WHY WERE UAE OFFSHORE COMPANIES POPULAR IN THE PAST?

Investors used to use UAE offshore companies due to their numerous advantages, including:

• Complete anonymity of private details having to do with the company structure;
• Absence of any taxes;
• Low cost for registration and maintenance of offshore companies.

THE COST OF RENDERING A UAE OFFSHORE COMPANY

It should be noted that only an accredited company having the legal status of a registered agent, officially operating in the UAE, and having a real office and staff, can legally register as an offshore company in the UAE. Business owners cannot register an offshore company as this is a requirement of offshore jurisdictions themselves. Before registering, the agent verifies the company’s documents for compliance, and only then will the government bodies accept the documents for consideration.

The cost of registering an offshore company in the UAE will depend on the cost of the services of the agent to who you refer. On average, it will cost between 1,500 to 3,000 US dollars.

ECONOMIC SUBSTANCE OF OFFSHORE COMPANIES

In recent years, the need for an economic substance of a company confirmation that a business is real, the presence of a real office, employees, and annual reporting, has become increasingly necessary.

If the company could not recognize itself as a resident anywhere before, now such company must be proven to be a resident of what jurisdiction it plans to be.

In some jurisdictions, the economic substance cannot be implemented, because offshore companies cannot formally rent a physical office, and have employees on a full-time basis.

WHY BUSINESSES LOSE INTEREST IN OFFSHORE COMPANIES

First of all, this is due to the anonymity that the offshore company provided earlier.In recent years, anonymity has become less and less accessible, registries of offshore companies are becoming public in one way or another, information about owners, directors, and shareholders is accessible to the public, which some investors are not entirely satisfied with.

In the United Arab Emirates, it was decided to publish some of the data of offshore companies. Since July 1st , 2019, basic information on all companies registered in the UAE (not only in offshore but also on the mainland and in free zones) is published in the national economic register of the country.

Below is the information that is published in the public register of the United Arab Emirates:

• Company name
• Registration number
• Date of registration
• Address
• Company status
• Business Activity

REDOMICILIATION IN THE UAE

At the moment, many offshore companies around the world are considering residing in the UAE, that is, the transfer of their legal address to the United Arab Emirates while still preserving the legal identity of the company. This is due to the fact that there are effective strategies for the organization of an economic substance for business.

Information about the names of key persons of an offshore company in the United Arab Emirates, its directors, and shareholders, remain confidential to this day. Personal information about the founders continues to be private in the public registry of the UAE.

Recently, the demand for offshore companies in the UAE has naturally decreased, because, investors prefer to use companies in onshore jurisdictions. I mainly meet offshore companies in the UAE only in the scenario of building a holding structure. Onshore companies are well known by the names:

• Free Economic Zones (Free Trade Zone);
• Mainland.

The advantages of onshore companies in the UAE is that they provide employees, or its shareholders, with resident visas in the United Arab Emirates, that is, a residence permit. Having a visa, office, and real staff makes it easier for banks to make a decision to open a bank account, and receive tax residency benefits in Dubai and the United Arab Emirates.

PRICE DIFFERENCE BETWEEN AN OFFSHORE AND ONSHORE COMPANY IN THE UAE

The cost of offshore in the UAE is 1,500-3,000 US dollars.

The cost of onshore in the UAE starts at 10,000 US dollars.

In the United Arab Emirates there is absolutely no corporate tax. Since 2018, the only tax that businesses pay is a value added tax of 5%.

Ease of registration, anonymity, and tax incentives are still a compelling factor for the registration of a company in the UAE. For example, It is noted that the growth of business licenses issued in Dubai alone in the first half of 2019 amounted to more than 35% over the same period last year.

If you have any questions, or want to get a comparative analysis of the advantages of offshore and onshore companies in the UAE for your business, please contact me.

MARSEL SHADMANOV

Head of Corporate Services of Garant Business Consultancy

Mobile +971 52 938 5533

Phone +971 4 421 4335

Email marsel.s@garant.ae