Is Offshore Company illegal? Bursting Myths

by Zaara 16, Mar 2022

UAE offshore companies have offered investors from around the world a fruitful and prolific climate. Yet, individuals equate offshore businesses with such fallacies as money laundering and asset confidentiality. 

UAE is undoubtedly one of the most ideal and incredible places to start an offshore company. Assumptions say that formations of offshore businesses are done to conceal an illegal income. However, the facts are different. 

The government takes strict steps to eliminate any such operation that the respective offshore companies note. UAE enables individuals to establish an offshore company and contribute to business growth and development in the best way possible. Keeping all this in mind now let’s bring out the myths.

UAE – An offshore Money Laundering Place? 

UAE offshore companies have offered investors from around the world a fruitful and prolific climate. Yet, individuals equate offshore businesses with such fallacies as money laundering and asset confidentiality.

Financial Action Task Force

  • The UAE government has appointed a 'Financial Action Task Force' for surveillance of offshore companies. 

  • It is a governmental body headed by the Federation's National Council and deals with money laundering and terror financing. 

  • With massive fines and long jail terms in the UAE, the committee aims to create a clean and uncorrupted economic environment.

Offshore Company Scam, Offshore Illegal Activities – The Most Heard words

There is a common misconception that offshore business is a scam. The setting up of an offshore company may affect the country’s economy as a whole, but only when its taxes and laws are unforgiving and unreliable for a business owner. It should be the government’s responsibility to properly implement regulations that favour both the business and the country. 

Those words that spread in the air about offshore companies not being trustworthy are not backed up by any source. Apart from this, it is to be told loudly that companies offshore are not built for illegal activities. 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. Little do they know about the tons of benefits of offshore company

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

Offshore Tax Evasion – Know in Detail

It is a prevalent misperception that starting an offshore company will allow you to avoid paying taxes. This is not the case. The benefits of establishing an offshore business are undeniable, and forming an offshore company in the UAE allows for tax reduction. As a consequence, as the law promotes, it minimises your overall tax obligations.

However, there is a huge 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.

  • Tax avoidance is reducing your tax legally

Each jurisdiction has its unique set of tax regulations. Each country has its own set of regulations that allow businesses to avoid paying taxes. Due to the size of these businesses, they must first meet the criteria in order to pass the no-tax screening. 

In certain cases, some stages of forming an offshore corporation entail paying a specific sum of the tax to the government. No matter how good or bad they do. Large firms frequently possess it since they control a large portion of the market. It's because, in contrast, the more powerful the service, the lower the flat tax rate seems.

How Can We Help?

After you decide to start an offshore company, it would seem like a maze and sometimes you may be lost. There is where we, Commitbiz, as a skilful consultant come into the picture.  We give you full assistance in offshore company registration in UAE

With your incorporation, you will be able to move freely in the Dubai economy with business setup services provided by us, to set up your own offshore company, Contact us.


Can I evade tax by forming an offshore company?

No, you can not evade tax, you can reduce your tax.

Are offshore accounts public?

No, it offers utmost privacy and cannot be accessed.

Are offshore accounts safe?

Unless and until you start offshore in a  country with a stable economy, you do not have to worry about safety.

How do offshore accounts avoid tax?

By investing in a country with fewer to no income tax regulations, you will be able to reduce or avoid your tax.

Why is there no tax for offshore companies?

As the company does not operate inside the country of incorporation, it does not generate any revenue inside the country and therefore the corporate tax for offshore companies is majorly 0% or the minimum percentage decided by the government of the company.