5 Necessary Elements for Starting an Offshore Company in Dubai

Dubai is often dubbed as the “City of Gold.” And while this superlative seems exaggerated, it has its merits — particularly for foreig...


Dubai is often dubbed as the “City of Gold.” And while this superlative seems exaggerated, it has its merits — particularly for foreign investors and entrepreneurs looking to set up an offshore company.

Dubai has all the necessary attributes for investors looking for international startup business solutions. It has world-class infrastructure, modern amenities, business-friendly taxation, a highly developed economy, and is expatriate-friendly.

What’s more, Dubai is strategically located to enable investors to manage business between three continents: Europe, Asia, and Africa. Its position in the global market means the conditions in Dubai are favorable for foreign investors.

What is an offshore company?

Broadly defined, an offshore company is a type of business entity structured to protect the interests of the foreign investor or shareholder. It is established outside of the investor’s national boundaries.
The aim of an offshore company is to protect an investor’s physical assets and/or funds in a tax-friendly jurisdiction. Strict confidentiality laws further secure an investor’s interests, providing a level of anonymity not found in traditional “onshore” company formations.

At the same time, an offshore company operates within the laws of international trading standards.

The commercial practices associated with offshore company formation include:

  • Property Holding
  • International General Trading
  • Investment Holding
  • Consultancy Services
Dubai’s liberal taxation and import/export policies make it a strategic location for investors looking to establish an offshore company formation.

While the formation of an offshore company is generally easier than that of its onshore counterparts, some considerations must be made before starting the legal formalities of offshore company formation.

Below, we outline the elements a foreign investor must consider in order to establish an offshore company.

Jurisdiction

Before legal formalities can begin, foreign investors must take into consideration the right jurisdiction for their offshore company.

Investors looking to incorporate an offshore company in the UAE are afforded three options: Jebel Ali Offshore (JAFZA), Ras Al-Khaimah Offshore (RAK) and Ajman Offshore. All are situated on the outskirts of the UAE, approximately an hour away, giving investors easy access to the UAE’s infrastructure.

JAFZA, Ajman and RAK provide investors with certain benefits and features. Each provides 100% foreign ownership, shares in local businesses, complete confidentiality and anonymity, tax exemption, and access to a local bank account.

JAFZA differs from RAK and Ajman in that foreign investors are afforded the opportunity to own local Dubai real estate. However, RAK and Ajman have significantly lower formation fees when compared to JAFZA.

Business activity

There are certain business restrictions associated with an offshore company formation.

The incorporation of an offshore company means foreign investors are issued an incorporation certificate instead of a business license. This prohibits investors from conducting business activities within the UAE.

Business ventures that are prohibited under an offshore company formation include, but are not limited to:
  • Banking
  • Advertising
  • Gaming
  • Media
  • Movie or film production
  • Education
  • Insurance
  • Intellectual property

Documents required

Once the jurisdiction and business activity has been decided, legal formalities can proceed.

To incorporate an offshore company, a foreign investor will need to procure the following documents:

  • Notarized passport copy of investors, shareholders, and directors
  • Original proof of residential address
  • Curriculum Vitae of shareholders
  • Bank reference letter
This is also a good time to decide on a name for the offshore company. Restrictions exist on offshore company names. Company names cannot mention “Insurance,” “Banking,” or “Reinsurance.” An offshore company name must end with “LTD” or “INC.”

Submission of documents

Once all the paperwork has been finalized and submitted for registration, the process for approval will take approximately one week. Some applications may be finalized within three business days.

The chosen jurisdiction will determine how long an offshore company will take to register.

After application approval, the offshore company will be issued with a Certificate of Incorporation, Memorandum of Association and Share Certificate. This will certify the completion of the application process, enabling business activities to proceed.

Banking

After an offshore company has been incorporated, shareholders are provided access to local banking services. Opening a Dubai bank account will require certain paperwork, which include:

  • Copy of passport
  • Original bank statements dating back to six months prior
  • Bank forms

Other things to consider

Once the steps above have been finalized, business activities can commence. But while this business setup legally provides confidentiality and anonymity, offshore companies are prohibited from employing staff in the UAE.

This means that offshore companies cannot secure work visas or residence visas for any staff under its employ.

Offshore companies are also limited in their freedom of movement. They are not entitled to expand beyond their jurisdiction. To do business in mainland Dubai and other emirates, the offshore company must register as an onshore company.

Conclusion

Foreign investors looking to start a business abroad need to look no further than the UAE. Its many options for offshore company formations, coupled with business-friendly benefits and a veritable global location, make it an entrepreneurial haven.


AUTHOR BIO
Raj Herry is the Founder and Chairman of Flying Colour Business Setup Services. His extensive experience comes from more than 15 years in the field of company incorporation for Dubai Mainland, all Free Zones across the UAE and offshore companies worldwide. He also owns several business centres offering furnished and ready-to-move offices in Dubai.

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