Choosing the Best Offshore Zone in the UAE: Advantages, Companies, Business, Accounts

This article discusses in detail what is good about Offshore Zones in the UAE, the opportunities they offer, free economic zones, and the forms of offshore companies to choose for your business needs.

Please note that UAE offshore incorporation requires an agent. We offer services in business  registration and development in the Offshore Zones and across all free economic zones in the UAE.  We also offer to open bank accounts in any UAE bank for foreign private persons, as well as for foreign and local companies.

Reasons for choosing the UAE as the best offshore destination 

We recommend the UAE as the first choice for anyone wishing to find an effective solution outside the EU or its sphere of influence. This solution will help you avoid the risk of your bank deposits being cut off, as has been the EU practice with Cyprus. Besides, you will be protected against all sorts of sudden amendments in the taxation policy. In other words, you will not be vulnerable in the face of new perils typical of many other jurisdictions nowadays.

The UAE offers full protection of beneficiary owners’ data confidentiality and banking secrecy. The UAE is the only jurisdiction that is not part of information-sharing agreements with other countries. 

If you decide to open a company in the UAE, you will certainly appreciate all the available options. Our experts offer the following tips: 

• You can choose between starting offshore companies and Free Zone companies.
• You can obtain residency for several years. For example, you can get the investor visa at a minimal cost.
• You can move to the UAE for permanent residence in the top-class international business hub and enjoy its minimal or zero-rate taxes for businesses, and other advantages, including the permission for problem-free and unconditional repatriation of capital.

The UAE is home to many free economic zones for companies that need reasonably priced production and storage facilities, also residence permits for staff, and benefits of double taxation agreements.

The 2 leading Free Zones where you can register offshore companies are: Jebel Ali Free Zone (JAFZ) and Ras Al Khaimah Investment Authority (RAKIA). 

Offshore companies are set up as acting or holding companies. They can develop any business, except for insurance and banking. They can operate only outside the UAE. Such entities enjoy tax exemption, solid reputation, and other benefits provided in this stable financial center. 

Key advantages of offshore incorporation in the UAE are as follows: 

• a gateway to international markets 
• no import and excise taxes in Free Zones
• no personal income tax
• no sales tax, wealth and capital tax
• 100% foreign ownership is possible
• full repatriation of profits is allowed
• no policy shifts or new restrictions   
• full confidentiality of beneficial owners’ data stored in banks and agencies, no information exchange agreements with other countries
• operational freedom
• benefits of double taxation agreements
• low setup costs
• attractive real estate investment options.

How to take advantage of Offshore Zones in the UAE 

The UAE maintains over 100 double taxation treaties and is often called the “Switzerland of the East”.

The Emirates of Dubai (in which JAFZ is located) and Ras Al Khaimah are not tax havens, but are recognized as large powerful international financial and business centers. They offer significant incentives to investors, many of whom chose a real presence with property and staff in the UAE Free Zones.

A company with an account with any UAE bank may be a perfect solution for asset protection and wealth accumulation in an anonymous and secure manner.  

You can open in any of the UAE Offshore Zones an offshore parent company for firms registered in Cyprus, Malta or another country. It will accumulate dividends on its bank account..

It is also possible to start an offshore limited liability company to provide services to companies in Cyprus or Malta or another country. It will invoice them and collect revenues in Dubai.

You can set up in some Offshore Zone in the UAE an agent acting on behalf of and collecting payments from a company in Cyprus, Malta or another country.

Another option is to form a Ras Al Khaimah company’s branch or a tax office (VAT representative office) in Malta or Cyprus and register it in the European VAT base, to trade goods across the EU (without transactions in Malta or Cyprus) while enjoying zero-profit-tax in Malta, Cyprus, and UAE. 

Moreover, Ras Al Khaimah offshore companiesare useful for an investment portfolio, for property and real estate transactions, for holding companies, for royalty, for transportation, and many other activities.

Basic facts about the Free Zones in the UAE 

The UAE Free Zones serve as the regional economic growth drivers and magnets for  foreign investors looking for business-friendly environment where they could conduct various transactions, set up companies, and develop business. To this end, the Free Zones have built the unparalleled infrastructure, provide many encouraging solutions, including multi-year visas for foreign investors and their employees, the freedom to trade internationally and with companies in the Free Zone of their incorporation, as well as in other UAE Free Zones. They allow 100% foreign ownership, and there is no import or export duty. 

On the other hand, the Free Zones help to regulate this fast-growing market and protect it from international fraudsters. 

In most of the Free Zones it is possible to register only Free Zone (onshore) companies, whereas in 3 Free Zones it is also possible to register offshore companies. These zones are: RAK International Corporate Centre (RAK ICC), Jebel Ali Free Zone, Ajman Free Zone.

Offshore companies set up in the UAE Free Zones can trade within the UAE only under certain conditions. 

Recently, foreigners have been allowed to own freehold property in special designated areas.

The UAE has the Federal legislation that applies to all seven Emirates and is more important than the law of each individual Emirate. Besides, all Emirates maintain their own internal laws and regulations, that may differ from the UAE laws. Each particular Free Zone has its own laws, but they are quite similar across all Free Aones. For example, the Dubai International Financial Centre (DIFC), which is a Free Zone specialized in financial services, has the English law as its main law, particularly geared for financial activities.

Types of companies registered in the UAE Offshore Zones

When registering onshore companies ub a Free Zone, the following types of companies can be chosen:

• Free Zone Companies (FZCO)
• Branches of foreign companies or companies from other Free Zones
• Free Zone Establishments (FZE) — single-owner companies.

The costs of registering a company are different in different Free Zones.

Choosing the right/ the best type of company to register in the Offshore Zone in the UAE

A very popular option is to register an offshore company, for example, in Ras Al Khaimah, and then use it as a holding company to be able to own companies in the Free Zone. The benefits of this approach are: anonymity, the investor visa for 3 years, the status of a tax resident company, advantages of DDTs.

Advantages of setting up a Free Zone company compared to opening an Offshore Zone company

A Free Zone company has the following advantages over an offshore company:

• The investor visas for 3 years for each investor plus his/her dependents, residence permit for managers and staff.
• Tax residency status with access to double taxation treaties, the tax residency certificate.
• A fully operational business with a formal status of an economic entity, its real physical presence with premises, employees and equipment. This is very good in terms of tax planning because. On the other hand, a Flexi-Desk office or a virtual office for a lower annual cost of about 1,000 euros per year can be a quite reasonable option. 
• Access to the well-established Free Zone market with state-of-the-art infrastructure and a community of similar companies. It is possible to choose a Free Zone specialized in a certain economic activity type matching your business profile. For example, a media company can be registered in the FEZ “Media City”, where there will be hundreds of other companies from the same sector. This opportunity is much better than renting an address somewhere in an empty apartment in Malta or Cyprus.
• If you decide to resettle from Europe to Dubai you will be entitled to many perks, including the legal right not to pay taxes.

Types of activities allowed in the Offshore Zone in the UAE

Companies in the UAE are different from companies in Malta and Cyprus, where the Articles of Association and laws allow for many activities in one company. The licensing situation in the Emirates is as follows:

• Free Zone companies must obtain a specific business license for each type of activity, for example, a license for construction is different from a license for trade.
• Any Offshore zone company is allowed to conduct multiple activities. Please note that the following activities are prohibited for offshore companies: financial activities, aviation activities, media activities, work with precious metals, work with oil and gas. The permitted activities are: business consultancy, management consultancy, general trading, holding activities and shareholding in other companies in the UAE or abroad, freehold ownership in the UAE.

Restrictions on trade inside the UAE and on ownership of shares of Free Zone companies and Offshore Zone companies in the UAE

Any company with a trade or manufacturing license is allowed to operate only within the Free Zone of its registration or abroad.

To be allowed to trade products in the UAE, the following requirements must be met:

• a contract with a registered agent 
• a 5% import duty payable on imports into the UAE
• registration of a Limited Liability Company in the UAE outside Free Zones.

Free Zone companies may trade with other companies within the zone of registration, with companies from other zones, and with foreign companies in the international market. They are not allowed to trade within the UAE (onshore) zone.

The UAE offshore and free-zone companies can own shares of other UAE companies, Free Zone companies, and offshore companies.

The restrictions applicable in the UAE Offshore Zone to offshore and Free Zone companies do not apply to their foreign subsidiaries, as they are not subject to UAE regulations, they may operate freely under the laws of another country.

Bank accounts setup for companies registered in the Offshore Zone in the UAE

When opening an account in Dubai or Ras Al Khaimah, the easiest and fastest option is to register a new company and simultaneously open a bank account if the beneficial owner is a private person. This is better than having it registered as a subsidiary of a foreign company, in which case you would have to make changes after its registration.

Current accounts and private accounts allow unrestricted funds transfer and cash withdrawal.

Opening accounts for offshore and Free Zone companies is problem-free, inexpensive, and fast.

Personal bank accounts setup is also not difficult, but the client will have to attend an interview with the bank in the UAE in person.

Obtaining a bank account for foreign companies (from British Virgin Islands, Seychelles, Cyprus or Malta) takes much more time and is more expensive (because of the fees for verification/notarization of documents).

Choosing a bank in the Offshore Zone in the UAE

A good choice would be a reputable local bank. To be sure of the banking secrecy, choose the one which does not have a major presence in the EU. Otherwise, it will be under pressure, as foreign banks register transactions in the EU and are obliged to exchange information. You are welcome to refer to our experts for help in selecting the right safe bank that will meet your needs and ambitions.

Privacy of beneficial owners’ data in the Offshore Zone in the UAE

Ras Al Khaimah does not require disclosure of ultimate beneficial owners’ data. This is an important reason to opt for Ras Al Khaimah. In Jebel Ali, Dubai, the Governing Authority requires a bank reference letter made in the name of the ultimate beneficial owner.

Banks may still be required to disclose some details, but they do not have information exchange agreements.

Reasons to choose the Ras Al Khaimah Offshore Zone in the UAE

Offshore regime in the RAK is one of the best ones in the UAE, as it guarantees you full confidentiality: you will not be required to submit the data about the ultimate beneficial owner to the Governing Body of the Free Zone. The RAK has the minimum number of rules and restrictions. It is possible to enjoy maximum flexibility, as the zone is designed to support the growth of this developing Emirate. The cost of offshore registration is lower, and the procedures are simpler and faster.

However, in some cases, for commercial reasons, it is still better to choose another Free Zone, as all Free Zones are specialized in certain types of business activities. So you should choose the one which matches the type of your business. For example, hedge funds should be registered in the DIFC, and the DMCC zone is best for gold trading business.

Limitations for investors in the Offshore Zone in the UAE

Islam forbids gambling in any form. Therefore, forwards, derivatives, futures, and options are banned. Other prohibited practices include short sale, margin trading, and scalping trade. Highly liquid securities typically have a multi-day settlement period during which the underlying instruments are not formally registered in the buyer’s name.

Since overnight traders do not wait until the settlement period is over, they use the type of credit cushion provided by their broker. Same-day traders also quite often rely on a margin account to fund their trading activity.

Paying or receiving interest are qualified as loansharking and unfair practices.

It is not allowed to pay a fixed or guaranteed return on capital. Instead of borrowing and lending, Islamic finance is based on shared ownership of assets and therefore shared risks, profit and losses.

Companies engaged in prohibited activities cannot be part of the Shariah Strategic Fund. Prohibited activities may refer to food, such as the production and sale of alcoholic beverages, this includes pubs and restaurants, pork products, tobacco products, gambling, such as casinos, online gambling, sweepstakes, lotteries, adult materials such as videos, magazines, strip clubs, online materials, suspicious, immoral, and illegal trade, such as prostitution, drugs.

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