10 Mar 2022
An offshore company is an international business company set up registered in one jurisdiction and operated and set up outside of that registered jurisdiction. Offshore companies are also referred to as International Business Corporations (IBCs). It is established outside of the country of residence. Offshore company’s formation and operation are different from other conventional types of companies. Such companies are intended to be registered in one particular jurisdiction, but the company does not exist in that jurisdiction physically. It benefits from a low-tax or sometimes no-tax environment. The United Arab Emirates (the UAE) introduced an offshore company mechanism in 2003 to expand its hold on the business and commercial world.
Factors behind the reasons for setting up an offshore company:
Investors and businesses should bear in mind some essential factors while choosing the right jurisdiction to form an offshore company. Some of the critical factors are Ideal offshore jurisdiction- for an offshore jurisdiction to be ideal for business requires a modern, updated, and reliable financial and banking system for the smooth operation of affairs internationally.
Strong work ethics
To start an offshore company in any jurisdiction, where the work ethics are strictly followed through hard work and secrecy.
Time zone
The time difference is one of the essential factors to be considered before forming an offshore company in any jurisdiction because it matters a lot for carrying out business from a different part of the world. Time distribution/management would be made accordingly.
Taxes
Taxes affect any business’s profitability, so before setting up any offshore company, one should assess that jurisdiction’s tax system and avoid high tax imposing countries as much as possible. The GCC countries, including UAE, are tax-free and encourage many businesses to invest in offshore companies in these jurisdictions. The offshore companies do not pay taxes in their home jurisdiction, 100% tax-free.
The UAE provides offshore company formation facilities in all states, including Dubai, Abu Dhabi, Ras Al Khaimah, Jebel-Ali Free Zone, Ajman. This article focuses on three main offshore company zones in the UAE: Jebel Ali offshore (JAFZA), Ras Al Khaimah International Corporate Centre (RAK ICC), and Ajman offshore company formation. These jurisdictions are tax-free, impose no income or corporate tax and allow 100% ownership for foreign investors. The UAE has a Double Tax Treaty with more than 40 countries in the world.
Offshore companies are allowed to carry out business internationally and can open a multi-currency bank account in the UAE. The bank account is required to get a certificate of incorporation of an offshore company. Both of the zones have their own particular benefits. However, Ras Al Khaimah is more cost-effective than JAFZA. One of the significant benefits JAFZA offers is it used to be the only offshore company that legally owns property located in Dubai, but now RAK is cheaper to register a property under it. Offshore companies do not require the investor to get residency or set-up an office in UAE; instead, a company can be formed by appointing an approved agent on behalf of the company in the UAE. The agent would be responsible for running all financial and registration matters of the offshore company. Documents required for Offshore Company set-up in UAE from all shareholders and directors:
- Certified passport copies
- 2 x Proof of address documents
- Bank Reference Letter
- A brief resume of shareholders and directors
Jebel Ali Free Zone Offshore Company (JAFZA):
Jebel Ali Free Zone Offshore Company (JAFZA) is the largest and best free zone in Dubai for registering offshore companies with more than 6400 offshore companies. The offshore companies are not physically set up in the UAE. They need to be registered only, and the shareholders are not required to have a resident visa to incorporate an offshore company. They only need a certificate of incorporation instead of a trade license because they cannot carry out business within UAE jurisdiction.
Procedure to form an Offshore company in JAFZA:
To form an offshore company in the Jebel Ali Free Zone, an approved registered agent is a must to interact with the authority regarding the registration and submission of documents of the offshore company. To register an offshore company in JAFZA, the company shall have one shareholder minimum, at least two directors, and a secretary. There is no restriction of minimum share capital; the company should keep accounting records for ten years. To register an offshore company in JAFZA, you will have to follow some steps to register and incorporate an offshore company after finalizing the business type to begin. Initially, the owner shall approach a reliable approved registered agent and appoint an agent on his behalf; an agent can be a registered company. After appointing an agent for the registration and looking after the paperwork of offshore company of an offshore company, advise him to initiate the process and instruct the agent type of work you want him to start; work could be registration, the opening of bank account, any special attestation required for the registration process, and nominee services. The owner needs to suggest three names for the company, out of which the registration authority will select and approve one name for the offshore company.
The next step is the finalization of activity or trading scope for the company, in which sector investment is intended to be made, such as investing in property, trade, etc. Share capital is required to be decided though there is no minimum share capital limit set for offshore companies in JAFZA. After deciding on share capital, you need to finalize persons for shareholders, directors, and secretary positions and Article of Association and Memorandum of Association of the company.
When all the above steps are taken and completed, the company owner is required to hand over the following documents, like all UAE offshore entities, to the nominated agent for submission along with stipulated fees.
i. The shareholder and directors notarized passport copy
ii. Proof of address of the company, in the original
iii. Bank reference letter
iv. Shareholders brief resume When the agent gets all the above documents and submits them all, the agent applies for the company name approval. The JAFZA decides and approves one name for the company if it meets the criteria.
The application form is signed by the shareholders, directors, and secretary and submitted along with the Article of Association and Memorandum of Association (MOA) and share certificate. The registration process takes a maximum of one to two weeks, depending upon approval and paperwork. The minimum fee for registering offshore is 18,000 AED (UAE Dirhams).
Once the process of submitting papers is done by the agent and company is registered, the Authority issues Certificate of Incorporation, Memorandum of Association, and Share Certificate. The offshore company is all set to start work and open a bank account in the company’s name. An offshore company’s registration is renewed every year through an approved agent; the owner’s presence is not required for this purpose. Once the registration is renewed, the company receives a good standing certificate to show the company’s active status.
Ras Al Khaimah International Corporate Center (RAK ICC)
Ras Al Khaimah International Corporate Center (RAK ICC) was established under Decree Number 12 of 2015 amended as Decree number 4 of 2016, and it governs the registration and incorporation matters of offshore companies in Ras Al Khaimah Free Zone.
Procedure to form an Offshore company in RAK ICC:
To register an offshore company in RAK (ICC), one shareholder, one director, and a secretary are required. It does not require any local shareholder; it is a 100% foreign ownership-based offshore company set up. It is the most cost-effective offshore company formation jurisdiction in the UAE. There is no limit for minimum share capital like JAFZA. Offshore companies are permitted to hold shares in local companies in free zones and onshore (LLC) companies. The incorporation process at RAK (ICC) is faster than other free zones; it takes one-week of maximum registration. The names of directors and shareholders are not exhibited on the public register. Ajman Free Zone offers offshore company formation like JAFZA and RAK ICC. It initiated offshore company incorporation in 2014. The Ajman Free Zone Authority regulates it. Ajman offshore company set-up is one of the safest and privacy securing free zones that attracts investors from across the globe. Like other free zone offshore companies, Ajman offshore offers a zero-tax business set-up with 100% capital and profit repatriation. It maintains the confidentiality and privacy of all documents and records of registered companies. Shareholders are not allowed to get a UAE residence visa after registering an offshore company in the UAE. However, shareholders are allowed to invest in UAE companies. Several business activities are allowed under the ambit of offshore company set-up; it can be a holding company, joint investment company, general trading company, consultancy services, international services, to name a few. Offshore companies in UAE offer countless benefits to investors in the form of;
- 100% percent tax exemptions
- 100% capital and profit repatriation
- 100% foreign ownership
- No office space required
- Multi-currency bank account in the name of the company
- Easy and fast process of company incorporation
- Access to the international market
- No record disclosure of shareholders and directors to the public
- Confidentiality and complete privacy
- Permission to hold in companies based in UAE free zones and the mainland (LLC)
- Protected from lawsuits and protection through flexible Commercial laws.