Different Offshore Companies In The UAE
For the outsider it might be difficult to understand what different offshore companies the UAE has to offer.
In this article the offshore companies currently available on the market are being discussed.
We will explain you what the benefits and downsides are, and which one we recommend the most.
First a brief definition of what an offshore company is.
Offshore companies normally are statutorily exempt from taxation in their jurisdiction of registration provided that they do not undertake business with persons resident in that jurisdiction.
A UAE offshore company cannot
engage in business inside the UAE. It cannot import goods into the local market, it cannot hire an office space and you cannot apply for residential visas (except for one of the options, as you will read below).
This is different from other types of companies like the free zone establishment (FZE) or free zone company (FZC), and the local LLC (a partnership with a local Emirati as 51% shareholder). These companies can do business inside the UAE, rent office space and can apply for visas for their staff and owners.
UAE offshore companies can all be 100% foreign owned and can open bank accounts inside the UAE (and abroad).
There are a number of different free zones currently offering offshore companies:
1. The Jebel Ali Offshore Company
Historically the first offshore company in the UAE was the Jebel Ali offshore company.
Jebel Ali is the free zone where the Jebel Ali port is located. This is a major international trading hub to Dubai. Therefore your offshore company is located in a main business hub, instead of in some a small tropical island. As with the other companies, you cannot do business inside the UAE.
But this is the only foreign owned company that can hold real estate in Dubai. So if you are looking to set up an investment company with 100% foreign ownership to hold real estate, this is the one option you have.
The downside of the Jebel Ali offshore company is that the costs are much higher than the other options available.
Also, the incorporation process is more complicated and requires the shareholder to visit the UAE in person, or to issue a (legalized) power of attorney. This adds to the costs and the paperwork. An annual audit is obligatory, which will add to the costs too.
All this makes this company as expensive as some of the onshore options with no clear benefit for the vast majority of business owners.
2.The Ajman Offshore Company
Recently, Ajman has created its own offshore regime. They already are offering a very competitively priced and easy to set up Free Zones companies. Since competition is the main drive for innovation we very much welcomed this new product.
The main characteristics of this type of company is the fast incorporation time. An individual has to visit the office of the Free Zone but this can also be the registered agent. And they have an office in Dubai in the Fairmont Hotel where you can go to talk to the administrators in person.
[2017 Update] We are pleased to announce that, as of 27 April 2017, Freemont Cyprus has been appointed as country representatives, in Cyprus, of Ajman Free Zone Authority in the UAE (more here). What this means is that Freemont Cyprus is licensed to incorporate in Cyprus free zone and international (offshore) business entities of Ajman Free Zone (AFZ) in its offices in Nicosia and Limassol
Another major benefit of this free zone is that they are very fast when an amendment to a structure such as a change of a shareholder can be done very quickly.
However, we have some concerns after reading the articles of association and regulations the free zone provided. They are clearly written by a lawyer with the perspective to protect the Free Zone from every possible liability. And without having eye for the needs of modern day offshore businesses.
For example, there is a number of ways in which the registrar can strike off the company. For example when they consider the company “inactive”. This is not what you want when in essence you are buying limited liability.
Other remarks we had were the need for two directors, while most people that set up an offshore company are single business owners.
Also, there is a requirement to appoint an auditor, perform annual audits, and to physically hold meetings where this auditor can demand presence (remember, this is an offshore company).
One argument we heard was that the Free Zone does not strictly follow these rules. But what is then the point of having rules in the first place? It does not contribute to the image of stability you desire when having a limited liability company.
All in all, there certainly can be reasons for setting up an Ajman Offshore company. But most international business owners we advice to go to Ras al Khaimah (RAK).
3. The Best Offshore Company In The UAE: The RAK Free Trade Zone (RAK FTZ) Offshore Company.
The best offshore company in the UAE is the RAK international company offered by the RAK Free Trade Zone.
There is a number of reasons why:
The set up procedure is relatively easy, and can even be done remotely.
The costs are low compared to other UAE companies. The same no-tax regime applies and these companies can open bank accounts in Dubai.
All types of business activities can be performed with the RAK Offshore company.
Management of RAK FTZ is actively working on getting rules and regulations up-to-date to make sure they keep providing the best product. They listen to rational arguments of the registered agents and look for improvements. This is rare in the UAE.
A registered office in Dubai. For the outside world it looks like you have a Dubai based company (not Ras al Khaimah).
In addition to the above, if you set up a RAK Offshore company with a company like Freemont, you will get a registered office in Dubai. This means that for the outside world it appears as if you have a Dubai-based business and this is a major advantage compared to having a business in some far away island.
A major downside of the RAK Offshore company is that amendments to the structure (like a shareholder change) can take them a long time to process.
4. The RAK Investment Authorities (RAKIA) offshore company
A company very similar to the RAK FTZ Offshore company is the RAKIA Offshore company. The difference in price and ways to use it is very small.
The set up of RAKIA company is somewhat simpler than that of the RAK FTZ and the requirements somewhat less.
Both RAK FTZ and RAKIA can attest resolutions passed by the board or shareholders after they have been witnessed by the registered agent. Those can be used in order to open a bank account or set up a subsidiary. The benefit of RAKIA is that they do this at a much lower rate.
Also, getting extracts like a certificate of good standing and incumbency is easier and cheaper at RAKIA.
The downside of the RAKIA company is that the procedures with regards to changes in the structure are very opaque. You never really know where you stand when you aim to make amendments in a structure. Often, a procedure is slightly different than the last time you did it and sometimes the requirements change.
Since one of the most important aspects of running a business is having clear rules and procedures, this is a very important reason for us to prefer the RAK FTZ offshore company OVER the RAKIA offshore company.
Recently, there have been some improvements in the offshore regime in Ras al Khaimah. The registers of RAK FTZ and RAKIA were merged into a new offshore regime: the Ras al Khaimah International Corporate Centre, RAK ICC.
With an updated and modern set of regulations, a state-of-the-art online registration system and a better legal foundation for asset protection and inheritance purposes, this really is the best of both worlds.
Different Offshore Companies In UAE – Conclusion
There are different UAE Offshore companies to choose for your business. Unless you want to invest in Dubai real estate or need a presence in Jebel Ali, for the vast majority of business owners the RAK ICC offshore company will do the trick.
We at the Freemont Group can assist you with incorporations at all these different free zones (and you already know our preference). Contact us
when you want to know more.
You might also be interested in this
Check the following link if you want to use the RAK Offshore company as holding company
. It has some very interesting information about the use of the RAK Offshore company in general.
Visit our main UAE free zone company and RAK Offshore
page to discover what services we mostly offer to our UAE customers.