The UAE has an excellent reputation as an offshore tax-haven for company formation. As well as offering tax advantages and numerous other benefits, it is seen as a stable jurisdiction with a good global reputation. It is one of the few genuine tax-havens that is compliant with all international anti-money laundering standards.
The most popular type of offshore company to form in the UAE is that of an offshore LLC. It offers potential investors freedom from taxes, privacy, and asset protection. There are 7 emirates in the UAE in which an offshore LLC can be incorporated: Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain. To take advantage of offshore company incorporation in the UAE, you will need to incorporate in one of the aforementioned Emirate’s ‘Free Zones’. These are areas which have favourable tax, customs, and import regulations, and allow straightforward foreign incorporation. In particular, the Free Zones are the only areas which allow for 100% foreign ownership of an offshore company in the UAE.
In this article, we will go over the various features of a UAE offshore LLC and its advantages.
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Advantages of a UAE Offshore Company
- Tax advantages: The UAE is a popular tax-free jurisdiction. LLCs can benefit from zero corporate taxes, income taxes, and capital gains tax. The UAE is also one of several countries which does not levy any personal income tax on its residents.
- 100% Foreign Ownership: It is possible for a UAE LLC to be 100% foreign owned. A minimum of only one LLC member is permitted.
- High degree of privacy and confidentiality: The identity of shareholders is kept confidential and is not publicly available.
- Fast and easy incorporation process: The process of setting up an offshore company in the UAE takes only a week or two to complete, sometimes as little as a few days, and is straightforward and simple.
- The UAE is politically stable with a fast-growing economy.
- Company capital can be kept in any currency.
- A UAE LLC provides Limited liability protection to its members, which makes it an ideal vehicle for asset protection.
- No foreign exchange controls or trade barriers.
Structuring and Ownership
When establishing an offshore company in the UAE, prospective owners have considerable flexibility in structuring their entity.
100% Foreign Ownership and Control
The UAE allows 100% foreign ownership for offshore companies, which means international investors can fully own their company without the need for a local partner or sponsor. This policy enhances the UAE's appeal as an investment destination, ensuring full control for foreign business owners.
- Minimum Requirements: At least one shareholder and one director are mandatory.
- Local Requirements: No local shareholding needed for foreign investors.
Corporate Shareholders and Directors
UAE offshore companies may have corporate shareholders and directors, providing a layer of privacy and structural complexity to the management and ownership of the company.
- Corporate Shareholders: Entities can be shareholders, enhancing the versatility in ownership structure.
- Directors: At least one director is required, who may be of any nationality and need not be resident in the UAE.
Offshore companies must adhere to the regulations set by the jurisdiction in which they are established, and structuring of ownership and management should comply accordingly.
Legal and Regulatory Framework
The United Arab Emirates (UAE) has a complex legal and regulatory framework that governs the incorporation and operation of offshore companies. This framework ensures that these entities meet certain standards of compliance and documentation.
Jurisdiction and Legal Setup
The UAE offers a range of jurisdictions for offshore company incorporation, including a number of free zones that provide varying benefits. A company may choose to incorporate in areas like Dubai which are known for strategic location and a business-friendly environment. The legal setup of an offshore company includes understanding the UAE Commercial Companies Law and the specific free zone regulations, when applicable. Here are key aspects concerning jurisdiction and legal setup:
- Jurisdiction Choice: Selecting the appropriate jurisdiction is crucial. Each free zone has its own legal framework.
- Legal Requirements: Incorporation must adhere to UAE Commercial Companies Law.
Compliance and Documentation Requirements
Companies incorporated in the UAE must follow a clear set of compliance and documentation requirements to maintain their legal status. The incorporation process involves the submission of specific documents to the relevant registrar, and potentially the assistance of a registered agent. Below are the crucial compliance and documentation requirements:
- Registration with the Registrar: Formal registration is a critical step, which includes submitting the necessary documentation such as owner and shareholder details.
- Registered Agent: Some jurisdictions require an offshore company to engage a registered agent to handle official correspondence and ensure compliance with local regulations.
- Documentation: Maintaining up-to-date records of corporate documents is mandatory, including those related to directors, shareholders, and financial transactions.
Ensuring strict adherence to the legal and regulatory framework is indispensable for UAE offshore companies to operate successfully.
Financial Considerations
When setting up an offshore company in the UAE, investors must carefully consider their financial strategy. This includes understanding the banking infrastructure, financial services available, and the requirements for transparency in financial reporting.
Banking and Financial Services
The UAE boasts a robust banking sector, which offers a variety of services tailored to offshore companies. Offshore bank accounts are vital for managing transactions and assets securely. The process of opening an account can be straightforward, but it requires due diligence and compliance with international banking standards. Typical costs associated with maintaining these accounts include:
- Monthly maintenance fees
- Transaction fees
- Minimum balance requirements
Foreign investors should compare the services, fee structures, and reputation of banks to choose the right financial institution for their business needs.
Transparency and Financial Statements
Offshore companies in the UAE are subject to certain regulatory requirements to maintain transparency, especially in financial dealings. They are generally required to keep accurate financial statements that reflect their financial health, though the level of detail can vary based on the jurisdiction within the UAE. However, UAE offshore companies typically do not need to file financial statements with the local authorities.
One must note the following about taxation for offshore companies in the UAE:
- Corporate tax: Generally, offshore companies benefit from a tax-exempt status.
- Income tax: There is usually no personal income tax levied on the earnings of shareholders.
Offshore entities must ensure compliance with both local and international financial and finance regulations to sustain their operations and reputation in the UAE marketplace.
Top Uses
- International trade
- Intellectual property
- Holding company
- Estate planning
- Asset protection
- Tax planning
- Asset confidentiality
- Real estate
Key Corporate Features
Setting Up an Offshore Company in UAE
Establishing an offshore company in the UAE offers a strategic advantage for businesses looking to expand internationally. The process involves a sequence of steps and submission of specific documents to comply with the regulatory framework.
Company Formation Process
The process to set up an offshore company in the UAE involves careful planning and attention to detail. One begins with:
- Choosing a Company Name: This is the initial step, which must be approved by the Registrar to ensure that it is unique and adheres to naming conventions.
- Application Form Submission: An applicant must fill out an application form, detailing key company information and intended business activities.
- Licensing and Registration: Depending on the jurisdiction, one must apply for the appropriate license and register the company with the authorities.
- Corporate Bank Account: Establishing a bank account is essential for conducting international transactions and is typically a straightforward process.
Required Documents and Information
The success of an offshore company setup in the UAE hinges on providing the necessary documents and information:
- Proof of Identity: Valid passport copies of the shareholders and directors.
- Proof of Address: Recent utility bills or similar documents affirming the residential addresses of the involved parties.
- Company Documentation: This includes the Articles of Association and a detailed business plan outlining the company's objectives and operations.
- Financial Records: Some jurisdictions require a certified copy of bank statements from the past six months to establish financial history and credibility.
In summary, setting up an offshore company in the UAE is a meticulous process that necessitates proper documentation and adherence to legal and procedural requirements.
Key Locations for UAE Offshore Companies
The United Arab Emirates offers several strategic locations for setting up offshore companies, each with its own advantages for international trade and investment. Businesses often select these jurisdictions based on specific needs such as taxation, privacy, and global market access.
Ras Al Khaimah (RAK)
Ras Al Khaimah, often abbreviated as RAK, is a popular choice for offshore company formation due to its cost-effectiveness and relatively straightforward registration process. This emirate is known for its favorable taxation policies, which include no corporate or income tax. RAK International Corporate Centre (RAK ICC) is the dedicated authority managing offshore company affairs, providing confidentiality and full foreign ownership opportunities.
Jebel Ali Free Zone (JAFZA)
Jebel Ali Free Zone, known as JAFZA, is located in Dubai and is one of the world's largest free zones. It allows for 100% foreign ownership and offers zero percent corporate tax for 50 years, a concession that is renewable. JAFZA stands out for its state-of-the-art facilities and connectivity, granting access to one of the busiest ports in the world, Jebel Ali Port, and Al Maktoum International Airport, which are integral to international trade.
Ajman Free Zone
The Ajman Free Zone offers competitive set-up costs and is strategically located near the Ajman Port, which services ships and trade routes from around the world. The free zone's streamlined processes attract investors looking to benefit from Ajman’s robust infrastructure and flexible regulatory environment, conducive to a variety of business activities.
Open a Bank Account
Once your UAE offshore company is registered, the final step is to open a UAE offshore bank account. While this is not a strict requirement, it is highly recommended as a vehicle for depositing the LLC’s capital, and making use of the many other benefits that a UAE offshore bank account provides.
To summarise, the documents required to incorporate an offshore company in the UAE (including those needed for the MOA and AOA) are:
For an individual shareholder:
- Certified passport copy
- Proof of residence
- Bank reference
- Details of beneficial owners/shareholders
- Company name
- Planned business activities of the company
- Business structure and hierarchy
For corporate shareholders:
- Memorandum of Association (MOA)
- Parent company certificate if applicable
- Hierarchy of beneficiaries
Taxation of a UAE Non Resident Corporation
The UAE is a popular tax-free jurisdiction. Its residents and citizens pay zero income tax. In addition, offshore companies based in a UAE free zone will not be subject to any corporate income tax, capital gains tax, withholding tax, VAT, etc.
That being said, you may still be liable to pay personal income tax in your own country of residence on profits which are repatriated from the UAE. Therefore, in order to maximise the tax advantages of a UAE offshore company, you should consider becoming a tax resident of a low or tax-free jurisdiction.
Learn How To Protect Your Assets With The Strongest Offshore Asset Protection Structure In The World.
Corporate Details
Anonymity, Confidentiality and Disclosure
A UAE offshore LLC provides a high degree of privacy. The names of shareholders are not publicly available, and in fact are kept confidential by law. Furthermore, nominee shareholders are allowed for even greater anonymity.
Required Capital
Minimum capital requirements were previously 150,000 AED (approx. $40,000); however, a 2015 amendment removed the minimum capital requirements.
Members
A minimum of one member is required who can be a natural person or corporate body. There is no maximum to the number of members permitted. An offshore LLC in a UAE free zone does not automatically grant the right for members to become UAE residents.
The members are usually in charge of managing the LLC, in which case it operates similarly to a partnership. It is also permissible for non-member managers to be employed who then report directly to the member/s. In this instance, the managers function in a similar way to the board of directors of a corporation.
Trading Restrictions
To maintain the status of “offshore company” in a UAE Free Zone, the company cannot engage in any business activities within the territory of the UAE other than opening an offshore bank account and purchasing real estate. Real estate can only be purchased in specially approved areas.
Principal Corporate Legislation
The UAE Commercial Companies Law (CCL).
Type of Law
Civil Law
Powers of the Company
A UAE Offshore LLC has all the same powers and rights as a natural person. It is regarded as a separate legal entity from its members. Therefore, a member’s liability is limited to their investment in the company alone.
Local Agent
A registered local agent and local office is required. The name and address of the registered agent should be listed in the memorandum of incorporation.
Company Secretary
A company secretary is not required.
Language of legislation and Corporate Documents
English.
Official Language
The official language is Arabic; however, English is widely spoken in the corporate world, and all legislation and corporate documents will be drafted in English.
Audit and Annual Reporting Requirements
A UAE LLC must maintain accounts and annual financial statements. These should be audited and distributed to shareholders. However, there is no requirement to file the annual reports with the regulatory authorities.
Exchange Controls
None.
Shelf Companies available
Shelf companies are available for faster incorporation.
Time required to form offshore company
It usually takes a total of 1-2 weeks to submit all the required documents and receive final approval of company registration. However, the process can be expedited and take as little as only 3 - 4 days. The process is simple and easy to complete.
Company Name Requirements and Restrictions
According to the regulations of the UAE Commercial Companies LAW (CCL), the name of a UAE LLC must adhere to the following:
- The name should be unique, and not deemed in any way similar to an existing UAE Company name.
- The name must include the suffix “Limited” or “Ltd.” to indicate that it is a limited liability company.
- The name of the company should not “contradict” the company’s business activities.
- The name should not refer to God’s name or his qualities, either in English or in Arabic, e.g. Al Quder, Al Razzaq, Al Aleem, etc.
- The name should not be deemed inappropriate or offensive by the governing authorities.
- The name should not fall under a restricted name category, which include:
- Words such as UAE, Emirates, names of cities, districts, airport codes etc.
- Names of continents, countries, or cities
- Names of government organisations, global political organisations, religious organisations etc.
- Names of global brands cannot be included in the company name
The company name can be in Arabic or English.
Access to Double Tax Treaties
Yes, the UAE has active double taxation avoidance treaties with 115 countries worldwide.
License Fee
The license fee varies in each of the UAE free zones. The initial government fee is usually around USD 1,150 but can be as much as USD 8,000 in Dubai. Annual fees amount to approximately USD 1,200. This makes the UAE one of the more expensive jurisdictions for offshore company formation in terms of its initial and ongoing fees.
Strategic Benefits and Business Expansion
When businesses select the United Arab Emirates for offshore company formation, they access strategic advantages that are recognized globally. Through established reputation and international treaties, UAE offshore companies often find themselves in an advantageous position for expanding their operations globally.
International Recognition and Reputation
The UAE's commitment to developing a strong business infrastructure has garnered it international recognition as a premium commercial hub. Offshore companies within the UAE benefit from this reputation, which conveys a level of prestige and confidence to international partners and clients. This positive image assists in establishing credibility when entering new markets and engaging with global stakeholders.
Access to Double Taxation Treaties
The UAE has signed an extensive network of double taxation treaties with numerous countries. These agreements serve to:
- Minimize the burden of taxation on the same income in two countries.
- Facilitate cross-border trade and investment by making the UAE a more appealing business environment.
For offshore companies, this access to double taxation treaties can lead to significant fiscal efficiencies—particularly for those engaged in international business activities. It allows for funds that would otherwise be paid in taxes to be redirected towards promoting business growth and expansion.
Frequently Asked Questions
In this section, readers will find concise answers to some of the most pressing questions regarding offshore company formation in Dubai.
How are offshore companies in Dubai taxed?
Offshore companies in Dubai benefit from being tax-exempt, meaning they are not subject to corporate tax, making it a financially attractive option for investors.
What are the main requirements for setting up an offshore company in Dubai?
The requirements for setting up an offshore company in Dubai include having at least one director, choosing a registered agent approved by the jurisdiction, and maintaining a local registered address, although physical presence in the UAE is not required.
What benefits do investors typically gain by establishing an offshore company in Dubai?
Investors typically gain 100% foreign ownership, complete repatriation of profits and capital, and exemption from import and export taxes by establishing an offshore company in Dubai. It also offers them a high level of privacy and asset protection.
Which free zone is preferred for setting up an offshore company in Dubai?
While there are several free zones in Dubai, investors often prefer the Jebel Ali Free Zone due to its strategic location, comprehensive services, and robust infrastructure for offshore business activities.
What are the potential drawbacks of owning an offshore company in Dubai?
Potential drawbacks may include the perception of offshore companies for tax evasion, difficulty in obtaining corporate bank accounts, and limited physical presence in the local market. Compliance with international regulations and transparency standards is also required.
Are there any corporate taxes imposed on offshore companies in the UAE?
Offshore companies in the UAE are generally not subject to corporate taxes, making the UAE a favorable international business hub. However, they must ensure compliance with international tax laws and adhere to changes in global tax regulations.
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