JAFZA (United Arab Emirates) *
We can help you incorporate in United Arab Emirates *
Offshore Company (Company limited by shares)
A JAFZA offshore company is an entity incorporated under the legal oversight of the Dubai-based free zone authority. It is distinct from onshore or free zone companies and is explicitly not permitted to carry out commercial business within the UAE mainland.
The legal structure is that of a company limited by shares, where liability of shareholders is restricted to their investment in the company’s share capital. Companies are authorized to issue different classes of shares with varying rights to dividends, voting, and asset distributions upon liquidation, provided these details are outlined in the constitutional documents.
The formation process requires at least one shareholder, and corporate shareholders are permitted. There is no minimum share capital requirement, but at least one share must be issued at incorporation. Shares are typically denominated in UAE dirhams (AED), although the specific denomination and pricing are determined by the incorporating party.
A company must appoint at least one director and one secretary, who may be the same individual. These positions are open to both UAE residents and non-residents. Management and control of the company lie with the board of directors, who are tasked with overseeing the strategic direction and affairs of the company in accordance with applicable laws and the company’s internal governance documents.
JAFZA offshore companies are structured to facilitate a broad range of cross-border commercial and investment activities. These include, but are not limited to:
- International trading operations
- Holding and managing foreign investments
- Intellectual property ownership and licensing
- Asset protection strategies
- Ownership of real estate abroad (including certain approved real estate in Dubai)
- Management of ships or maritime assets
- Corporate structuring and subsidiary holding
The key operational principle is that these companies must operate exclusively outside the UAE, except in specific regulated contexts such as property ownership in designated zones.
Despite their flexibility, JAFZA offshore companies are expressly prohibited from engaging in activities that fall under financial regulation unless they secure separate authorization. These activities include:
- Banking and deposit-taking
- Insurance and reinsurance
- Fund management and investment pooling
- Financial advisory services
- Trust or fiduciary services
Such sectors are regulated under the UAE’s broader financial services framework and require licensing through other competent authorities such as the Central Bank or the Securities and Commodities Authority.
Since the implementation of the UAE Corporate Tax Law in 2023, most UAE business entities, including JAFZA offshore companies, are subject to federal corporate taxation. The applicable tax rates are:
- 0% on taxable income up to AED 375,000
- 9% on taxable income exceeding AED 375,000
Dividends and capital gains earned from qualifying shareholdings in other companies may benefit from tax exemptions, provided specific conditions are met:
- The JAFZA offshore company must hold at least 5% of the shares in the underlying company, or the acquisition cost must be at least AED 4 million
- The shareholding must be maintained for a continuous period of 12 months
- The underlying company must be subject to taxation at a rate of at least 9% in its jurisdiction
- Less than 50% of the assets of the underlying company should consist of non-qualifying investments such as passive portfolio holdings
Moreover, companies tax-resident in jurisdictions with Double Taxation Agreements (DTAs) with the UAE may benefit from treaty relief, limiting the UAE’s taxing rights to income attributable to a permanent establishment within the UAE, if any.
JAFZA offshore companies that engage in specific “Relevant Activities” under the Economic Substance Regulations are subject to additional compliance burdens. These activities include:
- Banking and finance
- Insurance
- Fund management
- Lease-financing
- Shipping operations
- Holding company activities (pure equity holdings)
- Headquarters or management services to affiliated entities
- Distribution and service centre operations
- Intellectual property exploitation
Entities conducting any of these activities must demonstrate that the core income-generating functions (CIGAs) occur within the UAE, supported by appropriate personnel, infrastructure, and decision-making in the jurisdiction.
For pure equity holding companies, a simplified substance test applies, typically satisfied by maintaining a registered office and engaging a registered agent, without the need for extensive local operations.
JAFZA offshore companies must appoint and maintain a registered agent and a registered office address within JAFZA. These functions ensure ongoing communication with regulatory authorities and assist in fulfilling statutory duties.
Companies are required to maintain proper accounting records that reflect their financial position and transactions. These must be preserved for a minimum of five years from the end of the financial period to which they relate. While there is no legal obligation to conduct a statutory audit under the offshore regulations, the company must prepare financial statements to accompany its annual corporate tax filings.
Entities subject to the Economic Substance Regulations must also file an annual ESR notification and report, supported by documentary evidence of compliance with substance requirements, where applicable.
Tax returns must be filed with the Federal Tax Authority (FTA) within nine months from the end of the financial year. Non-compliance with filing requirements can lead to penalties under UAE law.
JAFZA offshore companies offer a robust and well-regulated structure for international operations conducted from a reputable jurisdiction. Their flexibility, low regulatory burdens, and tax-neutral characteristics make them suitable for a range of global business activities, provided those activities are conducted outside the UAE.
Legal *
Country code – AE
Legal basis – Although the legal code in UAE is based on Sharia and Civil Law, the Jebel Ali Free Zone is based on common law principles.
Legal framework - JAFZA Offshore Companies Regulations
Company form – Special Status Non-Resident Company (Company limited by shares).
Liability - The liability of its shareholders is limited to the amount of share capital.
Business restrictions – Special Status Non-resident companies are entitled to do business internationally and may not carry out any trade with residents or hold assets within the UAE, except real estate in certain approved areas.
Share capital – The law does not require a specific capital amount required, nor specifies a standard authorized capital. Shares may be in any currency and may be on a non-paid up basis. Bearer shares are not allowed.
Shareholders – Non-resident companies shall have at least 1 shareholder. Corporate shareholders are allowed, and there is no limitation on their nationality. Their details are not available to the public and the use of nominees is permitted.
Directors – A minimum of one director is required, which must be natural persons and can be nonresidents. Their names are not publicly disclosed. Nominee directors are allowed.
Secretary – A local secretary must be appointed, who cannot be a corporation.
Registered Address – Non-resident companies must have a registered office address and a registered agent authorized by the Jebel Ali Free Zone Authority.
General Meeting – There is no requirement regarding annual meetings and their location.
Electronic Signature – Allowed.
Re-domiciliation – The re-domiciliation of a foreign company is allowed.
Compliance – JAFZA offshore companies must maintain accounting records, appoint an auditor and file the audited financial statements annually with JAFZA. They are subject to a registration fee, which must be renewed annually.
A corporate tax return together with unaudited financial statements must be submitted with the Federal Tax Authority within 9 months from financial year end.
- Shareholders not disclosed *
- Directors not disclosed *
- Corporate shareholders permitted * *
- Corporate directors permitted * *
- Local director required * *
- Secretary required * *
- Local secretary required * *
- Annual general meetings required * *
- Redomiciliation permitted * *
- Electronic signature * *
- Annual return * *
- Audited accounts * *
- Audited accounts exemption * *
- Exchange controls * *
- Common law for corporate matters Legal basis *
- 1 Minimum shareholders *
- 1 Minimum directors *
- - Minimum issued capital *
- - Minimum paid up capital *
- USDAny Capital currency *
- Anywhere Location of annual general meeting *
- 2018 AEOI *
Taxes *
Tax Residency - Companies that are incorporated or otherwise formed or recognised under the laws of the UAE will be considered a resident person.
Companies incorporated overseas that are effectively managed and controlled in the UAE may also be deemed tax resident in the UAE.
Basis - Companies are subject to corporate tax on their worldwide income.
Tax Rate – UAE Companies are subject to tax as follows:
- 0%, for taxable income not exceeding AED 375,000;
- 9%, for taxable income exceeding AED 375,000;
- 15% for Multinational Enterprises (Groups with revenues over AED 3.15 billion)
Capital Gains - Capital gains from the disposal of capital assets are treated as ordinary income and subject to corporate taxes. Capital gains from the disposal of shares of portfolio companies are exempt from taxes as long as certain conditions are met (see below conditions for the tax exemption of dividends).
Dividends - Dividends from resident companies are generally exempt from corporate income tax. Dividends from foreign companies is exempt from tax if:
- the shareholding is at least 5%
- a 12-month uninterrupted holding period (or the intention to hold for 12 months) is in place
- the participation is subject to tax in its country or territory of residence at a rate that is not lower than 9%, and
- not more than 50% of the assets directly or indirectly owned by the participation consist of an ownership interest or entitlements that would not qualify for the participation exemption if these assets were held directly by the taxable person.
A shareholding of less than 5% may qualify for the exemption where the acquisition cost of the shares exceeds AED 4 million.
Withholding Taxes - There are no withholding taxes on payments of dividends, interests and royalties to nonresidents.
Foreign-Source Income - A company may elect to have profits from a foreign permanent establishment exempt from tax. Such exemption is available as long as such profits are subject to foreign taxes at a rate not less than 9% in the foreign jurisdiction. Losses, income, expenditure, and foreign tax credits in relation to the foreign permanent establishment will not be deductible for UAE tax purposes if the tax exemption is elected.
Anti-Avoidance Provisions - Transactions between related parties must comply with the arm’s-length principle. Transfer pricing documentation must be prepared if
- the taxable person is part of a multinational enterprise (MNE) group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period, or
- the taxable person has revenues of at least AED 200 million or more in a relevant tax period.
VAT – VAT of 5% applies to sales of goods and services in the UAE, including the import of services and goods. The export of services is generally zero-rated.
Generally, services which are taxable if provided within UAE then the same needs to be considered as VATable if received from a service provider located outside of UAE (import of services) under reverse charge mechanism, meaning that the recipient of the service in the UAE must pay VAT for such service.
If a FZ company provides services from its place of business in the UAE to a person whose place of establishment or fixed establishment is outside the UAE, it becomes an export of service, and is generally exempt from VAT.
Other taxes – In U.A.E. there is no personal income tax, capital gains tax, real property tax, inheritance tax or estate duty, capital transfer tax, gifts tax or wealth tax.
There is a real property tax levied on the transfer of properties, at rates that vary from 2% to 4%, depending on the Emirate where the property is located. Some municipalities, e.g. Dubai, also levy an annual property tax on the assessed rental value of the property.
- Offshore Income Tax Exemption * *
- Offshore capital gains tax exemption * *
- Offshore dividends tax exemption * *
- CFC Rules * *
- Thin Capitalisation Rules * *
- Patent Box * *
- Tax Incentives & Credits * *
- Property Tax * *
- Wealth tax * *
- Estate inheritance tax * *
- Transfer tax * *
- Capital duties * *
- 9% Offshore Income Tax Rate *
- 9% Corporate Tax Rate *
- 0% Capital Gains Tax Rate *
- 0% Dividends Received *
- 0% Dividends Withholding Tax Rate *
- 0% Interests Withholding Tax Rate *
- 0% Royalties Withholding Tax Rate *
- 0 Losses carryback (years) *
- 0 Losses carryforward (years) *
- 0% Personal Income Tax Rate *
- 5% VAT Rate *
- 76 Tax Treaties *
Country details *
The United Arab Emirates is a former British protectorate and currently a federation of the Middle East, located to the east of the Arabian Peninsula. It borders Oman to the southeast, with the Persian Gulf to the north and Saudi Arabia to the west and south. It is composed of a hybrid monarchy consisting of 7 emirates, Abu Dhabi, Ajman, Dubai, Fujairah, Ras al Khaimah, and Umm al Qaywayn.
It has a population of 9 million. Its capital is Abu Dhabi, but the most populated and popular city is Dubai. Arabic and English are their official languages. The official currency is the United Arab Emirates Dirham (AED), pegged to the US dollar at an exchange rate of 3.67:1.
The Supreme Council, made up of each emirate Sheikhs, is the highest political decision-making body in the country. Although each Emirate retains a considered political, economic and judicial autonomy, with different rules and regulations.
The federation is one of the richest countries in the world, supported by a liberal and open economy with the eighth highest per capita income worldwide and a considerable annual trade surplus.
Having the seventh largest oil reserve in the world, its economy is clearly dependent on this commodity fluctuations. In recent years efforts have been made to diversify the economy, be less oil-dependent and develop sectors such as retail, financial and tourism.
A clear example of this strategy is the establishment of free zones to attract foreign capital to invigorate the private business sector.
Especially in Dubai, where oil and gas, barely represent 3% of the economy. Positioning itself as the regional retail hub and a major player in the export market of industrial and manufactured goods, with the 9th largest port worldwide in terms of volume of goods.
As well as being the largest financial hub in the region and being positioned as a top tourist and entertainment destination, where the most luxurious hotels worldwide are located, which in turn is the engine of the real estate, infrastructure, and retail sectors.
The Jebel Ali Free Zone is in the Emirate of Dubai and is the main trading hub of the Middle East, located around the world’s largest artificial port and the ninth in volume of goods.
Although conceived for the distribution of goods throughout the Arabian Gulf, it currently supports the formation of companies from a wide range of activities ranging from commercial, manufacturing, e-commerce or professional services.