OFFSHORE COMPANIES IN THE UNITED ARAB EMIRATES

An ‘Offshore Company’ is a type of legal business entity available for businesses looking to establish in the UAE with the intention of either operating outside the UAE or for the purposes of acting as a holding company (for example for the purposes of holding Real Estate, Intellectual Property Rights, Shares in other Operating Businesses or other Financial Investments).

Offshore Companies are a relatively inexpensive structure (in comparison to the other types of legal entities available in the UAE) that are attractive for foreign investors to form entities for the purposes of holding Capital or Assets, both within or outside the UAE, or conduct business outside the UAE.

Whilst Offshore Companies may differ to a degree depending upon the corporate law in the relevant jurisdiction or Free Trade Zone in which they are incorporated in the UAE, the main advantages of setting up a UAE offshore company are as follows:
  1. Offshore companies are, broadly, not subject to Corporate Income Tax in the UAE;
  2. They promote business flexibility and anonymity at a lower comparative cost (for instance there is no requirements to maintain an office space for an Offshore Company);
  3. They provide asset protection for Real Estate purchased in the UAE.
The two principal jurisdictions offering Offshore Companies in the UAE are Jebel Ali Free Zone (JAFZA) and the Ras Al Khaimah (RAK).

Both jurisdictions are “Tax Free” jurisdictions that levy no UAE income tax or UAE corporate tax on companies operating within the jurisdiction, allow 100% foreign ownership and enable registered businesses to open multiple currency accounts in the UAE and carry out business internationally.

Note that conducting business with persons resident in the UAE and having physical presence within the UAE (other than interactions that are considered of a holding company / subsidiary nature) are not allowed.

Offshore Companies must appoint an approved registered Agent.

JAFZA Offshore Company Incorporation


The JAFZA was created in 1985. It is an industrial area surrounding the Jebel Ali Port, one of the world’s biggest shipping ports, which allows the international companies based there to enjoy the special privileges of the free zone. These include exemption from corporate tax for 15 years, no personal income tax, no import or export duties, no restriction on currency, and easy labour recruitment.

Jebel Ali is located just outside Dubai and is about an hour’s drive from Abu Dhabi, the UAE’s capital city. Al Maktoum International Airport, which is planned to be the largest airport in the world in both freight and passenger volume, is constructed just outside the port area.

The Jebel Ali Free Zone Authority (JAFZA), in conjunction with the Dubai Government, introduced the Offshore Company in 2003 under the Jebel Ali Free Zone Offshore Companies Regulations 2003 and recently JAFZA has issued its new JAFZA Offshore Companies Regulations 2018 (‘New Regulations” to replace the previous regulations for the Offshore Companies.

Key features of a JAFZA Offshore Company:

  • Shareholders– A minimum of one shareholder is required and corporate shareholders are permitted. International corporate shareholders are required to have all company documents attested;
  • Directors– A minimum of one director is required, details of directors are not available on the public register.
  • Secretary – Every company must have a secretary. A company director may also act as company secretary;
  • Share Capital – No minimum share capital requirements;
  • Annual Reporting – Every company must keep accounting record and the company must appoint an approved auditor.

Key benefits of an offshore company registration in JAFZA:

  • 100% Foreign Ownership– The JAFZA Offshore Companies Regulations require no local shareholding;
  • Local Real Estate Ownership – The JAFZA Offshore Company is permitted to directly own local Dubai real estate. Most properties in Dubai can be owned by JAFZA offshore companies but both Free Zone and developer approval are required;
  • Shares in Local Companies– Despite a general prohibition on Offshore Companies conducting business with persons resident in the UAE, the authorities do allow Offshore Companies to hold the shares of both Free Zone and Onshore (LLC) Companies.
  • Local Bank Account– An Offshore Company can hold multi-currency bank accounts in the UAE to carry out routine international transactions;
  • Shareholder/Director details – The names of shareholders and directors do not have to be disclosed on a public register;
  • Inspection – The registrar has the rights to inspect or appoint inspectors to examine the affairs of an Offshore Company.
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 UAE corporate tax, but they enable their shareholders, directors and employees to obtain residency in the UAE

Offshore Company Formation – FAQs

  • How long will it take to register a UAE Offshore company?
A JAFZA Offshore company will take approximately 3 weeks to register.
  • Am I required to visit the UAE to register a UAE Offshore Company?
Yes. For a JAFZA Offshore Company, the shareholders and directors are required to sign in the presence of the authorities in Jebel Ali.
  • Is it possible to obtain UAE residency visa through a UAE Offshore company?
With the new implementing regulations for a JAFZA Offshore Company, it is possible for a Company which owns a property in a designated free hold area in the United Arab Emirates, but approval of such application is subject to the Authority’s eligibility requirements.
  • Can an Offshore Company lease office space in the UAE?
No. However, each company must have a registered address and can use this address to receive mail and perform other secretarial services.
  • Can I convert an Offshore Company to an Onshore Free Zone Company?
Yes, a JAFZA Offshore Company can be converted to a Free Zone entity, to be able to conduct business and trade in the U.A.E.
  • Am I required to have my bank account located in Dubai or can I have an international account?
UAE offshore companies are typically incorporated to utilize the local banking services and 0% rate of tax. However, it is possible for these companies to have accounts elsewhere in the world.

FTA WARNS BUSINESS OWNERS OVER VAT REFUND SCAM

The UAE’s Federal Tax Authority has issued a warning to business owners to be wary of phishing emails from scammers.

The new scam came to light after emails were sent to customers of local banks requesting their personal banking details so that their VAT refund can be processed.

The Authority has revealed that some bank customers have received phishing emails “from unidentified sources impersonating banks and financial institutions and asking recipients to provide personal data” in order to help the businesses to recover the VAT refund from FTA. The personal data requested includes names, credit card numbers and bank account Personal Identification Numbers (PINs).

The Authority emphasized that the VAT refund process can only be performed by logging into the secure online portal which is available to each VAT registered individual and business.

The FTA added that the process is safely executed on the official portal by utilizing International Bank Account Number (IBAN) and that the system is under the authority of the Central Bank of the UAE.

In November last year, ENBD issued a similar statement warning its customers to be careful of such requests made by fraudsters.

The FTA has urged all business owners to remain vigilant and maintain confidentiality of their data.

It is important that all business owners seek advice only from reliable service providers.

Affiniax Partners has been providing Professional Services to its clients for over 25 years. We have a team of VAT specialists in the region who can assist you through the process. For more information, please contact us at mail@affiniax.com

PROCEDURE FOR VAT REFUND IN DUBAI – FOREIGN BUSINESSES

The 6 months deadline for VAT Refund for Foreign businesses is expiring on 1 October 2019.

The refund scheme for the calendar year 2018 started from 2 April 2019.

For the calendar year 2019, the refund scheme will start from 1 March 2020 and will last till 31 August 2020.

As a special exception, the above timeline does not apply to foreign businesses registered in GCC countries.

Foreign Businesses must assess whether they fall under the criteria, and if they do, they can submit an application to the Federal Tax Authority (FTA) on a special form to claim a refund for any business-related UAE VAT incurred in the relevant periods. The FTA has defined the following criteria (among other parameters) for a foreign business to qualify for this scheme:
  1. No Place of Establishment or Fixed Establishment in the UAE
  2. Not a taxable person in the UAE
  3. Not carrying out business in the UAE (unless the customer applies RCM)
  4. Must be carrying on a business and registered for VAT in a foreign jurisdiction
  5. Minimum VAT amount claimable is AED 2,000
Some of the conditions where VAT is not refundable to foreign businesses are as follows:
  1. Input Tax is not recoverable as per FTA laws (e.g. non-business expenses)
  2. Foreign business is from a jurisdiction which does not provide similar refunds (except for GCC registered businesses)
  3. Non-Resident Tour Operators
Below are the list of countries where businesses may be eligible for this refund:
  • Austria
  • Bahrain
  • Belgium
  • Denmark
  • Finland
  • France
  • Kuwait
  • Iceland
  • Isle of Man
  • Lebanon – in certain circumstances
  • Luxembourg
  • Namibia – refunds only available for business goods that are exported and not for services consumed in the UAE.
  • Netherlands
  • New Zealand
  • Norway
  • Oman
  • Qatar
  • Saudi Arabia
  • South Africa – refunds only available for expenses relating to goods that are exported from a designated UAE port within 90 days and does not apply to services.
  • Sweden
  • UK
  • Zimbabwe
  • Switzerland
Affiniax Partners has a team of VAT specialists in the region who can assist you through the process. For more information, please contact us at mail@affiniax.com