Set up an offshore company in Dubai

Setting up an offshore company in Dubai: A guideline

Terms such as illegal tax evasion and money laundering are often associated with offshore companies, which is why many people are skeptical of an offshore company at first glance - wrongly. In fact, offshore companies are in most cases used for reputable business purposes and are also a good way to protect your own assets. Especially in Dubai and the rest of the UAE.

That is why you will find out below how you can set up an offshore company, what advantages this entails and what other things you should consider when setting up a company.

Table of contents

The most important things in brief
What do you understand by offshore companies?
Benefits of an offshore company
Security against access by creditors
Tax benefits
bank account
flexibility
Discretion and anonymity
Facilitating international business
Disadvantages of an offshore company
Ineligible business licenses
Trade restrictions outside the UAE
Restricted purchase of real estate
Is an offshore company right for me?
Founding an offshore company: That's how it works
How much does an offshore company cost?
Start-up costs
Annual renewal fees
additional services
Comparing Offshore, Freezone and Mainland
offshore company
Freezone company
Dubai Mainland company
conclusion
FAQ
Is an offshore company legal?
Which corporate structures can be established as an offshore company formation?
Is there a minimum investment capital for offshore companies?
Is an offshore company the same as a company in a freezone?

The most important things in brief

• An offshore firm is referred to as a company that is established outside of the actual owner's home country.
• It is used for the purpose of asset protection, tax optimization and privacy.
• However, contrary to all prejudices, the offshore company is a legal legal form.
• However, a key disadvantage of the offshore firm is that no trading licenses can be issued to them.

What do you understand by offshore companies?

An offshore company is a company that is founded far away from the coast (in English: off the shore). In a figurative sense, this therefore means that a company is located outside the actual owner's home country.

However, a key feature of offshore companies is that they are usually based in countries that are known as tax havens. Because in these countries, there are many tax breaks and a jurisdiction that promotes asset protection and privacy.

But what is an offshore company needed for anyway? Basically, offshore firms are used for asset management, international business and sometimes to minimize tax burdens.

Benefits of an offshore company

There are many reasons why you should choose to set up an offshore company — whether you're acting as an individual or as an owner of a legal entity. These include:

Security against access by creditors

With an offshore company, you can protect your assets from various legal claims and creditors due to their legal liability veil.

Tax benefits

Many offshore jurisdictions have low or no corporate income taxes, which is why such a legal form is particularly interesting in those countries where there are high tax rates.

flexibility

As an investor, you do not have to have a physical place of business in the state of incorporation when setting up the offshore company. This gives shareholders greater flexibility.

Discretion and anonymity

Thanks to the special jurisdiction, an offshore firm offers a higher level of anonymity and data protection. This may be of interest to you if you're looking for discretion, whether for personal reasons or to maintain competitive advantages.

Facilitating international business

Offshore firms can make it easier to carry out international business by acting as central units for various activities, such as trade, investments, or intellectual property management.

Disadvantages of an offshore company

Offshore companies can be beneficial in many ways, but they also come with a few drawbacks that you should consider when setting up:

Ineligible business licenses

Offshore companies are, in a sense, equated with a “paper” company, especially in the UAE. This means nothing else than that the company is wholly owned by foreign countries. That is why you are not entitled to business licenses or a business license with an offshore company.

Good to know: Offshore companies are allowed to open bank accounts in multiple currencies. This not only enables you to make international business transactions, but also protects your money.

Trade restrictions outside the UAE

The business activities of an offshore company are limited to a few trading activities. This includes:

• online advertising business
• shipping businesses
• International trade
• General trade and distribution
• Operation of service centers

In addition, you may not work in the insurance, media or aviation sectors or conduct business transactions with other companies in the Middle East.

Restricted purchase of real estate

In principle, you are allowed to purchase real estate with an offshore company. However, this only applies if you and your company are based in the RAK International Corporate Centre or in the Jebel Ali Free Zone.

Is an offshore company right for me?

Setting up an offshore company comes with a number of advantages. These include, for example, a lower tax burden and administrative expenses, which primarily benefit consulting companies. But how can you decide for yourself whether an offshore company is the right choice of law for your project? If you work in e-commerce or as a freelancer, for example, you will not incur any tax charges. As a stock trader, on the other hand, you do not have to pay corporation tax and can only expect minor deductions. If, on the other hand, you are thinking about your descendants, an offshore company is a good option for inheritances. Because with this legal form, inheritance taxes are waived or reduced significantly.

As is so often the case, however, it depends on the individual case, which is why it is recommended that you ask a question like this to consult experts.

Founding an offshore company: That's how it works

If you have decided to set up an offshore company in Dubai, you will go through the following incorporation process:

1. Choosing an offshore jurisdiction: In order for you to set up an offshore company, you must first choose the place of jurisdiction. The Ajman Freezone, the Ras Al Khaimah International Corporate Centre (RAK ICC) or the Jebel Ali Free Zone (JAFZA) are available. We also recommend that you contact one of our experts from EXTENT for further action.

2. Company name and application: After you have decided on a jurisdiction, we submit your company name to local authorities for you as our client. If you choose a company name, keep in mind that your company must include the addition “Limited” or “Ltd.” so that you can be legally identified and marked as an offshore company. We will also process your application to set up a company and submit it with the necessary documents. To do this, we need from you:

• A copy of the offshore company's articles of association
• Passport copies and CVs of registered shareholders
• Relevant Emirates' identity cards
• A comprehensive business plan
• A certified copy of the latest account statements (6 months must be documented)
• Proof of address for a utility company's bill
• 3 possible brand or business names for the company
• Details of the company's operations

Everything else is then taken care of by the authorities.

How much does an offshore company cost?

How much you have to put in your hands to set up your offshore company depends largely on the nature of your company and the services you offer, as well as on the location of the jurisdiction where you plan to establish yourself.

In principle, however, it can be said that the costs of setting up a company consist of the following factors:

Start-up costs

When setting up your offshore company, you should factor in at least 8000 AED just for setting up yourself. These costs generally include all registration fees and costs for legal structuring. There may also be costs for the service provider that you have consulted to set up the company.

Annual renewal fees

It is not uncommon for offshore jurisdictions to charge an annual fee to keep your company registration valid. However, how much this fee is depends on the particular location where you have settled.

additional services

Setting up a company involves not only the costs of applying and registering. You will also have to pay various additional costs. These include, for example, costs that may arise as a result of using a lawyer or tax advisor. The same applies if you open a bank account as part of setting up your company, for which you usually have to pay not only opening fees, but also a minimum balance, which you must deposit upon opening.

Basically, it can therefore be said that setting up an offshore company costs you several thousand AED. At this point, it should be mentioned again that you should also consider the legal requirements and differences as well as all possible tax consequences in the UAE and in the respective offshore jurisdictions.

Comparing Offshore, Freezone and Mainland

In Dubai and in the UAE in general, you have the option to choose between different legal forms. One of them is offshore. However, there are two other important legal forms that are often confused with those of offshore, which is why the differences are briefly discussed:

offshore company

An offshore company is defined as a company that is not founded and is based in the actual owner's home country. This legal form comes with some privileges, such as increased anonymity and data protection. However, the offshore legal form is primarily used to protect one's own assets from access by creditors.

Freezone company

A free zone is a designated area that is not subject to trade barriers, which makes it much easier for entrepreneurs to set up their company here. In concrete terms, this means that entrepreneurs who set up a company in a free zone can more easily transact transactions and may also own foreign property without the need for an additional local sponsor.

Dubai Mainland company

A Mainland company is a company that is founded on the mainland of an Emirates. This legal form is therefore particularly suitable even if you plan to sell both products and services within the UAE. The Mainland company is therefore also comparable with a German GmbH.

conclusion

Offshore firms are companies that are established outside the owner's home country, but usually in tax havens. They offer various benefits, such as protection from creditors, international bank accounts, flexibility and data protection. However, there are also disadvantages such as restricted business licenses and trade restrictions.

However, setting up is an advantage if you plan to protect your assets and place great value on discretion and anonymity. However, how much you pay to actually set up your offshore company depends largely on your desired location.

If you have any questions about setting up a company and choosing the appropriate legal form, our team of experts at Extent will be happy to help you.

FAQ

Is an offshore company legal?

Yes, an offshore firm is legal. Because even though offshore companies are in some cases associated with illegal activities such as money laundering or tax evasion, the legal form itself is completely legally compliant. For example, offshore companies are often used for asset protection, risk management, inheritance planning or legal tax optimization. The only important thing is that the offshore company's business activities comply with the laws and regulations of the UAE, but also with the country in which the owner is based.

Which corporate structures can be established as an offshore company formation?

• Limited Liability Companies (LLCs)
• limited liability companies
• limited partnerships

Is there a minimum investment capital for offshore companies?

In principle, you will incur costs of at least 8000 AED when setting up a company. However, no minimum capital is provided for in addition. This is thanks to the updated company law from 2009. According to this legislative amendment, offshore companies can determine the share capital of their limited liability company themselves. That means there's no strict requirement to prove your start-up capital before starting your business.

Is an offshore company the same as a company in a freezone?

No As mentioned earlier, an offshore company differs from a freezone company in a few ways. The most important difference, however, is that a freezone company receives a trade license to do business in the UAE. That is not the case with an offshore company.