Any legal entity established, with the purpose of making profit, outside the country of residence is an offshore company. Such a venture is often established in a tax-free haven or an offshore financial center and known by many names such as an international business company or non-resident company. The purpose behind the creation of an offshore company is often manifested in finding a secure, stable, and friendly environment for business or to evade stricter tax regimes or for finding better business prospects.
- The laws & regulations of the non-resident country and Offshore Company Laws govern the incorporation or establishment of an offshore company.
- An offshore company is often incorporated for the purpose of managing offshore wealth, mutual funds, properties, hotels etc. It must not trade with other companies in the offshore residence.
Listed below is information summarizing the reasons for why offshore companies are formed:
- Cost-effective management of offshore assets
- Robust provision of secrecy
- Asset protection
- Privacy and confidentiality
- Tax optimization
- Expansion of business units
- Diversification of the financial bucket
Why set up an Offshore company?
A variety of reasons can be cited as the motives behind the creation of offshore companies. An exhaustive list of reasons behind the creation of an offshore company is given below.
- Secrecy & privacy
- Better protection and wealth management
- Zero cost for accountancy
- Remote access for easy management of the company
- Opening a corporate bank account
- Makes diversification easy
- An existing company’s address can be used as address for the offshore company
Plays the role of a channel for making international transactions and dealings with other foreign organizations.
Benefits of Offshore company formation
- Zero or low taxes
- Duty free environment
- Full ownership with no involvement or sharing with a local
- Uninterrupted repatriation of profits and proceeds
- Highest standards of secrecy and privacy
- Making transactions with other businesses
- No physical space is required for the incorporation of an offshore company
- Low maintenance and management costs
- Massive overheads savings
- Incorporation and registration can be done as quickly as within 3 days
- Opening of bank accounts is easy
Uses of an Offshore Company
Perhaps, the most basic use of an offshore company is that it lives a tax-free life. Here is a list of some other uses of an offshore company or international business company.
- International Trading
An offshore company established by a trading company will have the ability to take orders from customers but the orders will be delivered to the customers by the original trading company in another place, however, the profits arising from the sale can be added to the account of that offshore company.
- Professional Services
An offshore company provides the owner a zero-tax regime and an easily manageable office for giving consultancy and other professional services to other businesses and customers.
- Property Owning Companies
Managing property by an offshore company is very easy. Incorporation of offshore companies in Dubai has become very popular in recent years. The most common reason is to avoid the inheritance law.
An offshore company can have one or more partners or beneficiaries who will own the shares in the company as however, they feel like sharing them. Now, in that case, the property is owned by a company not an individual. A person may die but a company never dies. Therefore, if somebody dies, the bank account and property is frozen until the local Sharia court announces a decision on the fate of the company and property.
We always tell our clients to buy property through an offshore company. If the person owning the company dies, the main beneficiary highlighted in the offshore company will be able to own the property.
An investor can invest in Dubai through an offshore company if he wishes to remain hidden or anonymous. The offshore company will hold shares or investments in place of the real investor.
- Copyrights, Trademarks and Patents
An offshore company also reserves the right to register trademarks or other forms of intellectual properties.
- Holding Companies
It can be used as a holding company for managing all other businesses on one floor under one roof.
Choosing the right place for your offshore company
Choosing the right place for the establishment of an offshore company cannot be taken lightly. The country where you wish to establish an offshore company must have the right infrastructure you need to run the company easily. A well established, state of the art, updated telecommunication system and a reliable banking service are a prerequisite for managing the offshore concern from a remote location.
A place, that does not give due regard to secrecy, privacy and confidentiality of business operations cannot be an ideal place for the establishment of an offshore company.
The country where you wish to establish your offshore company must have tax free zones in it otherwise the purpose of establishing an offshore company there dies an immediate death.
The biggest advantage of setting up an offshore company in UAE is that the country has many tax free zones in it and it naturally adheres to the regime of no/low taxation.
Why incorporate an Offshore company in UAE?
UAE is politically & economically very stable. It offers a whole range of state of the art infrastructural facilities, and strictly adheres to secrecy clause like no other country which is exactly why UAE is one of the ideal destinations for the formation and running of an offshore company.
Unlike other tax-free havens of the world, UAE offers a trustworthy and reliable structure to offshore companies because it is an independent country with a shiny record for promoting a rich, flourishing culture for international trade, investment, and business.
Despite pressure from EU, UAE is continuing with its zero-tax policy and other forms of duty exemptions, which makes the country a very attractive destination for prospective investors wanting to establish offshore companies here. Investors can not only live here, invest here, run businesses, but also manage their offshore companies too by being here, which is an advantage unlike any.
UAE does not have any agreement with any country which makes it binding upon UAE to share or exchange business related information with other governments. UAE does have Double Tax Avoidance Agreement with a number of countries which ensures that a company’s products will not become less competitive by getting taxed twice.
Jabel Ali Free Zone Authority (JAFZA) became Dubai’s first Free Trade Zone in 2003 and allowed investors to form offshore companies there. A few years later, Ras Al Khaimah soon followed the suit in 2007, Ras Al Khaima Free Trade Zone (RAKFTZ) was established by Ras Al Khaimah Investment Authority (RAKIA) which soon became very popular with investors wanting to establish offshore companies in the region because of the easy documentation process and lower incorporation fees in RAK.
Advantages of Dubai Offshore Company Formation
Setting up an Offshore Company in UAE will benefit, and is particularly useful if you are considering or want to achieve any of the following:
- The image of a business friendly country is what makes UAE less susceptible to propaganda and international pressures
- Having a presence in Dubai adds a charm to the image of an offshore company
- The information related to shareholders and partners is not revealed to the public
- The incorporation process is easy and quick
- Zero tax regime is strictly in place
- The regulatory requirements for offshore companies are lax
- The environment is ideal for growth of business
- Privacy and secrecy get the highest regard in the UAE
- 100% ownership of assets