Investors prefer to set up a business in Dubai especially as an offshore company owing to a slew of reasons ranging from tax benefits to minimal reporting, reputation and government approval for registration. While many jurisdictions offer these benefits, some countries such as the UAE offer better advantages than the others. The offshore investors can get access to added advantages like the low cost of incorporation, ease of doing business, political stability of the jurisdiction, and the reputation of the jurisdiction while opting for offshore company registration in the UAE.
The UAE is at the forefront when it comes to offshore company incorporation compared to other major jurisdictions like Mauritius, Malta, Cyprus, or Singapore. The UAE has three offshore jurisdictions JAFZA in Dubai, RAK ICC in Ras Al Khaimah, and Ajman offshore in Ajman emirate. Consult the best business consultants in Dubai, UAE for easy and quicker offshore company incorporation.
Why Investors Prefer to form Offshore Company in the UAE?
i) Favourable Tax Regime
The UAE is one of the most favoured jurisdictions for offshore investors and the primary reason for this is the favourable tax regime in the country. The UAE still doesn’t impose taxes on personal and corporate incomes, which is a great draw for foreign investors. The only significant tax that the country has in force is the VAT that has been introduced in January 2018. The standard rate of VAT in the UAE is at 5%.
ii) Diversified Economy
The UAE boasts of being the second-largest economy in the Arab world only second to Saudi Arabia. The UAE economy is large and highly diversified thanks to the various strategies adopted by the visionary government, especially the Vision 2021 strategy. After diversifying from an oil-based economy to a knowledge-based economy, the UAE has been able to attract large investments in a variety of sectors including manufacturing, technology, and renewable energy. A promising aspect of this diversification is the UAE’s strategies have a special focus on the development of the SMEs, which is crucial to the growth and stability of the economy. The diversified and stable economy is a key factor that attracts foreign investors in offshore company formation in Dubai, UAE.
iii) Ease of Doing Business
The UAE has been regularly ranking high on the World Bank’s Ease of Doing Business Index, scoring better on many indicators. The UAE currently ranks 16 in the Ease of Doing Business Index 2019. The Index rates countries against 11 key indicators of business regulations to establish the ease with which it is possible to set up and run companies. The ranking is on an upward trajectory year by year as the UAE ranked 21st globally in 2018. The UAE owes its high ranking to factors such as minimal tax, audit requirements, and the lack of burdensome bureaucracy.
iv) Jurisdictional Reputation
The UAE has been considered a tax haven for a long time but the country has implemented strong measures in improving its reputation. The YAE has recently introduced the Economic Substance Regulations (ESR), which requires the companies that carry out relevant activities to demonstrate economic substance in the UAE. The ESR rules apply to the mainland, free zone, and offshore companies across the UAE. The ESR is sure to have improved the UAE’s image and the offshore investors can opt for UAE company formation on the back of a transparent economy.
These factors establish that investors can easily initiate the process of company formation in the UAE. The process of business setup in Dubai, UAE is swift and can be completed in a matter of weeks. In most cases, the physical presence of investors is not needed for company formation in the UAE. The investors can quickly register an offshore company with the help of reputed business setup consultants in Dubai.
v) Stability of Legal Requirements
The UAE offers offshore investors an environment that provides stability of legal requirements. Setting up an offshore entity in the UAE offers benefits including,
- Minimum Capital requirements
- Minimal filing requirements
- No audit requirements
- Fast incorporation procedures
vi) Double Taxation Treaties
One of the benefits of incorporating an offshore company in the UAE is the investors can have the benefit of double taxation treaties. The double taxation treaties help the investors avoid being taxed at the home country and the business incorporation jurisdiction at the same time. The UAE has signed double taxation treaties with around 115 countries.
How UAE Scores Better than Other Offshore Jurisdictions?
a) Cyprus
Cyprus is one of the popular offshore jurisdictions but it lags way behind the UAE in ease of doing business. As per the 2019 Index, Cyprus ranks at 54 in ease of doing business. The ranking of Cyprus has been affected mainly because it implemented changes to the tax regime which made it tough to pay taxes as an increasing number of audits are required.
b) Malta
Malta scores very low in the World Bank Index with its latest ranking at the 88th spot. The World Bank has cited various reasons for Malta’s poor ranking such as the difficulties in obtaining certain permits and accessing credit cards. Furthermore, Malta imposes a tax of up to 35% on both personal and corporate earnings, which is a big let-down for offshore investors.
c) Singapore
Singapore is one of the popular offshore jurisdictions that offer strong competition to the UAE in terms of Ease of Doing Business. Singapore ranks at an enviable 2nd spot in the World Bank’s Ease of Doing Business Index 2019. However, the UAE fares better than Singapore as far as taxation is concerned. A comparison of the two economies in terms of taxes will give the reason why investors prefer offshore company formation in the UAE over Singapore. While the UAE follows the zero corporate and personal tax regime, the taxation in Singapore can reach 17% and 22% respectively.
d) Mauritius
Mauritius imposes taxes on both corporate and personal income at a rate of 15%. The Mauritian tax regime in this regard fails to offer any competition to offshore business setup in the UAE.
e) Luxembourg
In terms of Ease of Doing Business, Luxembourg is nowhere near the UAE as it ranks lower at 72nd spot in the World Bank Index. One of the key reasons for the low ranking is the difficulty in obtaining credit in Luxembourg. Also, the country levies a corporate tax at 17% which cannot compete with the UAE’s 0%.
f) The Netherlands
The Netherlands imposes a corporate tax rate of 19%. When it comes to ease and cost of doing business, the UAE leads over the Netherlands. The Netherlands’ current ranking is 42 in the World Bank Index due to poor scores in obtaining permits and enforcing contracts.
g) Switzerland
Switzerland is one of Europe’s most popular destinations for setting up an offshore company. However, the country ranks at 36th spot in the World Bank Ease of Doing Business. In terms of taxation, the UAE’s 0% tax rate on corporate and personal incomes is far better compared to Switzerland’s 18% (corporate) and up to 11.5% (personal).
Jitendra Business Consultants: Offshore Company Agents in the UAE
The UAE is a perfect jurisdiction for offshore business set-up as the country scores high in every aspect such as ease of doing business, taxation, and a stable economy. Also, with the introduction of the Economic Substance Regulations (ESR), the UAE has made a strong move towards ending its previous tag of being a tax haven. Setting up an offshore company in the UAE is a highly cost-efficient process but the investors need to avail the help of reputed business setup consultants in Dubai such as Jitendra Business Consultants (JBC) to form the company quickly without any hassles.
Investors need not be physically present to initiate the process of offshore company formation in the UAE. JBC is a registered agent with JAFZA offshore, RAK ICC, and Ajman offshore jurisdictions in the UAE. JBC undertakes the offshore company incorporation in the UAE on behalf of the investors. JBC has a team of highly qualified business setup consultants who guides the investors through the whole application process.