Offshore companies in the UAE: what they can and can't do

An offshore company in the UAE is a company with a certificate of incorporation but no trade licence. It exists to hold things: shares, property, bank balances, or contracts with clients outside the UAE. It cannot sell to customers in the UAE, run an operating office or employ staff, and since corporate tax arrived it is not outside the tax net either.

This guide explains the two registries most people mean when they say offshore, what an offshore company is good for, where it goes wrong, and the compliance that still applies. It is general information, not legal or tax advice.

Two registries, two sets of rules

When people in the UAE talk about an offshore company, they usually mean one of two registries.

• RAK International Corporate Centre (RAK ICC) in Ras Al Khaimah. It was formed under Ras Al Khaimah Decree No. 12 of 2015 by merging two older registries, and it registers international business companies and foundations. You deal with it through an approved registered agent, who files your documents and keeps the company's beneficial ownership record.
• JAFZA Offshore, run by the Jebel Ali Free Zone Authority in Dubai under its Offshore Companies Regulations 2023. A JAFZA offshore company must have a registered agent unless it keeps an office in the zone. Its registered office is either that office, a freehold property the company owns, or the agent's office in Dubai.

Don't confuse RAK ICC with RAKEZ, the Ras Al Khaimah free zone that issues trade licences to operating companies. If you want a licensed business in Ras Al Khaimah, read our RAKEZ guide instead.

Offshore, free zone or mainland: the practical differences

The table explains the usual mismatch. Founders choose an offshore company because it is lighter and cheaper to keep, then find they need a licence to invoice a Dubai client, a visa to live here, or an office for the bank to visit. If any of those is part of the plan, compare legal forms and licence types before you choose.

What an offshore company is good for

Used for the right job, an offshore company is a tidy, low-maintenance holding vehicle. JAFZA's regulations, for example, allow an offshore company to:

• own shares in other companies, including operating companies in the UAE
• hold an account with a UAE bank
• own property in designated freehold areas
• hire UAE lawyers and accountants, keep its books in the UAE and hold board meetings here

Typical uses are a parent company above one or more operating companies, a vehicle for property or investments, or a company that contracts only with clients abroad. RAK ICC companies are used in similar ways, and RAK ICC signed an agreement with Ras Al Khaimah Municipality in 2021 so that investors can register Ras Al Khaimah property through a RAK ICC entity.

Say you own a trading company in a Dubai free zone and a software company in India, and you want one UAE parent above both. An offshore company can be that parent. It holds the shares, receives dividends and gives you one place to plan succession. It does not invoice anyone in the UAE, and it does not need to.

Owning Dubai property through an offshore company

This is where the choice of registry matters most. In 2011 the Dubai Land Department (DLD) issued guidelines that limited new property registrations by offshore companies to those registered with JAFZA, and asked owners to undertake to report any change in their shareholding. JAFZA's 2023 regulations still list owning property in designated freehold areas among the things an offshore company may do.

Rules like these can change, and providers' brochures are not always current. Before you sign a sale agreement, confirm with DLD that it will register property in the name of a company from your chosen registry, and which documents it will want. Our guide to freehold areas in Dubai covers where foreigners, and companies, can buy.

Corporate tax: offshore does not mean exempt

Older marketing material, some of it still online, describes UAE offshore companies as tax-exempt. Under the corporate tax law, that is no longer a safe reading.

The Federal Tax Authority (FTA) states in its guide on tax residency that companies labelled offshore, but incorporated in the UAE, are juridical persons. A juridical person incorporated under UAE law is a Resident Person for corporate tax wherever it is managed from, and resident juridical persons must register. In practice:

• Register and file. The company registers on EmaraTax and files a return every year, even when no tax is due.
• Worldwide income. A resident company is taxed on income from inside and outside the UAE, at the standard rates in our corporate tax guide.
• Holding income may be exempt. Dividends and gains from a qualifying shareholding in a foreign company can fall under the participation exemption. The conditions are detailed, so test them before you rely on them.
• Treaty certificates are harder. An offshore company can apply for a UAE tax residency certificate, but for treaty purposes the FTA's checklist for companies includes a trade licence and a lease agreement, which an offshore company may not have.

UBO filings and other compliance

Offshore companies sit inside the UAE's beneficial ownership rules, not outside them. RAK ICC's Beneficial Ownership Regulations 2019 require the registered agent to keep a record of the company's beneficial owners, file it with the registrar and report changes within 15 days. The register is confidential, not public. JAFZA asks both its onshore and offshore companies to submit a UBO form through the Dubai Trade portal.

There are other recurring costs. JAFZA's regulations require an offshore company's accounts to be audited and laid before a general meeting within six months of the year end. Add the registered agent's annual fee and the registry's renewal fee. For who counts as a beneficial owner under the federal rules, see our guide to UBO declarations in the UAE.

Bank accounts: possible, with more questions

An offshore company can hold a UAE bank account, but it is a harder file for a bank than a licensed company. There is no trade licence, no office to visit and often no staff in the UAE, so the bank relies entirely on your documents: the ownership chain down to individuals, the source of funds and a clear reason for the account.

Apply with that pack ready and expect a narrower choice of banks than a free zone or mainland company would have. Our guide to opening a corporate bank account lists what banks usually ask for.

Where people go wrong

• Invoicing UAE clients from the offshore company. It has no licence to trade in the UAE, and JAFZA's own guidance says an offshore company cannot do business with persons in the UAE.
• Expecting a residence visa. Apart from JAFZA's narrow route for companies that own freehold property, an offshore company is not a visa route.
• Never registering with the FTA because the company was sold as tax-free.
• Buying property first and checking later whether DLD will register it in the company's name.
• Letting it lapse. A dormant offshore company keeps accruing fees. JAFZA's guide makes an inactive offshore company pay its overdue renewal fees and late penalties before it can be liquidated.

If your plan involves UAE customers, staff or a visa, you need a licensed company, possibly with an offshore holding company above it. Our business setup team can structure both layers. If you want a second opinion on whether offshore fits at all, book a free consultation.

Sources

• JAFZA: Offshore Companies Regulations 2023
• JAFZA: Company termination for offshore companies
• RAK ICC: Beneficial Ownership Regulations 2019
• Federal Tax Authority: Tax Resident and Tax Residency Certificate guide (TPGTR1)
• Federal Tax Authority: Corporate tax registration of resident juridical persons (CTGRJP1)
• Al Tamimi & Company: DLD guidelines on offshore companies owning property (2011)