically present in the UAE, which is convenient for those companies that need to have local operations or offices.
Why You Should Setup an Offshore Company in the UAE
• Tax Efficiency:
The Emirates of the UAE are famous for having low or no corporate tax rates at all (although the UAE has recently introduced some corporate tax laws – please check the latest information). The opportunity for tax savings exists regardless of whether you choose an offshore or free zone model.
• Global Accessibility:
The Emirate of Dubai is strategically located to provide a convenient access to Africa, Asia and Europe. Dubai International Airport and different sea ports make it easier to do business and to import and export goods.
• Stable Regulatory Environment:
The UAE has a clear legal system and this makes the environment very attractive to investors. Free zones have their own regulatory authorities to ensure that there are well defined and conforming business rules.
• Asset Protection:
An offshore company with a bank account can help to protect international assets by virtue of the confidentiality and the stability of the banking system in the UAE. Free zones also provide for the proper protection of assets while you develop your business in the region.
• Risk and Reputation:
Establishing a company in a reputable free zone like DMCC or JAFZA can improve your brand. Clients and stakeholders tend to look more favourably at companies that are based in major international centres an offshore company in Dubai.
How to Set Up an Offshore Company in the UAE
Below are the company incorporation steps on how to start an offshore company in the UAE:
1. Choosing a Jurisdiction:
Compare the different offshore jurisdictions in the UAE, like JAFZA Offshore or RAK ICC, and compare the corporate governance, costs of incorporation, and the company’s reputation.
2. Incorporation Documentation:
Prepare the registration documents that are required for offshore setup in the UAE, these may include proof of ownership, passport copies, proof of address and shareholding, among others.
3. Company Name Registration:
Make sure that the name of the company does not contain prohibited words or pointers to the government.
4. Engaging Company Incorporation Agencies:
It is easier to work with offshore company formation services (like us!) for a professional offshore setup. Some of these services may also assist in the collection of supporting documents and understanding of the requirements of the law.
5. Offshore Bank Account Opening:
Many entrepreneurs require an offshore company with bank account to be opened at the time of company formation. International corporate banking can be essential for long term business growth. International or local banks in the UAE can provide certain corporate accounts, but this will be accompanied by strict KYC measures.
The Differences between Setting Up a Free Zone or UAE Offshore Company
There are several noticeable differences when comparing the setup of offshore companies in UAE versus Free Zone companies:
- Physical Office Space:
Some free zone authorities demand that you get or rent an office, flexi-desk or shared workspace. Offshore companies, however, do not require physical premises. - Business License Categories:
Free zones classify licenses according to the activity to be performed; for instance, trading, consultancy, or industrial. It is necessary to specify the main business objectives in order to obtain the license. - Local Service Agents:
If some services or partial mainland operations are required, then it may be necessary to engage the services of a local service agent, as per the laws of the free zone and the UAE. - Visas:
Residency visas for employees and shareholders are offered by free zone entities; offshore entities do not offer this. This can be important for entrepreneurs who want to relocate or actually run the operations on the ground.
Frequently Asked Questions about setting up a company in UAE
Q: Can I register an offshore company in Dubai?
While there is no such thing as a ‘Dubai Offshore Company’, there are several Free Zones in Dubai that will allow you to set up a mainland company in the UAE. One popular Free Zone jurisdiction in Dubai include the Dubai International Financial Centre (DIFC) which is regulated by the Dubai Financial Services Authority (DFSA).
JAFZA (Jebel Ali Free Zone) is the only jurisdiction that provides Dubai offshore company formation.
For more information on JAFZA offshore company formation check our other blog on comparing different free zone and offshore jurisdictions in the UAE.
Q: Are offshore and free zone companies taxed differently?
A: Before the new UAE corporate tax laws were announced, both types of companies paid zero corporate tax. Based on the current laws, free zone companies that comply with the conditions set by the free zone and do not carry on business in the UAE mainland may still be exempt from tax. Offshore companies still keep their exemption but it is recommended to check the latest provisions.
Q: Can an offshore company do business in the UAE mainland?
A: Offshore structures are not permitted to carry out business activities on the UAE mainland. On the other hand, free zone companies are permitted to engage in business with the help of local distributors or once they have obtained the required mainland trading license.
Q: Is it possible to open a local branch of an offshore company?
A: Yes, in some instances it is possible. Nonetheless, it is important to note that there are different rules and regulations that must be met in order to operate. These vary greatly depending on the free zone and the kind of activity.
Disclaimer: This article is for informational purposes only and should not be taken as legal or tax advice. Always consult a qualified professional for tailored guidance.