Clearing Myths About Offshore Company Formation in the UAE

by Zaara 16, Mar 2022

Clearing Myths About Offshore Company Formation in the UAE

The offshore company set up in the UAE has continued to offer a productive and prolific environment to the investors and business persons worldwide. Yet, it is still considered a taboo among a few, and they associate offshore companies with fallacies such as money laundering and secrecy of assets.

Most of the people assume that the offshore company formations are mainly done to disguise illicit money. This article has been drafted to tackle many such myths concerning UAE offshore company formation.

What is an Offshore Company?

An offshore company is known as a company incorporated in a jurisdiction other than where the beneficial owner resides. In other words, an offshore company is simply a company that is incorporated in a country overseas in a foreign jurisdiction.

Benefits of an Offshore Company

There are many benefits to opt for an offshore company formation in the UAE:

1. Taxation

A company can be structured so that profits are realized in ways that decrease their total tax liability.

2. Anonymity

The name of the underlying principle may be kept out of documentation by carrying out business operations in an offshore company's name.

3. International Trade

An offshore business would be a good pick for those who want to do international business along with other investments.

4. Property Transfer

When the owner sells the property; the authority may charge a certain percentage of its value. This transfer fee can be easily avoided by selling the business itself.

5. Multiple Investors

Very few property developers around the world permit for more than a single property owner. In the case of an offshore company in UAE, however, the number of shareholders can be 1-50, and the company owns the property.

6. Bank Account

Many of the MNCs and local banks operating in UAE provide offshore corporate bank accounts.

7. Economic Stability

There is the availability of standard banking system, flexible legislative framework, latest telecommunication facilities, and simple incorporation & filing requirements for offshore companies.

Five Myths Concerning Offshore Business Formation in the UAE

Here are some of the most common myths about an offshore business that people might have.

Myth #1 - Offshore Business is Illegal

This is untrue. Offshore business is a highly legal and regulated industry in many jurisdictions. In essence, an offshore company is an entity that does not conduct business activities in the country it was incorporated. Many large corporations own offshore subsidiaries and book profits overseas to minimize tax and retain more funds for re-investments legally.

For example, Apple owns many companies in low-tax jurisdictions such as Nevada, British Virgin Islands or Luxembourg. The company CEO, Tim Cook, said in an interview that they would not repatriate their funds to the U.S unless they receive a more favourable tax rate from the government.

Myth #2 - Offshore Business is Set up to Evade Tax

The myth is that you can evade tax by setting up an offshore company, which is false. Without a doubt, starting an offshore business is tax-efficient, and offshore company formation in the UAE offers tax avoidance. Meaning it decreases your overall tax liabilities as promoted by the law. However, there is a difference between tax evasion and tax avoidance. Evasion of tax means an illegal activity, wherein you do not pay the tax that you owe to the government.

Myth #3 - Offshore Companies Perform Illegal Activities

This myth does not make any sense. There is no proof of any offshore company formation involving themselves in child abduction, and there is no link between the two. Discussing the very idea is like a waste of precious time and effort. There is another similar rumour that terrorists, criminals and drug lords own the offshore companies. This is not true; ordinary people are the owners of offshore companies looking to start a business without running through the uncomforting abilities of the country's unusual rules and the unfair things that companies have to follow.

There are global laws for both IBCs and LLCs that dictate that offshore businesses in the Middle East cannot participate in:

  • Extortion
  • Prostitution
  • Assassinations
  • Drug Trafficking
  • Trafficking of any sorts

Myth #4 - Offshore Companies are Costly Setup

All companies are costly to an extent to incorporate. The cost of building or renting a place to run the company and the cost of officially registering the business are some of the bills that a business owner has to pay regardless of whether they open a company in their own country or another country. You will most likely have to pay the same amount of cash for an offshore company set up as a company that is set up in the same country.

There are just three necessary steps involved in setting up an offshore business in the UAE -

Myth #5 - Offshore Business is the new Fad

Although the term "offshore" recently attracts a lot of media attention, it has a long history and is nothing new amongst international business owners. Some writers claim that offshore activity began as early as over 200 years ago.

Traditionally, the main difference is that due to limitations in transportation and communication systems, such activities and opportunities are only available to large corporations with deep pockets. However, nowadays, anyone can own an offshore business. This is mostly thanks to the Internet and advanced global banking system. It is now much more comfortable and cheaper to conduct business remotely.

Also, there is a surge of location-independent business start-ups such as web design, content creation and business consultancy. An offshore structure brings about lots of benefits.

Set up your Offshore Company in Dubai Today!

Indeed, Dubai is one of the most ideal and unique places for opening an offshore company. Specifically, freezone company formation Dubai allows people to start an offshore company and contribute to business growth and success in the best possible manner. In this way, you will grow and expand your business in the best possible manner.

If you are wondering how to start an offshore business in the UAE, we at Commitbiz can assist you. Get in touch with us today!

Start your Entrepreneurship Journey Today in UAE at AED 5,500

Commitbiz will help you with every step of your success journey. You can get one-on-one mentorship from our experts and get guidance on how to clear the legal proceedings and grow your business.

Know More