How To Start an Offshore Company in UAE?

An offshore company in UAE is a legal entity created to conduct business activities outside the jurisdiction where it is registered and/or where its owners reside. These entities are designed to facilitate international business, asset protection, and tax planning, without engaging in commercial activities within the UAE itself. Offshore companies benefit from tax exemptions and allow for full repatriation of profits and capital, making them an attractive option for global investors. They operate under specific offshore regulatory authorities and are not permitted to conduct business within the UAE market.

Offshore companies in the UAE are authorized to establish multi-currency accounts and engage in international business transactions. However, they are prohibited from conducting business with UAE residents or maintaining physical offices within the UAE.

Offshore companies in the UAE are distinctly different from UAE free zone companies. Free Zone Companies are considered onshore entities that can conduct business within Dubai under specific conditions, they differ significantly from offshore entities. Free Zone Companies benefit from a 0% corporate tax rate and offer the advantage of allowing their shareholders, directors, and employees to obtain UAE residency. These companies are designed to operate within designated free zones, facilitating international trade and investment while complying with the regulatory framework of the respective free zone authority.

Jurisdiction Options for Offshore Company Registration in UAE

In the UAE, the two main jurisdictions for establishing Offshore Companies are Ras Al Khaimah (RAK) and the Jebel Ali Free Zone (JAFZA). Each jurisdiction has distinct advantages: RAK is known for its cost-effectiveness, making it a popular choice for budget-conscious investors, whereas JAFZA offers the unique benefit of being the only offshore entity authorized to own property in Dubai. Both jurisdictions offer “tax-free” environments, with no income tax or corporate tax, and allow for 100% foreign ownership.

Ras al Khaimah, located just about an hour’s drive from Dubai, stands out as one of the most rapidly developing among the seven Emirates comprising the UAE. In September 2006, the government of Ras al Khaimah introduced the International Company structure, commonly referred to as the RAK Offshore Company. These entities are governed by the Ras Al Khaimah Free Trade Zone Authority International Companies Regulations 2006.

RAK has the highest level of industrialization in the UAE, with manufacturing accounting for 26% of its GDP. Its reputation is built on a business-friendly investment environment and competitive costs. The cost of doing business in RAK is 25 to 50% lower than the UAE average, enabling companies to optimize their return on investment.

Established in 1985, the Jebel Ali Free Zone (JAFZA) is an industrial zone encompassing the Jebel Ali Port, one of the world’s largest shipping ports. The strategic location of JAFZA enables international companies operating there to benefit from various special privileges offered by the free zone. These privileges include a 15-year exemption from corporate tax, no personal income tax, no import or export duties, no currency restrictions, and streamlined labor recruitment processes.

In 2003, the Jebel Ali Free Zone Authority (JAFZA), in collaboration with the Dubai Government, introduced the Offshore Company under the Jebel Ali Free Zone Offshore Companies Regulations 2003.

Benefits Of Starting An Offshore Company In The UAE

Here are the numerous advantages of registering an offshore company in the UAE:

Tax Benefits: No income tax and customs duties.
Profit Repatriation: Full repatriation of profits.
Ownership: 100% foreign ownership is permitted.
Minimal Requirements: Only one shareholder and one director are required to register the company.
Capital Flexibility: Any currency can be used as capital.
Privacy: Shareholders benefit from high levels of privacy.
Cost-Effective Banking: Setting up an offshore company is a straightforward and affordable way to open a corporate bank account.
Professional Licensing: Facilitates obtaining a professional license.
Legal Framework: Offers a stable and supportive legal environment.
Regulatory Flexibility: Features an adaptable regulatory system.
Asset Protection: Provides effective segregation and safeguarding of assets.
Global Market Access: Acts as a gateway to international markets.
Funding Sources: Offers access to international funding sources.

Required Documents for Setting Up an Offshore Company in the UAE

To establish an offshore company in the UAE, all shareholders and directors must provide the following documentation:

Certified Passport Copy: A copy of your passport, certified by a lawyer, accountant, or authorized employee.
Proof of Address: Two documents verifying your residential address.
Reference Letter: A bank or professional reference letter.
Professional Background: A curriculum vitae (CV) outlining your professional history.

Steps For Setting Up an Offshore Company in UAE

Setting up an offshore company in UAE involves several distinct steps. Here’s a revised guide:

1. Choose a Company Name

Verification: Initiate the company name verification process with the Registrar.
Name Restrictions: Ensure that the chosen company name does not contain certain prohibited words such as insurance, bank, building society, cooperative, fund, Municipal, Chamber of Commerce, trust, Royal, chartered, finance, mutual fund, and Emirates. The company name should end with Ltd. or Incorporated.

2. Complete the Application Form

After selecting the desired company name, proceed to fill out the application form. The application requires the submission of a specific set of documents for offshore company incorporation in the UAE, including:

Identity proof for shareholders and directors
Address proof for shareholders and directors
Curriculum Vitae (CV) of shareholders and directors
Well-drafted business plan
Photocopies of identification documents for shareholders and directors

Note: Document submission requirements may vary for individuals and corporate entities. Complete details can be found in the subsequent section.

3. Submission of Relevant Documents

Once the required documents are gathered, submit them to the relevant authorities for review. The authorities will assess the documents and issue the necessary approvals.

4. Draft the Memorandum of Association (MOA) and Articles of Association (AOA)

Drafting: After obtaining initial approval, draft the MOA and AOA in English, as it is widely accepted for international business purposes.
Review: Submit the drafted documents for final review and approval by the authority.

5. Open an Offshore Bank Account

Conclude the process by opening an offshore bank account for the offshore company. This facilitates smooth business transactions for business owners.

Offshore jurisdictions also assist in opening offshore companies and offshore bank accounts in various locations. This same process can be applied to open an anonymous offshore bank account.

It’s important to note that an offshore company in UAE is limited from conducting any business activities within the territory of the UAE, except for opening an offshore bank account and purchasing real estate.