When investors and entrepreneurs decide that the UAE are the ideal jurisdiction for their business activities, the question arises: Free Trade Zone or Offshore – what is the ideal corporate form and structure for my type of business?
It is important to know that offshore companies in the United Arab Emirates are restricted from carrying out activities in the UAE. For an active business in the UAE and trading within the UAE, an offshore company is not feasible. But an offshore company can own interest in real estate (as approved by the relevant authority where the offshore company is registered) in the UAE and can act as a Holding.
The restrictions placed on Offshore Companies are:
The RAK Investment Authority (RAKIA) launched the concept of the International Business Company in January 2007 and has since become one of the most popular offshore destinations in the world. RAK Offshore companies are exempted from all corporate and income taxes and are ideal for international business without physical presence and active business in the UAE.
The RAK free trade zone entity is a cost-effective investment destination, in order to maintain an office or warehouse in the UAE. A free trade zone is a special area of RAK where normal trade barriers, such as taxes, tariffs and quotas, are eliminated and bureaucratic requirements are lowered, to attract new business and foreign investments. With free zone companies it is possible to benefit from over 50 double taxation agreements in the UAE and to receive an investor visa/residency. Free Trade Zone companies are tax exempted for up to 50 years.
In many cases, a company with substance and actual presence is required for international tax optimization. A Free Trade Zone company combines the benefits of full tax exemption with the benefits of an active, local society. For example, the authorities will issue a lease for the company’s own office or a „shared desk” to attest the actual location of the company. A simple domicile or the address of a “Registered Office” will often not suffice nowaday. With an active company in the free trade zone, it is also much easier to open a business account in Dubai. In addition, there is the possibility for the founder of the company as well as employees to obtain residence permits, which entitle them to residency without, however, requiring a minimum period of presence. By incorporating a company and obtaining a residence permit, you can thus ensure complete tax exemption at both private and corporate level.
For further information and if you have any doubts with regard to the question “RAK Free Trade Zone or RAK Offshore” do not hesitate to contact us or to read our fact sheet with further details.