An Ultimate Guide to Offshore Business Model in the UAE

by Zaara 07, Apr 2021

An Ultimate Guide to Offshore Business Model in the UAE

So, how does an offshore model work? The answer may appear complicated, but we are here to help you out. There’s just one word you must know - Jurisdiction. It all comes down to the question of jurisdiction. But how does location come into the picture? Here’s all you must know.

What is Offshore Business?

Outside the business world, we use the term offshore to refer to a location outside the national boundaries of the entities we're discussing. In the case of corporations, an offshore business refers to an entity based in a country (that would be the jurisdiction) that is different from their principal's country of origin.

One of the most important misconceptions behind offshore is the assumption it is always illegal. Many companies choose to move offshore because they decide to transfer to a jurisdiction where they will enjoy fewer regulations and lower taxes. The move offshore and its benefits would permit them to lower their costs of doing business. Offshoring a business (or anything else you could go offshore for that matter) becomes illegal when you fail to declare it. Offshore company owners also claim significant privacy benefits depending on the jurisdiction where they set up shop.

Offshore Business in the UAE

Offshore businesses are the most popular business formation type in the United Arab Emirates. The UAE Offshore companies offer an ideal system for business management, wealth management, smart international investment strategies, ease, and freedom of business operations.

The UAE is home to several offshore companies, notably in Ras Al Khaimah (RAK), Ajman, and Jebel Ali (JAFZA).

Let us understand each of these jurisdictions one-by-one.

RAK Offshore Company

In September 2006, the RAK government launched the International Company structure, also known as the RAK Offshore Company. These are regulated under the Ras Al Khaimah Free Trade Zone Authority International Companies Regulations 2006.

Read more: https://www.commitbiz.com/rak-offshore-company-formation.

JAFZA Offshore Company

In conjunction with the Dubai Government, the Jebel Ali Free Zone Authority (JAFZA) introduced the Offshore Company in 2003 under the Jebel Ali Free Zone Offshore Companies Regulations 2003. It is an industrial area surrounding the Jebel Ali Port, one of the world's biggest shipping ports, which permits worldwicompanies 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, restrictions on currency, and easy labor recruitment.

Read more: https://www.commitbiz.com/jafza-offshore-company-formation.

Ajman Offshore Company

Strategically situated at the Arabian Gulf entrance, Ajman Free Zone is well placed to serve the eastern and western markets to set up a business. Ajman's proximity to Sharjah and Dubai provides easy accessibility to the two international airports and four ports. In 2014, Ajman Free Zone expanded to include global offshore companies, often known as International Business Companies (IBC's), located in the Emirate of Ajman. To that end, the Ajman Free Zone Offshore Companies Regulations of 2014 (the "Ajman Offshore Regulations ") were enacted, allowing the incorporation of offshore entities in the Ajman Free Zone.

Read more: https://www.commitbiz.com/ajman-offshore-company-formation.

Activities Restricted for Offshore Business in the UAE

  • The activities expressly prohibited under regulations are insurance, banking, and financial services. The Authorities will have the power to add other activities to the list of prohibited activities.
  • UAE Offshore Company formation is not generally permitted by the Regulations to carry on any commercial operations within the UAE.
  • Own an interest in real estate property located in the UAE except in the UAE's designated areas as approved by the authorities.

Exceptions for Offshore Business Formation in the UAE

  • Offshore Companies may own or rent real estate properties in the designated areas of the Emirates or any other real property allowed by the RAK Free Zone Authority.
  • An Offshore Company can also open an account in the UAE bank/s and operate such account/accounts.
  • An Offshore Company wanting to conduct a trade or any other business within the UAE free zones, or elsewhere in the UAE, must get a relevant license from the competent authorities. This exception to the rule would allow an offshore business wishing to conduct trade or business in the UAE to form or participate in a subsidiary in a UAE Free Zone or onshore UAE. After that, engage in UAE business following applicable Licensing regulations.

Do you want to Start an Offshore Company in the UAE?

Commitbiz Management Consultancy specializes in helping onshore and offshore companies in the UAE. We'll make sure that you're registered quickly and that all corporate obligations are adhered to. We also offer a range of value-added services to help your business to flourish. To learn more, get in touch with us today.