An offshore Company is a process of establishing a lawful business in an offshore financial center or under a specific legislation that make sure to provide special consideration and status to the offshore companies formed under its jurisdiction. It generally enjoys tax exemption and a high level of privacy and security.
An offshore Company owned by a single person can be selected to treat as a not liable entity for income tax purposes, which makes it absolutely free from income-tax.
Offshore investment refers to investing one’s money in a country other than one’s own country of residence. Offshore investments are a commonly accepted solution for reducing excessive tax burdens. The advantages are, it is legally recognized, considerably less expensive and simple formation norms. Besides, tax benefit is the driving force behind offshore activity.
OFFSHORE AUTHORITIES IN UAE.
Presently there are four offshore authorities through which offshore entities can be incorporated in UAE. The Emirate of Dubai offers offshore company registration in the Jebel Ali Free Zone Authority (JAFZA) domicile.
The Emirate of Ras Al Khaimah (RAK) has two offshore domiciles. The Ras Al Khaimah Free Trade Zone (RAK FTZ) and the Ras Al Khaimah Investment Authority (RAKIA).
Ajman offers offshore company registration in the Ajman Free Zone Authority (AFZA)
JEBEL ALI FREE ZONE OFFSHORE
JAFZA offshore is the only offshore authority accepted by the Dubai Land Department for registration of properties in Dubai. Incidentally one may also own property through any UAE free zone or local Company.
JAFZA is one of the few offshore jurisdictions that also issue Dubai Certificates of Origin and allows invoices for shipments.
All the shareholders and Directors are required to be present at the time of registration of offshore entity, where as it is not mandatory with other offshore authorities.
The bank accounts for JAFZA offshore companies can be opened in a wider choice of banks compared to other offshore companies.
Documentation requirements are more elaborate. Owner’s personal, academic and other details are required. Also a security approval will be sought by JAFZA, before providing sanction for offshore company registration.
The selection of relevant offshore authority is done by keeping ones business target in the mind. Decision based merely on cost of incorporation may be short sighted. A more prudent approach will be, to discuss the advantages and disadvantages of different domiciles with an offshore company registration agent who will be able to provide appropriate advice.
RAS AL KHAIMAH FREE TRADE ZONE OFFSHORE
RAK FTZ is the most economical offshore authority in the UAE. However the processing time for completing registration formalities are high when compared to other authorities.
RAK FTZ allows using the acronym “Ltd” and “Inc” suffixes along with the names of the offshore Company.
RAK FTZ is one of the few offshore authorities in the world that allows Bearer Shares.
The personal presence of all the Shareholders and Directors are not required during registration.
RAK FTZ companies are accepted by almost all the banks in Dubai for opening a bank account.
RAS AL KHAIMAH INVESTMENT OFFSHORE
RAKIA is highly customer friendly coupled with fast and prompt service. The turnaround time is quick. Name approval comes within a day. Offshore company registration can be done in the very next day if all documents are in order.
The procedures for changing the shareholders, directors or the secretary are extremely simple and such changes can be done immediately.
There is no need for the personal presence of shareholders and/or Directors during registration.
Registration cost of RAKIA offshore is much cheaper than JAFZA offshore but slightly more expensive than RAK FTZ offshore.
RAKIA’s know Your Client (KYC) requirements are straight forward and the processing is simple.
Why people are going for Offshore Company?
Tax Optimization – The most common reason for registering an offshore Company is for tax optimization. Tax optimization is the process of minimizing the tax overhead through legally available means. The tax optimization is lawful method of reducing tax Pay-off , it is very different from tax evasion; tax evasion is treated as illegal and criminal by many countries across the world.
Asset Protection – High net worth people and wealthy persons from countries which are politically unstable or potentially risky normally use offshore company as a way of saving their properties, wealth and holdings. An offshore company in this situation is being used as a tool to protect their assets from hidden discord and restraint in the country of their residence. An offshore company would work perfectly with the properties that are earned in foreign countries or has been evacuated by significant time through lawful route. Assets earned in foreign countries can be protected directly under the umbrella of the offshore company or through an offshore bank account under the UAE offshore company.
Asset Holding – Very often large corporate body and assorted entities assemble valuable properties as part of their business. In order to prevent the risk on properties from lawful problem affecting the parent group, many holding companies are formed in UAE under any one of the offshore authority. High risk assets parked under such an offshore companies offer better security.
Trading in Derivatives – Trading in derivatives and other high risk instruments in the normal stock markets is a cumbersome process because of the stringent legal formalities and other regulations prevailing in the country. In such cases wealthy people often set up offshore company as a method to do business with risky investment tools and transfer their earnings to the offshore bank account.
Stock Market Listing – There are many top companies in the world in which most of them are originated from poor and low developed corporate rules. Corporate entities keen to raise funds or listing their shares in the stock market do so by forming a company in one of the offshore jurisdictions. The under development of corporate laws are the good base for offshore company formation in uae for joint enterprise business.
Security – An offshore bank account in the name of an offshore company can be maintained in strict confidentiality. Banks never disclose information about the ownership of offshore bank accounts and also do not share with any third party or other entities, any details, unless those are of very special significance or under unusual circumstances.
LIMITATIONS
Though offshore companies are very useful to save tax burden, those have also the following limitations.
Offshore Companies cannot carry on business with persons or legal entities resident in the jurisdiction of incorporation.
Offshore Companies are not allowed to own an interest in real estate property situated in the country of incorporation.
Offshore Companies cannot hold shares, stock, debt obligations or other securities in a local company incorporated under the ordinary companies Act.