Offshore Corporate Tax Registration in UAE

The UAE has established itself as one of the world’s leading business hubs, providing a favorable environment for international companies looking to expand their business. Recently, the UAE corporate tax system made corporate tax registration mandatory for all companies that offshore companies include. It is also to ensure this. For offshore businesses, filing corporate taxes is more than just compliance; It’s also about finding important benefits that can strengthen your company. 

Offshore Corporate Tax Registration in the UAE refers to the mandatory process through which offshore companies must register with the Federal Tax Authority to comply with the country’s new corporate tax laws.This registration not only ensures legal compliance but also opens doors to enhanced transparency, credibility, and long-term operational stability in the region.

Corporate tax is a direct tax applied to the profits or income generated by companies operating in the UAE. While tax rates remain competitive compared to many other global markets, companies need to remain compliant by registering and filing taxes as required. The UAE is home to them.  Failure to comply may result in fines, penalties, and legal consequences, making it imperative that offshore businesses follow proper registration procedures If setting up an offshore company in the UAE is a practice it is strategically available to international businesses looking to increase global scale while reducing operating costs Offshore companies allow businesses to operate with fewer restrictions, delivering benefits such as any restrictions that apply of foreign ownership, access to global markets and asset protection This program is particularly attractive to companies seeking confidentiality, flexibility and tax efficiency. However, the introduction of corporate tax means that offshore companies must now take proactive steps to ensure full compliance while still reaping the benefits of being based in the UAE.

What is Offshore Corporate Tax Registration?

Offshore corporate tax registration entails forming a business in an offshore location that, usually, promises attractive tax advantages with low reporting requirements and increased financial confidentiality. Offshore Corporate Tax registration allows businesses the legal opportunity to operate their businesses outside their home country while enjoying the financial benefits afforded them by the offshore jurisdiction.

Understanding Offshore Companies in the UAE

Offshore companies in the UAE have been in much demand lately due to strategic benefits offered by them, which are mainly in the form of tax benefits, confidentiality, and protection of assets.

Definition and Purpose of Offshore Companies

An offshore company is legally structured in a jurisdiction other than its site of incorporation, mainly intended to operate outside the national market rather than in it. The UAE provides various aims for offshore companies. For asset protection, among others, these entities act as a protective cover for personal and business assets against any potential creditors and claims.

• Tax Efficiency : The offshore company has a tax-free environment since it is tax-free for corporate taxes and income tax in the UAE.
• Confidentiality : While UAE offshore registries limit public disclosure, companies must maintain and submit Ultimate Beneficial Owner (UBO) details to authorities under Cabinet Decision No. 58 of 2020. Confidentiality is not absolute; UBO data is available to regulators.
• International Trade : The companies can offer international business ventures by acting as holding companies for investment or conducting external trade outside the UAE.

Legal Framework Governing Offshore Companies in the UAE

Offshore companies in the UAE fall under a body of federal laws and specific regulations for certain jurisdictions. Some of the main features include:

• Federal Decree-Law No. (32) of 2021 on Commercial Companies : This is one of the foundational legal structures for all forms of company in the UAE, including off-shore firms.
• Jurisdictional Regulations : There are several jurisdictions created within the UAE specifically for the purpose of offshore company formation.
• Ras Al Khaimah International Corporate Centre (RAK ICC) : It is particularly appropriate for setup and streamlined processes at competitive costs.
• Jebel Ali Free Zone Authority (JAFZA) : it allows a strong regulatory regime along with easy direct access to Dubai's wide trading opportunities.

Each jurisdiction has its rules governing the formation, management, and operational guidelines of offshore companies. For instance, RAK ICC ensures that a client can have 100% ownership without any local partners, whereas JAFZA has advantages like the right to property in the State of Dubai.

Differences Between Offshore, Free Zone, and Mainland Companies

Understanding the distinctions between offshore, free zone, and mainland companies is crucial for entrepreneurs considering business setup in the UAE:  

In summary, offshore companies in the UAE are designed for international operations with significant benefits such as asset protection and tax efficiency. They operate under a well-defined legal framework that facilitates secure and confidential business practices. Understanding the distinctions between free zones and mainland companies is essential for making informed decisions regarding business establishment in the region.

Distinction Between Onshore and Offshore Tax Registration in the UAE

Offshore Jurisdictions in Tax Planning

Offshore jurisdictions form a vital part of tax planning everywhere around the globe. They have the following benefits to businesses:

• Tax Efficiency : Low or no corporate tax rates are offered in these jurisdictions, meaning that the levels of corporate tax liabilities are lowered.
• Asset Protection : offshore entities have a legal structure that serves to protect assets from litigation and creditors.
• Business Expansion : They facilitate companies' ability to access international markets without strict local regulations.
• Financial Privacy : Offshore jurisdictions keep business transactions and ownership information confidential.
• Cost Savings : Less administrative and compliance costs as compared to onshore structures.

Challenges in Offshore Corporate Tax Registration

Limited Scope for Some Business Activities

• Offshore companies cannot engage in domestic operations and many of them also barred from sectors such as retail and manufacturing business
• All dependence on external markets may make them susceptible to worldwide fluctuations

Regulatory Updates

• Regular updates in the legal system, like economic substance requirements, add to the compliance cost
• Increased transparency and reporting are sought through more stringent AML and CTF measures

Banking and Financial Challenges

• Failure to open bank accounts due to rigorous due diligence. Poor loan access and credit facilities.
• High banking fees and de-risking practices by international banks.

How Offshore Corporate Tax Registration Enhances Business Operations?

Simplifying Global Transactions and Operations

• Offshore entities provide a streamlined structure for conducting international trade.
• Centralized financial management across multiple markets reduces administrative complexity.

Reducing Tax Liability for Multinational Companies

• Offshore jurisdictions offer low or zero corporate tax rates, optimizing tax obligations.
• Tax treaties prevent double taxation, maximizing profitability for global operations.

Attracting International Investors and Clients

• Favourable tax regimes and legal frameworks boost investor confidence.
• Financial privacy and asset protection have drawn offshore companies to global clients.

Offshore Zones in the UAE for Corporate Tax Registration

Jebel Ali Free Zone (JAFZA Offshore)

• Zero corporate and personal tax.
• Duty-free import/export and 100% foreign ownership.
• Strategically positioned close to Jebel Ali Port and Al Maktoum International Airport.

Ras Al Khaimah (RAK) Offshore

• No corporate tax or VAT; full profit repatriation.
• Affordable setup with privacy in operations.
• Quick and straightforward registration process.

Ajman Offshore

• Tax-free with no audit or reporting requirements.
• Cost-effective with no physical office needed.
• Fast company incorporation.

Corporate Tax Regulations for Offshore Companies

The introduction of corporate tax rules for the United Arab Emirates (UAE) is a landmark change within the Emirates' fiscal framework. 

Corporate Tax Laws Applied to Offshore Corporations in the UAE

The corporate tax regime of the UAE is governed by Federal Decree-Law No. (47) of 2022 dated December 9, 2022. Federal Decree-Law No. (47) of 2022 stipulates that a federal corporate tax will be applicable to the financial years beginning on or after June 1, 2023. Features of this tax regime are:

Tax Rates : The headline corporate tax rate is 9% on taxable income over AED 375,000. Profits below this limit are taxed at 0%. Some big multinational enterprises are liable to a higher rate of 15%, as well as for example to meet international standards set by the OECD.

Scope of Taxation : Corporate tax subjects the following corporate structures to taxation:

• Businesses formed or effectively controlled in the UAE by UAE companies.
• Natural persons performing business activities in the UAE.
• Non-resident entities with a permanent establishment or deriving income arising from the UAE.

Exemptions : Certain entities are not subject to corporate tax. Examples include government entities, qualifying investment funds, and extractive industry businesses. Free zone companies may be exempted if they meet predetermined requirements.

All UAE-based businesses, including offshore businesses, will have to register with regard to corporate tax even though they may be exempt from paying tax. Registration, for example, becomes a prerequisite for compliance and is based on a tax registration application submitted to the FTA. The offshore businesses that lack the criteria for exemption will comply with corporate tax rules.

Qualifying for Relief The offshore companies qualify for the 0% corporate tax rates if they meet specific conditions, such as having sufficient substance in the UAE and producing qualifying income.

Registration Deadline and Filing Deadline

The deadlines for registration and compliance for offshore companies are strictly time-barred:

• Registration Deadline : Offshore companies should file their applications for tax registration by the 1st of March 2024, in case they are having a Permanent Establishment in the UAE, before that date. In any other case of a company commencing the operation after the said date, registration would be required within nine months from the date of commencement.
• Date of Filing : After registering, the companies are required to file a first corporation tax return within nine months of the end of their financial year. With a calendar year operation up to the end of 31st December, for example, the first filing would fall on 30th September 2025 with the period covered being 01st January 2024 to 31st December, 2024.
• Record Keeping : All relevant records and documentation of the business should be maintained for seven years after the tax period. It would further facilitate compliance and audits by the FTA.

Offshore companies operating in the UAE have to find a way through the new corporate tax compliances requiring registration and to be skilled at balancing according to deadlines to abide by further compliance. The understanding of these laws would enable the operation to complete integrity and avoid possible penalties in case of non-compliance.

Process of Offshore Corporate Tax Registration: Step-by-step guide to the registration of an offshore company

The process of Offshore Corporate Tax Registration in the UAE involves several critical steps to ensure compliance with local tax laws and regulations. This registration is particularly significant for businesses that want to operate outside their home jurisdiction while benefiting from the UAE's favourable tax environment. Here’s a detailed breakdown of the registration process:

Step 1: Access the EmaraTax Portal

• Visit the EmaraTax Portal : Open your web browser and go to the EmaraTax website (https://eservices.tax.gov.ae).
• Log In or Create an Account :
  • If you have previously registered for VAT, use your existing account credentials to log in.
  • If you are a new user, create a new account by clicking the registration link. You will need to provide your email address and phone number.

Step 2: Add Taxable Person Details

• Navigate to the Taxable Persons Section : Once logged in, locate the "Taxable Persons" section on the dashboard.
• Add a Taxable Person : Click on the option to add a new taxable person. You will need to provide details such as the legal name of the business, the commercial registration number, and other relevant information.

Step 3: Open the Corporate Tax Dashboard

• Locate the Corporate Tax Section : Find the "Corporate Tax" option on the dashboard.
• Access the Corporate Tax Dashboard : Click on this option to open the Corporate Tax registration interface.

Step 4: Begin the Registration Process

• Click on ‘Start Registration ’: In the Corporate Tax dashboard, find and click the “Start” button to initiate the registration process.
• Follow the Prompts : The system will guide you through a series of steps to gather the necessary information.

Step 5: Fill Out the Entity Section

• Provide Business Information : Enter details about your entity, including the type of business structure (e.g., LLC, sole proprietorship) and its registered address.
• Click ‘Next’ : After entering the information, click the “Next” button to proceed.

Step 6: Complete the Identification Section

• Enter Identification Information : Fill in the identification details, which may include the Tax Identification Number (TIN) and other identification numbers relevant to your business.
• Proceed to the Next Section : Once done, click “Next.”

Step 7: Input Contact Details

• Add Contact Information : Provide the contact details for your business, including a primary contact person’s name, email address, and phone number.
• Click ‘Next ’: Review the information and move to the next step.

Step 8: Fill in Authorized Signatory Information

• Provide Signatory Details : Enter information about the authorized signatory who will represent the business regarding tax matters.
• Verify and Continue : Check the information for accuracy before proceeding.

Step 9: Review Your Application

• Review All Sections : Before submission, review all filled sections to ensure all information is correct.
• Declaration : Tick the checkbox indicating that all provided information is accurate and complete.

Step 10: Submit Your Application

• Submit the Registration : Click on the “Submit” button to finalize your registration process.
• Confirmation : After submission, you should receive a confirmation message indicating that your application has been successfully submitted.

Step 11: Await Approval

• Monitoring Status : Log in to your EmaraTax account periodically to check the status of your application.
• Receive Notification : Once your registration is processed, you will receive a notification with further instructions or confirmations regarding your corporate tax obligations.

Following this step-by-step guide will help ensure a smooth process of Offshore Corporate Tax Registration in the UAE. Ensure that you have all the necessary documents and information ready before you begin to make the process more efficient. If you encounter any issues, consider consulting with a tax expert or advisor to assist you with your corporate tax registration.

Required Documents for all offshore companies

• Memorandum and Articles of Association
• Certificate of Incorporation
• Corporate bank account details
• Board resolution authorizing the appointment of a tax agent
• Power of attorney authorizing a tax agent to act on behalf of the company stakeholders.
• Company's financial statements and records
• Copies of the directors' and shareholders' passports, as well as any other
• Any other important business records that the UAE's tax authorities consider necessary

Benefits of Offshore Corporate Tax Registration

Corporate tax registration for offshore companies in the UAE offers many benefits to businesses that want to optimize the management of their finances. Some of the obvious advantages are as follows:

• Tax Rates : A few offshore jurisdictions in the UAE offer a 0% corporate tax rate. Free zones offer this advantage; therefore, businesses can maximize profit without the burden of heavy tax liabilities. This is why multinational companies find this an attractive and lucrative option.
• Exemptions and Incentives : Firms that work within free zones receive various tax breaks including no capital gains tax or taxes on repatriation of capital. This allows for reinvestment so the company can expand without dire financial constraints.
• Asset Protection : Offshore companies also serve to protect company assets from local creditors. Of course, this is especially beneficial to high-risk industries. It provides a piece of mind both to the business owner and to investors.
• Greater Privacy : Offshore incorporation commonly ensures greater confidentiality about the ownership of the company and financial information, which might be helpful for business owners to maintain matters private while also adhering to local laws.
• International Market Access : An offshore corporation in the UAE may serve to open a wider international market. With respect to the global position and infrastructure of high standards presented by the UAE, global trade and investment opportunities will be accomplished easily.

The offshore corporate tax registration in the UAE would provide financial, operational, and strategic benefits that will greatly help improve company performance within the international marketplace.

Corporate Tax Penalty for Non-Registration

According to Cabinet Decision No. 10 of 2024, businesses failing to comply with mandatory corporate tax registration requirements in the UAE will be subject to a penalty of AED 10,000. This penalty has been enforced by the Ministry of Finance starting from March 1, 2024, with no extensions on registration deadlines. Businesses are urged to ensure timely registration to avoid fines and maintain compliance.

Conclusion

In conclusion, Undoubtedly, the registration process for an offshore corporation tax is very complicated. As such, it should be undertaken cautiously and expert assistance is necessary. Even so, experts, such as experienced consultants, may ensure full compliance with local requirements, optimize tax structures, and reduce possible risks in the registration procedure.

Understanding that each client has a unique requirement calling for specialist service to fulfil offshore tax registration, we at Reyson Badger engage businesses in more core operations while leaving compliance and, indeed, tax optimization to us as a result of leverage expertise. We therefore give our advice and support to companies that wish to create or expand their presence offshore. Together, we shall build the way towards a prosperous and compliant offshore venture.