JAFZA Offshore Company Formation: Simplifying Your Business Setup

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A JAFZA offshore company refers to an entity registered in the Jebel Ali Free Zone in Dubai. The Jebel Ali Free Zone Authority (JAFZA), established in 1985, is one of the UAE’s oldest, largest, and most reputable free zones. In 2003, after introducing the JAFZA Offshore Companies Regulations, the free zone began facilitating the formation of offshore companies in Dubai. These regulations allow investors and corporations to establish offshore or non-resident companies within the free zone.

Setting up a JAFZA offshore company is perfect for:

  • Ideal for Holding and Property Purchase: Suitable for investors looking to create a holding company or purchase properties in Dubai.
  • Tax and Asset Protection: Commonly designed to minimize tax liabilities and protect assets.
  • Business Activity Restrictions: Offshore companies in the UAE cannot engage in business activities. Rather than obtaining a trade license, they are issued a certificate of incorporation.
  • Requirement for Registered Agents: Must be established through registered agents in Dubai, who provide the necessary office space.

Essential Features of a JAFZA Offshore Company

Setting up an offshore company in JAFZA offers businesses an easy and flexible process. However, the Authority expects foreign investors to follow certain rules and guidelines to uphold JAFZA’s international standing. Investors should keep in mind the following key points and requirements when creating an offshore company in JAFZA:

Shareholders

A JAFZA offshore company needs at least one owner, which can also be a business entity. The owners decide how much capital the company will have.

Directors

A JAFZA offshore company must have at least two directors, and they cannot be corporate entities.

Secretary

Every offshore company in JAFZA is required to have a secretary.

Company Incorporation Timeframe

You can register an offshore company with JAFZA in less than ten days.

Account Keeping and Audit Requirements

JAFZA offshore companies must keep accounting records for ten years from the time they are created. These records need to be approved by the directors, with one director signing the documents. The company must hire an auditor, approved by JAFZA, to review and report on the accounts.

Local Requirements

JAFZA offshore companies must have a registered office within the JAFZA free zone and appoint a registered agent. Since the offshore company doesn’t have a local physical presence, investors can use the registered agent’s office in Dubai as the company’s registered office.

Company Name

The company name must end with "Limited." The company can legally buy and hold its shares. It must have a registered office and agent in the Jebel Ali Free Zone or Dubai and can have bank accounts in the UAE.

Taxation

JAFZA offshore companies enjoy zero corporate tax, capital gains tax, and no restrictions on capital repatriation.

Ultimate Beneficial Ownership for JAFZA Offshore Companies

JAFZA offshore companies need to reveal who really benefits from the company (UBO) and maintain a Real Beneficiary Register (RBR) along with a Partners or Shareholders Register (PSR). Companies that are closing down must also stick to UBO rules. Failing to meet UBO requirements can result in severe fines.

Definition of a UBO:

A UBO is defined as:
  • Any person who has direct or indirect ownership or the power to influence or control the company in any way
  • Any individual owning at least 25% of the company’s share capital or holding 25% or more of the voting rights
  • Any individual possessing ownership powers through other means, such as the right to appoint or dismiss managers

Economic Substance Regulations for JAFZA Offshore Companies

JAFZA offshore companies must check every year if they need to follow the Economic Substance Rules (ESR). If a company is involved in any of the nine specified activities, it must meet ESR requirements, including submitting an ESR notification, filing an ESR report, and passing the Economic Substance Test. These nine activities are Banking, Insurance, Holding Companies, Headquarters business, Investment Fund Management, Lease-Finance business, Shipping, Intellectual Property business, and Distribution & Service Centre business.

JAFZA offers the necessary resources and support to help companies pass the ESR test, such as full-time staff, directors, managers, offices, and assets. Annual checks and compliance are required, and not meeting ESR obligations can lead to serious legal problems, including fines and information sharing with other countries. Companies can seek assistance with their yearly assessments and filing needs from registered agents in Dubai.

Documents required for the registration of JAFZA Offshore Entity

For Individual Applicants

  • Copies of passports of shareholders
  • Copy of valid visa
  • CV of shareholders
  • Proof of residence (utility bills or credit card bills)
  • Bank reference letter

For Corporate Shareholders

  • The company's founding documents are the Memorandum of Association (MOA) and Articles of Association (AOA)
  • Certificate of Incorporation
  • Power of Attorney
  • Board Resolution
  • Certificate of Credit Worthiness

Steps to Setup JAFZA Offshore Company Formation

Forming a company in JAFZA requires adherence to specific compliance standards and obtaining necessary approvals. Key steps include:

1) Define Business Activity

Decide on the type of business activity and model, ensuring alignment with the business’s nature and scope.

2) Name Reservation

Choose an appropriate name representing the company’s identity, objectives, and aspirations while complying with the required criteria.

3) Document Preparation

Collect necessary documents for setting up the offshore company in JAFZA. This includes:
  • Passport copies
  • Necessary visa pages for all shareholders
  • Business Experience Form for all proposed shareholders
  • Suggestion of five names for the new company
  • Original proof of residence for shareholders
  • Business plan
  • Bank reference letter for shareholders
  • Unified Identity Number for all shareholders
  • Passport-sized photos

4) Obtaining Visas

Apply for visas for employees to allow them to reside and work in the country.

5) Compliance and Renewal

Ensure all employees and members follow government regulations, including paying fees and fulfilling registration and licensing requirements.

6) Bank Account Opening

Open a bank account to manage business transactions and maintain financial transparency.

7) Maintain and Renewal

Once your business is established, ensure adherence to all regulations set by JAFZA. This involves keeping essential records such as the Real Beneficiary Register (RBR) and the Partners or Shareholders Register (PSR) and revealing the identity of the Ultimate Beneficial Owner (UBO).

Benefits of Setting Up a Company in JAFZA

JAFZA is a thriving business hub, attracting various sectors such as logistics, electronics, automotive, food & agriculture, and e-commerce. It accounts for nearly 25% of Dubai’s foreign direct investments, underscoring its significant role in the region’s economic landscape. Establishing a company in JAFZA provides access to these diverse industries and numerous benefits.

Exclusive Ownership Rights

Allow entities to own property in Dubai legally.

Adaptable Board Leadership

Offers flexibility in appointing directors and shareholders.

Office-Free Setup

Reduces setup costs by eliminating the need for physical office space.

Strategic Investment Paths

Enables owners to hold shares in other UAE free zone companies and LLCs.

Tailored Solutions for Businesses

JAFZA's policies are flexible, allowing businesses to operate efficiently and adapt to changing market conditions. This flexibility is crucial for maintaining a competitive edge.

Streamlined Registration Procedure

Streamlined and quick registration process, considering the trade license cost.

By taking advantage of these benefits, businesses can strategically position themselves within a dynamic and supportive economic zone, enhancing their potential for growth and expansion in the Middle East and beyond.

Why Choose IMC for JAFZA Offshore Company Formation?

Choosing IMC for your JAFZA offshore company formation ensures a smooth, efficient, and compliant setup, allowing you to focus on growing your business.

With extensive experience in JAFZA company formation, IMC ensures a smooth setup process through deep knowledge of regulations. We provide complete support from consultation to registration and compliance, assisting with documentation, legal requirements, and post-setup services. Customized solutions tailored to specific business needs and dedicated account managers offer guidance throughout the process. Streamlined procedures expedited formation with prompt communication and minimized administrative delays. Full regulatory compliance with JAFZA and UAE laws is ensured, including maintenance of required registers and reporting obligations. Strong relationships with JAFZA authorities and local experts provide an in-depth understanding of the local business environment. Competitive pricing with transparent fees and value-added services maximizes your investment.

FAQs
No, the partners must be physically present.

Here are the reasons you need a Certificate of Incorporation for a JAFZA Offshore Company:

  • It serves as definitive proof of the incorporation of the offshore entity.
  • It includes the incorporation date and an identification reference number.
  • It confirms compliance with JAFZA Offshore Company Regulations regarding registration.

Here are the rules for registered agents of an offshore company in JAFZA:

  • No one can act as a registered agent without JAFZA’s approval.
  • The registered agent must always be present in JAFZ or Dubai.
  • The Registrar keeps a register of approved agents.
  • Notify the Registrar if there is a change in the registered agent(s) for the offshore entity in JAFZA.
The company cannot engage in banking, consultancy, insurance, or advertising.

There are a few key differences:

  • An offshore company is not permitted to conduct business in the UAE, whereas a free zone company can import goods and offer services.
  • An offshore company is not eligible for UAE resident visas, whereas a free zone company can typically obtain resident visas.
  • A free zone company may be liable for VAT if it operates within the UAE, but an offshore company is exempt from UAE VAT.
  • An offshore company is the most cost-effective type of UAE corporate entity, whereas a free zone company generally incurs higher costs.

An offshore company in JAFZA is legally allowed to undertake various activities.

  • Conducting international trade
  • Establishing holding companies
  • Owning real estate properties
  • Registering copyrights and patents
  • Providing international consulting services
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