What is an offshore company in the UAE?

An offshore company in the United Arab Emirates (UAE) is a business entity established outside the jurisdiction of its primary operations, primarily designed for asset protection, tax optimization, and confidentiality.   Many investors, big corporations, and small startups are entering the UAE through offshore companies. But is forming an offshore company in the UAE is a smart move for any business? In this article, we will learn what an offshore company in the UAE is, highlighting the pros and challenges of offshore company formation. We will also cover the essential aspects of setting up a UAE offshore company and the fundamental requirements for its establishment.

What is an Offshore Company?

An offshore company is a legal entity that operates outside its owner's country of residence. Businesses often move their operations to other countries to benefit from tax advantages and relaxed regulations. These companies are typically established in countries with low or zero taxes on corporate earnings. The UAE is a popular destination for forming offshore companies due to its favourable tax environment. Starting an offshore company in the UAE is a cost-effective way to expand internationally without heavy administrative burdens.

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Key Aspects of an Offshore Company in the UAE

Offshore companies in the UAE offer significant benefits for businesses looking to tap into international markets. Here are three key aspects to consider:

• Access to a Corporate Bank Account: Offshore companies can open corporate and private bank accounts in the UAE, facilitating international trading and asset management.
• Know Your Customer (KYC) Compliance: Offshore companies must comply with KYC regulations, requiring documents like passport copies, proof of address, and investor bio-data to prevent identity theft, financial fraud, and money laundering.
• Jurisdictional Benefits: The UAE has three offshore jurisdictions, each offering unique advantages. Analyzing these jurisdictions is crucial to selecting the best fit for your business needs.

Advantages of Setting Up an Offshore Company in the UAE

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

International Market Expansion

• Establishing an offshore company in the UAE offers a cost-effective gateway for international business expansion without needing a physical presence.
• Allows use of a single UAE bank account for transactions in different currencies, saving on transactional costs and navigating foreign exchange rates.

Business Anonymity

• Offshore companies in the UAE offer high confidentiality with limited liability.
• Financial and ownership details remain private and are only revealed in cases of suspected criminal activities.

Multiple Tax Benefits

• Offshore companies in the UAE enjoy exemptions from various taxes such as corporate income, sales, inheritance, property, and personal taxes.
• Avoids double taxation due to treaties with 117 countries, ensuring savings on international business taxes.

Simplified Procedures

Exemptions from taxes and annual auditing requirements simplify business operations.

• There is no need to file audited financial statements in most Emirates.
• Access to Better Global Funding
• UAE's strong reputation enhances its appeal to foreign investors.
• A growing economy, expected to rebound and grow steadily, supports business growth.
• These advantages make the UAE attractive for forming offshore companies, providing a solid foundation for international business activities.

Challenges of Setting Up an Offshore Company in the UAE

Offshore companies in the UAE offer many advantages but have specific challenges. Here are some of the key challenges:

No Access to a Business License

• Offshore companies, or "paper" companies, cannot obtain a business or trade license to operate within the UAE.
• They are restricted from conducting commercial activities or hiring staff within the UAE, limiting their operations to holding assets and international business.

Limited Real Estate Options

• Offshore companies can only purchase real estate in specific jurisdictions: RAK International Corporate Centre and Jebel Ali Free Zone.

Restricted Business Activities

• Offshore companies can only engage in activities outside the UAE, such as international trade, property holding, IP holding, and shipping.
• They are prohibited from engaging in insurance, media, aviation, or business with UAE companies.

Higher Costs

• Setting up an offshore company in the UAE is relatively more expensive compared to other tax havens, often costing over $1000 due to the benefits provided.

• While offshore companies in the UAE provide significant advantages, these challenges must be considered to ensure they align with your business goals and requirements.

3 Key Jurisdictions Offering Offshore Companies in the UAE

The success of your offshore entity largely depends on the jurisdiction in which you choose to form it. In the UAE, three key jurisdictions allow for the formation of offshore companies. Here's an overview:

RAK International Corporate Centre (RAK ICC)

Ras Al Khaimah (RAK), a fast-growing Emirate, launched the RAK ICC in 2006 to facilitate the formation of International Business Companies (IBC). Key benefits include:

• No local shareholding is required
• Ability to buy shares in UAE companies
• Multi-currency bank accounts
• No annual audit report needed
• Cost-effective incorporation within a week
• Real estate purchases allowed without a business license

Learn more about RAK Offshore Company Formation -   Filings.ae can help you set up your offshore business in RAKEZ Freezone.

Jebel Ali Free Zone (JAFZA)

Jebel Ali, a major trading hub in Dubai, offers another prominent offshore jurisdiction. Key features include:

• Establish business in Dubai'sDubai's main hub
• Higher incorporation costs
• Mandatory shareholder visit for incorporation
• Annual audit report required
• A minimum of one shareholder, one secretary, and two directors

Filings.ae experts can assist you in establishing your offshore business in JAFZA.  Click here to find all the information you need about JAFZA offshore company formation.  .

Ajman Free Zone

Situated in the Emirate of Ajman, this free zone provides competitive offshore company formation. Notable features include:

• Cost-effective setup with minimal operational costs
• Easy amendment of business structure
• A minimum of one director and one shareholder, who can be the same person
• Choosing the right jurisdiction is crucial for the success and efficiency of your offshore company in the UAE.

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Click here to know more about Ajman Offshore Company Formation

Requirements for Offshore Company Formation in the UAE

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

• Name of the Company: The name must end with the suffix "Limited" or "Ltd" to denote its legal status as an offshore company.
• Local Offshore Agent: To complete the incorporation, a registered local offshore agent recognized by authorities such as the JAFZA Offshore Authority, RAK Offshore Authority, or Ajman Offshore Authority is required. For JAFZA, in-person registration is necessary.
• Minimum Share Capital: There is no mandatory minimum share capital requirement. Companies can determine their share capital based on their objectives, and authorities will not require proof of a specific capital amount before incorporation.

Conclusion

Forming an offshore company in the UAE is a legitimate way to help your business grow. You can benefit from relaxed regulations and thrive in a tax-free business ecosystem. Offshore companies allow 100% foreign ownership and are excellent for asset protection and privacy. However, forming offshore companies also comes with its own set of challenges. Use the information in this article to plan your next move and take decisive steps to grow your business.

Filings.ae experts can help you set up your business seamlessly. Get started today!