UAE Offshore Company Registration | UAE Offshore Facts

UAE offshore company registration is a very popular method of doing business in the Middle East region. One of the most important reasons for the popularity of offshore company registration in UAE is the facility to set up an offshore bank account in United Arab Emirates (UAE).

So it would be a good idea to discuss the general characteristics of UAE offshore company registration in this article before we go ahead with articles on offshore company registration in Dubai and RAK. This article would discuss the general characteristics, advantages and limitations of an offshore company registration in UAE.UAE Offshore Company Registration

What is an Offshore Company?

An offshore company is a legal business entity established in an offshore financial center or a tax haven, being protected by specific legislation which guarantees some special status for the offshore companies formed under the jurisdiction. An offshore company generally enjoys a status of full tax exemption and high level of privacy and security.

In United Arab Emirates, there are two offshore jurisdictions – Dubai and Ras Al Khaimah. They offer similar services but serving different strategic goals of offshore company registration.

Advantages of UAE Offshore Company Registration.

There are many reasons for UAE offshore company registration by the business community and professionals. As in any case, these reasons could be legitimate and legal or fraudulent and illegal.

The legitimate reasons for UAE offshore company registration include the following.

Tax Optimization.

The most popular reason for UAE offshore company registration is tax optimization. Tax optimization is the process of minimizing the tax burden through legally available means. While tax optimization is considered as a legal way of minimizing the tax pay-out, it is very different from tax avoidance. Tax avoidance is treated as illegal and criminal behavior by many countries across the world.

United Arab Emirates follows 0% tax rates. United Arab Emirates is a real economy with an open market policy that encourages fair competition. United Arab Emirates has signed Double Tax Avoidance (DTA) agreements with many countries across the world. This helps foreign companies to optimize their tax obligation through UAE offshore company registration.

Asset Protection.

High net-worth people and wealthy persons from high risk regions use offshore company as a vehicle to protect their assets and family wealth. An offshore company in this situation is being used as an instrument to shield their assets from potential unrest and restrictions in the country in which they live. An offshore company would work best if the assets are earned in a foreign country or has been expatriated over a significant time through legal and legitimate channels. Assets earned in foreign countries can be protected directly under the umbrella of the UAE offshore company or through an offshore bank account under the UAE offshore company.

Asset Holding.

Very often, large corporate  entities and conglomerates accumulate valuable assets as part of their operations. In order to protect the high risk assets from potential legal conflicts affecting the parent group, many holding companies are formed through UAE offshore company registration. High risk assets parked under such an offshore company offer better security.

Succession Planning.

Strict rules of heir-ship exist in many countries even in this era. Such rules limit the freedom in distributing the assets or deciding on the custodians of their wealth upon his / her death. As a result, people and corporate entities choose offshore companies elsewhere in the world to take advantage of the liberal heirs-ship provisions.   By keeping the high value assets under the UAE offshore company, and then having probate for the shares in the offshore determined by the laws of the offshore jurisdiction (usually in accordance with a specific Will or Codicil) the testator can sometimes avoid complexities in succession planning.

Ship and Aircraft Registration.

Aircraft and ships are often registered in offshore jurisdictions and financed by banks in onshore financial centers. This kind of an activity is very common when the finance provider has concerns over the regulations and the judicial systems in the carrier’s home country. UAE offshore company registration helps to register ship and aircraft under the offshore company.

Trading in Derivatives.

Trading in derivatives and other high risk instruments in the normal stock markets is a troublesome process due to the strict rules of the regulatory bodies. Wealthy people often set up offshore company as a vehicle to trade in such high risk investment instruments and transfer their earnings to the offshore bank account.

Exchange Control Trading Vehicles.

In countries where there is either Exchange control or is perceived to be increased political risk with the repatriation of funds, major exporters often form trading vehicles in offshore companies so that the sales from exports can be safely parked in the offshore bank account of the offshore company until needed.

Trade Financing.

Corporate groups often form offshore companies to enable them to secure financing and to treat the financing as Off-balance sheet under applicable accounting procedure.

Stock Market Listing.

Some of the best companies in the world could emerge from countries with poor or underdeveloped corporate laws. Corporate entities keen to raise funds or capital by listing their shares in the stock market do so by forming a company in one of the offshore jurisdictions. Underdeveloped corporate laws in the domestic market can also be a good reason to form an offshore company in UAE for joint venture projects.

Security.

An offshore bank account formed under an offshore company is considered as one of the most secured in the world. Information about the ownership of offshore bank accounts are not shared with any third party entities unless there are very special or unusual circumstances.

Limitations of UAE Offshore Company Registration.

  • They cannot carry on business with persons or legal entities resident in the jurisdiction of incorporation (United Arab Emirates in this case).
  • They are not allowed to own an interest in real property situate in the country of incorporation (there are exceptions to this point).
  • They cannot hold shares, stock, debt obligations or other securities in a local company incorporated under the ordinary Companies Act.

Types of Offshore Company Registration in UAE.

An offshore company can have any of the following legal structure depending on the jurisdiction under which the company is registered;

  • Offshore company.
  • Offshore partnership.
  • Offshore trust.
  • Private foundation.

The most popular group of UAE offshore company registration is the IBC or International Business Company, which exists in almost in all offshore jurisdictions, although sometimes under other nomenclature.

Who will Benefit from UAE Offshore Company Registration?

  • Companies with significant overseas transactions.
  • High net-worth individuals.
  • Professionals employed in foreign countries.

As discussed above, Dubai and Ras Al Khaimah are the pioneering offshore jurisdictions offering UAE offshore company registration. While Dubai started the offshore company registration in UAE for the first time, Ras Al Khaimah offers a much more economic option making offshore company registration in UAE much more competitive.

About Cross Border Business Consultants

Cross Border Business Consultants (CBBC) is a fast growing new generation business advisory firm head quartered in United Arab Emirates. Dubai Business Blog is the official blog of CBBC.

CBBC is a professional team of Management and Business Consultants in Dubai specializing in Company Registration in Dubai, Free Zone business registration, UAE Offshore company registration etc.

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