Offshore Company Formation

 

In the United Arab Emirates - more precisely in its individual Free Zones - the formation and registration of offshore companies is now possible quite some time.

It is interesting to note that offshore regulations (e.g. in the Jebel Ali Free Zone) has partly been set up favoring the local real estate developers. These should be dissuaded to establish their real estate holding companies & trusts continue primarily in the "usual suspect" jurisdictions such as Belize, BVI, Seychelles, etc.

Again and again, in UAE are also hot discussions about "Assets and the Sharia law" on. Especially the (commercial) Liquidation and the (private) Succession Law are in the Sharia interpretation significantly different from the "Western" reading.

As a result, more and more foreign property buyers establish first their offshore company, primarily at Jebel Ali Offshore, to let acquire this corporation the property.

But the clear Trend towards the Offshore Version now also arrived in all offshore common areas outside of freehold property acquisition: The number of offshore companies is rapidly increasing, last but not least because regarding terms of fees and regulations a similarly systematic way is trodden, as it can be expected from any good offshore jurisdiction.

 

|  Offshore Jurisdictions in the UAE

Currently, 3 Free Zones are playing a serious role regarding the formation of offshore companies:

Jebel Ali Free Zone (JAFZA)
In our opinion, quite limited catalog of offshore activities.
Either defense against excessive demand - or even primary focus
to ownerships of individually qualified property developers.
In addition, there is the requirement of at least two directors and
Limited (Ltd.) as only available legal form.

 

Ras Al Khaimah Free Trade Zone (RAK FTZ)
RAK FTZ was the second free zone in the UAE enabling the
establishment of offshore companies. In the legal form of
Incorporated (Inc.) or Limited (Ltd), these Companies are
aligned on both, the acquisition and holding of freehold
property as well as a huge variety of other activities.

 

Ras Al Khaimah Investment Authority Free Zone (RAK-IA)
"RAK Offshore" provides virtually free choice of business objects,
a good price-performance ratio and - especially - quick registration.
The initial selection of various legal forms (Inc., Ltd., S.A., SA, AG)
was unfortunately reduced to Limited (Ltd.). "RAK Offshore" has no
audit requirements
for registered IBCs. Of particular note is here
the planned establishment of a "Financial City", the first purely
Offshore Financial Hub in the entire Middle East.

 

 

Fujairah Free Zone
FFZ also proposes establishment of offshore companies.
However, FFZ seems to be focused on the maritime sector
and logistics only.

 

 

|  Offshore Trusts?

A clear "Yes - but": All jurisdictions - JAFZA, RAK FTZ and RAK-IA - already advertise the option of setting up trusts. But in all cases, the proper authorization by the UAE Central Bank is still lacking. We believe, these approvals will not come soon - avoiding punishing by this the registration growth of DIFC (Dubai International Financial Centre) the water. Companies that establish themselves in DIFC, spend huge amounts of registration and licensing fees. DIFC shall gain by 2015 its place among the Top 5 Financial Hubs in the world (which was, critically seen, one of the various pre-crisis master plans - no to be seen more un-realistic).

Solution approach is up to date and for the foreseeable future the Nominee Trust "only".
But even with the already existing regulatory framework, the offshore location UAE  is far ahead the usual Trust & Foundation jurisdictions in Europe and overseas.

 

|  When / Why Offshore?

The reasons and motives for offshore foundations are of most diverse nature.
We would like to mention here only as examples, in which cases the establishment of an offshore entity may make sense:

Asset & Property Acquisition
As mentioned earlier, the holding of assets & property through offshore companies gives the advantage to move out from jurisdictions with complex or completely different legal systems. The applicable law as well as the applicable court location can be determined in the statutes for offshore companies free of choice.

Exploitation of Rights (patents, trademarks, media rights, licenses etc.)
Offshore companies are increasingly acting as licensor, utilizing targeted low total cost of ownership (TCO) as well as known benefits in income taxation. Up to active modification and control of licensee's profit / earning potential.

Holding & Investment Function
Especially for internationally distributed "free float", the grouping in an offshore company is well recommended - whether for reasons of clarity, tax harmonization, evasion from over-regulation etc.

Corporate Splitting to reduce asset risks in operative companies
Operating companies, requiring a high-quality asset base for efficient operation, can establish an offshore company and create its own quasi "lessor". This lessor purchases the necessary operational equipment and working capital, then subletting this to the operating company under flexible terms. This may preserve in various cases of (operating) companies collapses the efficient protection of the working capital against loss at least.

Avoiding LLC Fronting
The "sponsoring problems" in countries with more restrictive regulation of foreign ownership in domestic companies can also be solved in an elegant and safe way by nesting an offshore entity with a domestic one. Applying principles of corporate splitting may enable various possibilities regarding the determination of profit frames in the domestic company etc.

Anonymity
Trustee (Nominee) models provide a maximum of anonymity in a jurisdiction, where only internal audits on money laundering and terrorism financing are taking place. Furthermore, registrars have no accessible registers, registered agents and trustees have no further information obligations. Some of UAE's offshore zones even don't require the submission and filing of annual accounts.

 

|  Why UAE as Offshore Location?

In comparison to many other Tax Havens, UAE is not an island - wherever - with a few "mailboxes and bank branches" on it only. UAE is the driving and fastest growing force in the middle of the GCC (Gulf Cooperation Council) markets. At the same time, UAE has an uncontested role as a business hub in the rapidly growing markets "subcontinent" (India & Pakistan), Arab world, Asia and Africa.

The offshore location UAE is still young, which also means that UAE's reputation in international legal & business transactions is much higher than in many "conventional" locations such as Channel Islands, Panama, BVI, etc.
With the identified modification options for corporate splitting, UAE's offshore zones will always be, moreover, a mix of "pure" off-shore entities with more operationally oriented holding companies and operative firms.

 

|  Services by MCI CLT

MCI CLT itself is licensed as Registered Agent, i.e. as the trustee of offshore companies towards the registrars. We are handling offshore incorporations in RAK-IA, JAFZA and RAK FTZ.

In our support of offshore incorporations, we attach great importance to discretion and individual design of structures. Offshore incorporations "off the shelf" we do not offer - except in cases of the real estate property models. MCI CLT operates primarily as a full-service advisor and incorporation companion - and, if needed, as a Trustee on shareholder and executive level.

 

You need further information?
Just drop us an
E-Mail or use our Contact Form.

 

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