[ Updated in February 2020 ]
An offshore company in the UAE free zone – what is it?
Free economic zones in the United Arab Emirates are special territories with specific rules apply to foreign investors. Since there is no clear definition of the term “offshore zone” or “tax haven” in the world, many people think that since there are no taxes on the income of companies and individuals in the UAE (for almost all categories), the whole country is one big tax heaven. But in fact, this is not true. Here, offshore companies (International business companies – IBC) are those registered as foreign tax residents. In most free zones, one can register the so-called “free zone firm,” or “onshore firm.” Only three jurisdictions in the UAE register IBCs: JAFZA, RAK FTZ, and Ajman Free Zone.
Offshore free zone firm means the legal entity registered in free zone, but, unlike an onshore free zone company, all the activities of this legal entity must be conducted only on the outer markets (except for the purchase of real estate in the UAE (JAFZA) and holding of shares of other firms in the UAE). Offshore company in the UAE free zone can have a bank account in the UAE, but cannot have a physical office space or other premises in the United Arab Emirates. It does not provide the option to receive residency visas in the United Arab Emirates over such a firm either.
The advantages of an offshore company in Dubai, UAE. Why register?
Nowadays, the United Arab Emirates is one of the most popular and attractive jurisdictions for setting up an IBC. The advantages of the offshore company formation in Dubai, UAE compared to other offshore jurisdictions around the world are as follows:
- No taxation on any business activities performed outside the United Arab Emirates.
- No audit required after the business setup.
- Minimal time periods for offshore company registration in Dubai, UAE (typically 3-7 days).
- It provides the highest level of confidentiality (all the information about a director and shareholders is confidential).
- The business incorporation process does not require a director of an IBC in the United Arab Emirates to be of particular citizenship. This can be a nominal position.
- Effective assets protection mechanisms for offshore setup in the UAE.
- The UAE, unlike classical offshore jurisdictions, never appears in any blacklists of tax heavens, which means that when working with foreign banks, you will never face such unpleasant situations as payment blocking and refusal.
Despite the ever-changing fiscal policy in respect of offshore companies in many states lately, the incorporation of an IBC in the United Arab Emirates ensures a high level of confidentiality and anonymity of your business and that owing to the stable and reliable politics in the United Arab Emirates.
Offshore or onshore registration?
There is no universal answer to this question. Both of these legal entity types have their advantages and limitations. The optimal solution depends on your priorities. Let's take a look at the main features and differences of an onshore firm and an IBC setup in the United Arab Emirates.
Table 1 – Comparing offshore and onshore companies
| Free zone (onshore) firm | Offshore company (International business company – IBC) | |
| Full foreign ownership | Yes | Yes |
| Limitations on citizenship or residency of company shareholders and directors | No | No |
| Corporate tax rate | 0% | 0% |
| VAT rate | Generally – 5% (in some cases – 0%) | 0% |
| Bank account in the UAE | Yes | Yes (not in all the banks) |
| Residence visas for director and employees | Yes | No |
| Business operations in the UAE | Within a free zone | No |
| Office and other premises | Yes, in a free zone | No |
| License | Yes | Not required |
| Annual audit | Yes | No |
| Incorporation cost | Higher (Starting form $8,500) | Lower (Starting from $2,500) |
| Limitation on capital withdrawal | No | No |
| International business operations | Yes | Yes |
In case you need the most cost-efficient solution, residency visas and office in the United Arab Emirates are not required, and all activities are supposed to be outside of UAE – offshore company incorporation is the best solution for you. In case you are interested in the local market, need residence visas local office and personnel – onshore company setup is for you. In any case, you can contact our consultant who will help you to make the right choice in your particular situation.
Offshore company setup in Dubai free zone. How it goes?
The complete process of offshore company formation in Dubai, UAE, goes as follows: you collect all necessary documents and pay the mandatory registration fee. The registration process can take 3-4 days on average, but in some cases, the express registration of 48 hours is possible. Offshore company registration in Dubai, UAE, requires the mandatory involvement of a registered agent. Our consulting firm has a license and the status of a registered agent, we can help you with complete registration from A to Z. All it takes is to contact our specialists, and we will provide all the necessary information and provide the registration services. The service package for offshore company registration in the UAE and administration includes the payment of government fees, a full set of incorporation documents, registered agent fees and an officially registered office. In addition, we can provide support in the account opening process in UAE, additional administration services registration of trademarks etc.
Here is a typical sequence of actions for you to register an IBC in the UAE:
- Call us or send us a request that you wish to register offshore free zone company,
- We send you the additional details you may require on the UAE offshore company, price quote, and company order form.
- Send us backfilled order form together with copies of the required documents. Typically includes Passport copies of shareholders and directors, bank recommendation/reference letter, confirmation on the resident address of shareholder– utility bills, the statement from the account with residential address.
- We prepare the company documents, and you can sign them and send us over post or visit our office for signing the forms in person.
- As soon as we have all the required documents, the payment for the company incorporation and the documents required for offshore company incorporation in Dubai signed by you we file the UAE offshore company to the firm registry and the IBC is ready in 3 to 5 business days, express registration – 48 hours.
- The documents needed to open an offshore company in a local free zone can be sent by post or collected in our office by you or your empowered representative in person.
Every offshore company opened in the United Arab Emirates must have a registered agent as well as the official registered company’s address. Our consulting firm acts as an agent since it is duly registered and has the legal status of the registered agent for IBCs and has a fully operational office in UAE.
Offshore bank account in the UAE
Opening an offshore bank account in the UAE takes a couple of days in some banks, which means you can open an offshore company and get the bank account in about 1 week in total.
We should note that not all banks work with offshore companies. So, as of 2019, three large local banks work (open and maintain accounts) with offshore companies registered in the United Arab Emirates: Emirates NBD, Mashreq Bank and Abu Dhabi Islamic Bank (ADIB). They all have rather strict requirements for the current balance on the accounts of an offshore company:
- Emirates NBD – the monthly account balance of an offshore company opened in the UAE, should be at least 500,000 dirhams (137,000 USD) for the first 3 months, after which you can switch to a package with a minimum balance of 200,000 dirhams (55,000 USD);
- Mashreq Bank – the average monthly balance must be at least 150,000 dirhams (42,000 USD). Besides, the shareholder must prove the presence of the same business in the country of his/her citizenship.
- Abu Dhabi Islamic Bank (ADIB) - the balance on account of an offshore company opened in the United Arab Emirates must be at least 50,000 USD.
It is important to remember that if the minimum balance requirement is not met, a bank may block your account.
Frequently asked questions
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Do I have to come to the UAE for an offshore company setup in Dubai?
The complete offshore company formation in Dubai will be completed when you provide all the required documents, and your signature on the documents needed for offshore company formation in the UAE would be duly certified. Therefore you must come to the country for at least 1 day. -
Is it possible to open a bank account for a UAE offshore company abroad?
Yes. The corporate bank account can be opened both in the United Arab Emirates bank and abroad. -
Can an offshore company lease a real office in the UAE ?
No. This is one of the main limitations of this type of business. Is it not allowed to have any real office within the United Arab Emirates. It must have a registered address, but this is the address of the company registered agent. -
Are there any guarantees that your company would manage to register UAE offshore company for me?
When ordering an offshore company setup in the UAE, you sign the company order form with all the details of your situation, which we would also co-sign as well as issue the invoice with detailed info on your order. These two documents provide a clear legal basis for you as the customer on our obligations to incorporate your company within the parameters chosen by you.
