BackDubai has long been a prime destination for international investors, providing stable returns in a secure environment. Naturally, large-scale investments, particularly in real estate, raise numerous questions regarding taxes and inheritance. Utilizing an offshore company in Dubai to invest in apartments, villas, townhouses, and penthouses can address these concerns, making it an increasingly popular choice for overseas buyers.
Benefits of setting up an offshore company for the purposes of purchasing real estate?
| 1. Anonymity | 2. Ownership | 3. Limited Liability |
| 4. Tax Exemption | 5. Corporate Structure |
1. Anonymity
Company information is kept confidential, so the details of the transaction and the extent of your property portfolio will not be a part of any public records.
2. Ownership
If you are setting up a business in Dubai, you will need to have a local partner with a majority share in the company. Though new rules have been announced regarding full ownership for expats, they have yet to be formally effected. At present, there are two ways to have complete ownership of a company - start up your business in a free zone or open an offshore company.
3. Limited Liability
In addition to giving you the option of 100% ownership, an offshore company is treated as a limited liability company (LLC), so your personal legal liability is greatly reduced. This adds a further level of security to your investment.
4. Tax Exemption
Offshore companies in Dubai are not subject to corporate tax or VAT, so the returns you generate from your investment are yours in full. This is one of the key incentives that attract international investors to the city.
5. Corporate Structure
Inheritance is a major concern among ex-pats and that becomes even more of a concern when your assets are in the UAE and you are not. By purchasing property in Dubai through an offshore company and making it a corporate asset, you will be exempt from local inheritance laws, giving you complete control of how the property is passed on in the future.
How can I set up an offshore company in Dubai?
| 1. JAFZA | 2. RAK ICC | 3. DIFC Foundations |
There are currently three options available for setting up an offshore company - through the Jebel Ali Freezone Authority (JAFZA), Ras Al Khaimah International Corporate Centre (RAK ICC), or DIFC Foundations.
1. JAFZA
Operating under JAFZA gives you all of the above benefits, plus further safeguards that have been put in place for added privacy and security.
The company must have a minimum of one shareholder, two directors and a secretary - a shareholder can also be a director and either a shareholder or director can also be a secretary. The company must have a registered office address in Dubai, whether that is an office owned by the company as an asset, an office maintained by the company, or the address of the registered agency that helped set up the business. Accounts must be kept meticulously and an auditor will need to be appointed to conduct an annual audit. Shareholders or appointed legal representatives must be present at the time of legal incorporation.
The name of the company must end with ‘Limited’ and there are certain activities for which setting up an offshore company is not possible - this restriction is applicable to Banking and Financial Institutions, Consulting Firms, Real Estate Brokerages, Media Companies, Production Houses, Casinos, Military Facilities and Educational Institutions.
2. RAK ICC
Incorporation under RAK ICC is even simpler and ultimately, cheaper.
The company has a minimum requirement of one shareholder, one director and one secretary. Accounts should be kept but will not have to be filed and there is no audit. The company must have a registered office address in Dubai, whether that is an office owned by the company as an asset, an office maintained by the company, or the office of the registered business setup agency. Shareholders do not need to be present at the time of legal incorporation, but all legal documents must be signed at the office of the registered agency by the shareholder or their legal representative
The name of the company must end with ‘Limited’ or ‘Incorporated’ and there are certain activities for which setting up an offshore company is not possible - this restriction is applicable to Banking and Financial Institutions, Funds, Trusts, Chambers of Commerce, Building Societies, Co-operatives and Insurance Firms.
3. DIFC Foundations
As a free zone that operates under its own jurisdiction, DIFC is an ideal option for creating an offshore entity and offers that option through the DIFC Foundations, officially known as DIFC Law No.3 of 2018 (known as the Foundations Law).
A DIFC Foundation is a fully independent legal entity that is established by a Founder or group of Founders. There are no shareholders or partners, effectively allowing the Foundation to operate on its own and even have assets registered under its name.
There are 4 key parties who are involved in a DIFC Foundation:
- The Founder(s) – the individual, or group of individuals, who wish to establish a Foundation
- The Beneficiaries – Made up of the Founder(s), as well as any family members or other dependents
- The Foundation Council – a council made up of at least two members, which may include the Founder(s), that operates in a similar fashion to a Board of Directors, managing the Foundation’s assets and ensuring that its activities are being carried out in accordance with the Foundation Charter (more on that below) as well as the DIFC Foundation Law and any other applicable laws
- The Guardian – appointed by the Founder(s), the Guardian is responsible for overseeing the Foundation Council and ensuring that they are acting in the best interest of the Foundation in accordance with its objectives and the Foundation Charter
A Registered Agent may also be appointed by the Founder(s) to aid in establishing a Foundation and manage legislative matters related to the Foundation, but this is not a requirement.
It is essential for every Foundation to have a Foundation Charter, a document that lays out the name of the Foundation, its objects, its description and its duration (whether that is in perpetuity or for a set period of time). The Charter must also have a declaration by the Founder(s) requesting the Foundation Council to act in accordance with the terms of the Charter.
Additionally, a Foundation may have By-Laws that will define the roles and duties of the Foundation Council and the Guardian, as well as details of their appointment or removal, and the management of Foundation assets – especially if the Foundation is dissolved.
Process for setting up an offshore company
The actual process for company setup is quite straightforward. The first order of business is to appoint a registered agency that will manage the process for you and to determine the total costs involved in registering the company, opening corporate bank accounts and in any specific government attestations that will be required. You will also need to determine the activities your company will be involved in and to finalise the total number of shareholders and the division of share capital, as well as the appointment of directors and company secretary.
Documents Required to Incorporate an Offshore Company in Dubai
| 1. For Individuals | 2. For Overseas Companies | 3. For DIFC Foundations |
An offshore company can be formed by an individual or an existing overseas corporate entity. In each case, the documents required would differ slightly.
1. For Individuals:
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Document showing that an official agent has been appointed for company setup (provided by the agent)
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Application form (provided by the agent)
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Personal profile of the applicant - essentially a brief resume and professional background
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Certified Passport copy with UAE entry page stamped
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Original certified reference letter from the applicant’s bank
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Proof of residence of the shareholder - this can be in the form of utility bills and/or bank statements and must be no older than 3 months
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Power of Attorney (notarized and attested) if the applicant is being represented by a POA
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A few different options for trade names
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Details of Directors/Shareholders with individual addresses and percentage held by each shareholder
2. For Overseas Companies:
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Business Plan
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Application form (provided by the agent)
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Document showing that an official agent has been appointed for company setup (provided by the agent)
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Original certified reference letter from the company’s bank
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Copy of Certificate of Incorporation of the parent company, notarized and attested by the UAE Embassy in the country of origin
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Copy of Memorandum & Article of Association of the parent company, notarized and attested by the UAE Embassy in the country of origin
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Power of Attorney in favour of Manager, notarized and attested by the UAE Embassy in the country of origin
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Board resolution to form a subsidiary in Dubai, notarized & attested by UAE Embassy in the country of origin
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Certificate of good standing of the company, notarized & attested by UAE Embassy in the country of origin
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Passport copies, original bank reference letters, proof of residence and profiles or resumes of the shareholders/directors of the parent company
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Original bank reference letter of the authorized representative of the parent company
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Proof of residence of the authorized representative of the parent company - this can be in the form of utility bills and/or bank statements and must be no older than 3 months
3. For DIFC Foundations:
For DIFC Foundations, the process must be completed by a Registrar at DIFC. The Founder(s) will need to submit an application for registration. The application must contain the following details:
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The name of the Foundation
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The address of the Foundation's registered office in DIFC - though a Foundation doesn't need any physical presence, an office is required
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The full name, nationality and address of each Founder
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The full name, nationality and address of each of the proposed members of the Foundation Council
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The name and business address of the Registered Agent in DIFC (if one is appointed)
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The Foundation Charter
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The By-laws of the Foundation, if applicable
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Any other particulars that the Registrar may require
This is a general guide to setting up an offshore company in Dubai. Document requirements or processes are subject to change depending on government regulations. We would always recommend taking legal advice before starting any processes to ensure that everything is above board.
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