Offshore Companies (not just in the UAE) are commonly misunderstood because many people fail to distinguish how these vehicles differ from a standard onshore corporate entity.

Firstly it is important to define the term “offshore”. The term typically refers to an asset that is registered or held outside its home country – away from where its main operation and/or ownership is located. An Offshore Company is therefore a legal business entity that is set up with the intention of operating outside its registered jurisdiction and/or the location of its ultimate ownership.

There may be many reasons to register an Offshore Company, but among the general benefits of utilising an offshore corporate structure are to:

  • Serve as a gateway for international market expansion;
  • Supply a stable and business friendly legal system;
  • Provide a more flexible regulatory regime;
  • Offer tax neutrality on international earnings in respect of (depending on jurisdiction) personal or company income, capital gains and inheritance taxes.
  • Gain better access to global funding;
  • Separate or protect assets, such as Intellectual Property, from operating entities;

The two principal jurisdictions offering Offshore Companies in the UAE are Ras Al Khaimah (RAK) and the Jebel Ali Free Zone (JAFZA). Both are “tax free” jurisdictions that levy no income tax or corporate tax and permit 100% foreign ownership. Offshore Companies are permitted to open multi-currency accounts in the UAE and carry out business internationally. They may not, however, carry on business with persons resident in the UAE or have physical offices within the UAE.

Both RAK and JAFZA Offshore Companies allow corporate shareholders and directors and there is no requirement for shareholders/directors to be physically present in the UAE for incorporation. Offshore Companies are not obliged to maintain books and records.

RAK and JAFZA each have their own specific benefits. RAK is the more cost effective of the two, but JAFZA is the only Offshore Company that is legally permitted to own property situated in Dubai.

UAE Offshore Companies should not be confused with UAE Free Zone Companies. Free Zone Companies are onshore entities permitted to carry out business in Dubai with certain restrictions. They are similarly subject to the 0% rate of corporate tax yet they enable their shareholders, directors and employees to obtain residency in the UAE.

It is particularly important to remember that the tax and other benefits obtained by an Offshore Company will depend not only upon the tax legislation in the country of residence (and possibly the domicile) of the beneficial owner, but also upon any relevant anti-avoidance legislation in any country in which the client intends to do business.

Sovereign can assist with UAE Offshore Company Registration, for further information and fees of various Offshore or Free Zone solutions please contact:

Daniel Crumplin
Company Formation Specialist - Sovereign Corporate Services UAE
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