There's a good reason why foreign merchants and investors are flooding Dubai—this sprawling metropolis in the United Arab Emirates (UAE) is an ideal place to set up an offshore company.
Politically stable, boasting a flexible regulatory regime and with a business-friendly ethos, Dubai should be your first port of call for entering the global market.
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Dubai is a great choice to set up an offshore company — a tax-free, low-regulation business haven affording total privacy for foreign businesses. From choosing the right business structure to submitting the correct documentation, this article will show you everything you need to know about setting up an offshore company in Dubai.
An offshore company in Dubai is a business entity that is incorporated in one of the free zones of Dubai or any other emirate of UAE, with the aim of conducting business operations outside of the UAE. These companies are commonly known as Dubai offshore companies or Dubai Offshore International companies, and they offer various benefits such as tax exemptions, 100% foreign ownership, confidentiality, and limited liability. However, offshore companies in Dubai are not allowed to conduct business within the UAE, and they are typically used for trading, holding assets or property, or as a vehicle for international investments.
There are two types of companies allowed to incorporate in Dubai. One is a free zone company, and the other is an offshore company.
Freezone companies are allowed to set up their businesses in a physical space and can conduct business in Dubai and the UAE. Those setting up a free zone company can also apply for visas for themselves and their employees.
On the other hand, offshore companies are not permitted to conduct business, or trade, in Dubai and UAE, nor are they eligible to apply for a residency visa. This is why offshore companies in Dubai are usually consultation services, holding companies and shipping companies.
Millennium Consultancy is a Singapore-based human resource company. They intend to make their presence known in the Middle East and want somewhere with viable business options and low tax rates. They won’t be taxed in Dubai, so they decide to set up an offshore company there.
There are many advantages of setting up an offshore company in Dubai. Without further adieu, let’s dive right in and see.
Dubai is a no-tax haven for offshore companies. Offshore companies in UAE are exempted from tax — including value-added tax, capital gain tax and withholding tax. Unsurprisingly, this makes Dubai a popular choice for many international businesses.
Other than the zero-tax policy, the Double Tax Avoidance Agreement (DTAA) ensures that companies are not taxed twice, primarily when they reside in their home country but their income derives from another country or region. So far, UAE has signed DTAA with over 100 trade partners, so check whether it applies to your own home country.
Incorporating an offshore company in Dubai will protect your assets if you’re involved in any potential lawsuit or become bankrupt when your assets are legally separated from you as a business owner.
Offshore companies based in Dubai aren’t required to appoint a local director and shareholder. You can be the director — fully owning your business without any interference from a local partner or business entity. Furthermore, shareholders can own properties in selected areas of Dubai.
If you want anonymity, choose Dubai. Offshore companies in Dubai are entitled to total privacy. In short, they’re not required to publish details of their directors and shareholders.
Incorporating an offshore company is simple. Depending on the nature of the company, it takes about four days to set up and does not require any minimum capital requirements. Essentially, all you need is a director and shareholder to start a company.
Likewise, your business doesn’t require a physical presence in the country itself. Virtual office space is good enough. Moreover, you’re not legally mandated to meet any local accounting or tax obligations.
RAK Offshore and RAKEZ are two different company formation options in the UAE.
RAK Offshore is a non-resident company that operates from Ras Al Khaimah (RAK). This type of company formation is ideal for businesses that want to take advantage of tax exemptions, confidentiality, and asset protection. RAK Offshore companies can conduct business internationally and hold assets without being subjected to onshore commercial regulations.
On the other hand, RAKEZ Freezone is an alternative option that offers a wide range of business activities and industry sectors for investors. It is a cost effective option because it offers business owners with low set-up costs, a simplified process of incorporation, 100% ownership, and tax exemptions.
When choosing between RAK Offshore and RAKEZ Freezone, businesses need to consider their specific needs and objectives. For instance, if international business is the priority and asset protection is important, they should go for RAK Offshore. If they require local operations and access to infrastructure, customers and suppliers, then RAKEZ Freezone is the best fit.
There are a few essential steps to take when setting up an offshore company in Dubai:
Choosing the right business structure is crucial for companies, as it will affect your business operation in the long run — determining your requirements for management and paperwork.
The list of business structures available in Dubai includes the following:
An offshore foundation is a separate legal entity with no shareholders. Non-profit organisations, social clubs and any associations use this business structure to operate their business.
Applicable for beneficiary planning, An offshore trust is usually created outside the country of residence of an individual. As Dubai is a tax haven, it enjoys the benefit of security, legal protection and privacy.
A legal entity created in a country other than the home country of the individual. An LLC is advantageous because it gives business owners liability, and no taxes will be taken out of the income received.
Companies that don’t perform business activities in UAE but operate overseas are considered International Business companies. They can be exempted from taxes and duties.
You will need to provide the following documents:
The process of registering an offshore company normally takes around 4 or 5 working days. If you need to register your offshore company urgently, there’s an express registration that takes 48 hours to complete.
Once you have the necessary documents, you can submit them to the relevant authorities of the jurisdiction you reside in. Every jurisdiction has different requirements, so check them first.
Opening an offshore bank account makes it easier for offshore companies to incorporate, and even conduct business transactions.
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The cost of opening an offshore company in Dubai can vary depending on a number of factors such as the type of company being set up, the services required, and the fees charged by the service provider. However, according to some sources, the average cost to set up an offshore company in Dubai can range from around $ 3,000 to $ 10,000 USD. It’s important to note that this is just an estimate and the actual cost may be higher or lower depending on the specific circumstances of the company being set up.
The requirements for offshore company formation in UAE depend on the respective jurisdiction in UAE where the company is being formed.
However, some general requirements for offshore company formation in UAE are:
1. Minimum one shareholder and director
2. A registered agent must be appointed
3. The company must have a registered office address in the UAE
4. The company’s Memorandum and Articles of Association must be drafted and submitted to the registrar
5. The shareholder (s) must provide a valid identification document/ passport copy
6. Financial statements are not usually required
7. A minimum share capital is not required
8. Offshore companies can only do business outside the UAE and cannot trade within the local market
It is recommended to consult with a professional service provider or company formation specialist to ensure all requirements of the respective jurisdiction are met.
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Offshore companies in the UAE are entities that are established in one of the UAE’s offshore jurisdictions, such as Jebel Ali Free Zone Authority (JAFZA) or the Ras Al Khaimah International Corporate Centre (RAKICC). These types of companies allow foreign investors to own and operate a business in the UAE without having a physical presence in the country. Offshore companies also enjoy various tax and financial benefits such as 100% foreign ownership, exemption from corporate income tax, no restriction on currency exchange, etc.
Yes, Dubai has offshore companies in the Dubai Multi Commodities Centre (DMCC) Free Zone which is one of several free zones catering to offshore companies. The DMCC operates as a separate jurisdiction from the UAE mainland, allowing businesses to operate with greater flexibility and privacy.
The cost to set up an offshore company in Dubai can vary depending on various factors such as the type of company, the size of the company, and the services required. It is recommended to consult with a registered agent or a business setup consultant who can provide you with the exact fee structure and help you understand the requirements for setting up an offshore company in Dubai.
There are some potential disadvantages associated with setting up an offshore company in Dubai, including:
1. Limited business activities: Offshore companies in Dubai cannot conduct business activities within the United Arab Emirates (UAE) or with UAE-based companies.
2. High initial cost: Setting up an offshore company in Dubai can be costly, with registration and licensing fees adding up quickly.
3. Lack of privacy: Like other offshore jurisdictions, Dubai has recently taken steps to increase transparency and information sharing, which means that an offshore company’s financial and ownership information may be subject to disclosure.
4. Limited banking options: Offshore companies may face difficulty in accessing banking services due to stricter regulations and anti-money laundering measures.
5. Limited residency options: Offshore companies do not automatically grant residency status to their owners or employees, which may make it difficult to operate a business in the country on a day-to-day basis.
It is important to note that these disadvantages may vary depending on the specific requirements and needs of each individual business, and there are also potential advantages associated with setting up an offshore company in Dubai.
The United Arab Emirates (UAE) is not considered an offshore tax haven as it has implemented various measures to comply with international standards on tax transparency and anti-money laundering. However, some jurisdictions may consider certain locations within the UAE, such as Dubai International Financial Centre, as offshore tax havens due to their favorable tax policies and business-friendly environment. It is important to note that opinions on what constitutes a tax haven may vary among countries and organisations.
Yes, an offshore company can buy property in Dubai. However, the rules and regulations regarding ownership of property in Dubai by offshore companies can vary based on the jurisdiction where the offshore company is registered. It is recommended to consult with a legal professional or a real estate agent in Dubai for more information on the specific requirements and processes involved.
Yes, you can open a bank account in Dubai for an offshore company. However, specific bank requirements may vary depending on the bank you choose to work with and the regulations regarding offshore companies in Dubai. It’s recommended to consult with a financial advisor or a banking representative for more detailed information and guidance.
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