Offshore Company Setup

Dubai Company Formation? Yes, thanks to the new EU directive takes effect Dubai is becoming the better place incorporate your offshore company.

Dubai looks set to reap the rewards of a recent EU ruling under which banks are now forced to reveal information to tax authorities.

The EU Savings Directive, which came into effect on July 1, obliges financial institutions in all EU member states to either disclose tax and bank information to the relevant tax authority, or charge clients a hefty withholding tax. 

Though the new directives will specifically affect EU residents, a number of banks in ‘tax havens’ have also agreed to exchange customer information, including Jersey, Guernsey, the Isle of Man, the British Virgin Islands, the Cayman Islands, Switzerland, Liechtenstein, Monaco and San Marino. 

The reputation of discretion for some of these countries is being eroded. Since July 1, in order to keep details of their wealth private, bank customers now have the option of paying a withholding tax which will be levied directly in the country in which their savings are held. This will be charged at a rate of 15 per cent for the first three years, 20 per cent for the following three years, and 35 per cent from 2011 onwards.

Dubai has long enjoyed a reputation as a secure, tax-free jurisdiction for international banking and company incorporation. With this latest development from Europe, Dubai company registration and corporate and personal banking options are becoming more popular with international businesses and high net worth individuals. 

Since Dubai is neither a signatory to this directive, nor agreeing to cooperate with the Organisation of Economic Cooperation and Development (OECD), it looks set to gain even further.

Legal form: Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the Commercial Companies Law - and its by-laws govern the operations of foreign business. In broad terms the provisions of these regulations are as follows: The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation, which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. The seven categories of business organisation defined by the Law are: General partnership company,Joint Venture Company, Public Shareholding Company, Private shareholding company, Limited Liability Company, Share Partnership Company. By far the most usual form that businessmen and/or corporations prefer is the limited liability company.

The legislation, which governs Dubai Offshore Companies, was enacted in Jebel Ali Free Zone (Jafza) in Dubai in May 2003. It provides for a secure environment for investors without the levels of unnecessary intrusion and bureaucracy found in other offshore jurisdictions.

Name of the company: Dubai offshore companies must use the suffix Limited or Ltd. to denote limited liability. The following words and their associated activities are prohibited: Banking, Insurance and Re-insurance.

Shareholders: Dubai offshore company can have minimum one and a maximum of 50 persons whose liability is limited to their shares in the company's capital. 100% foreign ownership of the company is allowed. There is no public register of shareholders and directors. Shareholders need to visit Jafza and sign the incorporation documents in the presence of the authorised official of Jafza. Alternatively a power of attorney notarised and legalised by UAE Embassy, can be issued to a nominated person who can then sign before Jafza authorised official.

The minimum share capital: Dubai offshore company can select its own minimum capital. Usually we recommend share capital to be US Dollars 1,000. All shares must be fully paid when allotted. A company may not create different classes of shares. Bearer shares cannot be issued. Presently, joint shareholding is not allowed.

Directors of the company and secretary: A minimum of two directors and one secretary are required and they cannot be bodies corporate. One of the directors can also be a secretary. A register of directors must be held at the Registered Office, but it is not a matter of public record.

Registered office and local agent: Dubai offshore company must maintain a local Registered Agent approved by the local authorities and a local Registered Office, which is usually provided by the Registered Agent.

Taxation: Dubai offshore companies pay no taxes on profit, capital gains or anything else in Dubai.

Audit and financial returns: No annual reports or accounts need to be filed. Accounts must be audited and accounts must be distributed to shareholders (but NOT filed with the authorities). Dubai offshore company may retain their accounting records wherever in the world the directors deem appropriate.

Meetings: Dubai offshore company meetings need not be held in Dubai.

Time needed for formation: Usually it is 5-7 working days.