Another popular option that most investors choose is the formation of offshore companies in the UAE. Let us dive into this and try to understand what an offshore company is:

The offshore company in the UAE is a very flexible corporate entity. This allows the company to be integrated into numerous business arrangements. Proper use of an offshore company can achieve tax reduction and increased confidentiality.

An offshore company is a legal entity that is incorporated for the purpose of operating outside the jurisdiction or the location of formation. In most cases, an offshore company does not require to maintain an office space and can undertake many business activities in the country of its formation.  An offshore company can be formed by both individuals and companies, and its shares are easily transferable.

The main purpose of this type of companies is to eliminate the taxes associated with capital gains, property sales, and other business earnings.

The three principal jurisdictions that offer offshore companies in the UAE are Ras Al Khaimah (RAK), Jebel Ali Free Zone (JAFZA) and Ajman Offshore. All are 'tax-free' jurisdictions that impose no income tax or corporate tax and allow 100% foreign ownership. The United Arab Emirates has established double tax treaty agreements with more than 40 nations.

Activities allowed for the UAE Offshore company

International Trading

An offshore company allows you to engage in international trading activities that include imports and exports of goods and certain commodities.

Investment holding

Another purpose of offshore companies is investment holding. It allows you to hold investments such as shares in other companies and moveable and immovable properties.

Asset protection

One of the popular uses of offshore companies is asset protection and provides complete confidentiality. It allows the protection of assets with real estate, intellectual property, financial assets, etc.

Professional Services

Offshore companies also permit certain professional services, whether it is business activity/sector/industry like consultancy and legal firms, management and accounting, etc.

Process of Offshore Company Formation in Dubai/UAE

Starting a UAE offshore company involves a few steps process that typically takes two weeks for incorporation. The process includes:

Select company name

The name of the Dubai offshore company should be verified initially from the registrar. It is important to note that there are certain names that you cannot select for an offshore company such as insurance, bank, fund, trust, etc.

Fill in the application form.

After selecting the company name, you need to fill in the application along with certain documents required for the setup. The submission of documents depends on the individual or corporate entities.

Submit MOA and AOA

The next step for UAE offshore company is to draft the Memorandum of Association (MOA) and Articles of Association (AOA) of your company in the internationally accepted language i.e. English. Once you prepare these drafts, the authorities will verify it and, on the approval, you can start your business in the Emirates legally.

Benefits of an Offshore Company:

• 100% foreign ownership
• Provide a gateway for international market expansion
• Gateway to a stable and business-friendly legal system
• Access to a more adaptable regulatory authority
• Offer tax impartiality on international revenues with respect to (depending on the jurisdiction) personal or company income, capital gains, and inheritance taxes
• Provide better access to global funding.

We offer complete services and support to start an offshore company in Dubai and other emirates of the UAE. We handle all the corporate and legal paperwork, business documentation, provision of directors, and company secretary and work on your behalf to make sure the compliance with relevant government authorities.

An offshore company is a great choice for any individual or enterprise that wants to protect its assets and finances earned from international trade and transactions. The administrative cost is minimum, which provides an extra advantage. Offshore companies also allow for simplified sale of shares so you can easily get liquid, nonrepayable funds.

Note that UAE offshore company requires you to take all the business operations outside the Emirates, however, you can open bank accounts, hold intellectual property and real estate.

Corporate tax on Offshore Company

Now that UAE has introduced corporate tax, now here the question is whether UAE offshore company is subjected to corporate tax and obliged to obtain a corporate tax registration number?

As per the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, it is important to find out what constitutes a taxable person and if an offshore company falls within the definition of a taxable person.

Article 51 states: "Any taxable person shall register for corporate tax." And a taxable person is defined as "a person subject to corporate tax," according to the decree.

Article 11 further provides that 'a Taxable Person shall be a Resident Person or a Non-Resident Person'.  It further provides that a resident person can be 'a legal person that is incorporated or otherwise established or recognised under the applicable legislation of the state, including a free zone person'.

Article 12 of the Decree states that “A resident person, which is a legal person, is subject to corporate tax on its taxable income derived from the state or outside the state”.

From the above laws, it is concluded that an offshore company, being a juridical person, registered in the UAE will be considered as a Resident Person and subject to UAE corporate tax.