The Jebel Ali Free Zone Authority (JAFZA), established in 1985, is one of the oldest, largest and most reputed free zones in the UAE. The free zone started facilitating offshore company formation in Dubai in 2003 after promulgating the JAFZA Offshore Companies Regulations 2003. The JAFZA company formation regulations allow investors and corporate bodies to establish offshore or non-resident companies in the free zone.
JAFZA offshore company formation is ideal for investors who want to form an entity to use it as a holding company or purchase properties within Dubai. Investors generally set up an offshore company in JAFZA to minimize tax liabilities or protect assets. JAFZA offshore companies are not allowed to conduct any business activities in the UAE, and the Authority will issue a certificate of incorporation instead of a trade license. The investors need to set up an offshore company through registered agents in Dubai who will provide the office space for the company. Read ahead for more details:
JAFZA Offshore: A Strong Investor Magnet
Since its inception, JAFZA has been attracting investors from all over the world to set up an offshore company in Dubai. The factors that make JAFZA a preferred destination for foreign investors are diverse. Some of them are:
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- Foreigners of any nationality are entitled to 100% company ownership
- JAFZA offshore companies are subjected to zero corporate tax
- Investors can open bank accounts under the company’s name in the UAE
- The formation of a JAFZA offshore company is the best way to own real estate properties in Dubai. An offshore company incorporated in JAFZA can own real estate properties on Palm islands or any properties owned by Emmar Nakheel Company LLC, Dubai Holdings or any other real estate properties approved by the free zone Authority.
Key features of a JAFZA Offshore company
Setting up an offshore company in JAFZA is flexible and straightforward. However, the Authority mandates the foreign investors to abide by specific rules and requirements that help JAFZA maintain its global reputation. Investors need to consider the following features and requirements while setting up an offshore company in JAFZA:
A JAFZA offshore company requires at least one shareholder, and the shareholder can also be a corporate entity. The shareholders are responsible for deciding the capital structure of the JAFZA offshore company.
An offshore company incorporated in JAFZA needs to have at least two directors, but the Authority doesn’t allow the appointment of corporate directors.
All offshore companies incorporated under JAFZA must have a secretary.
4. Account Keeping and Audit Requirement
All the JAFZA offshore companies must keep the accounting records for ten years from the date on which they are made. The company’s accounting records will be approved by the directors, and one of them needs to sign the records. Offshore companies need to appoint an auditor approved by JAFZA, who will examine and report in accordance with these regulations upon the accounts prepared.
5. Local Requirements
Offshore companies incorporated under JAFZA must maintain a registered office in JAFZA free zone and appoint a registered agent. Since an offshore company doesn’t have a local physical presence, the investors can use the office of registered agents in Dubai as the company’s registered office.
6. Time Taken for Company Incorporation
An offshore company can be registered with JAFZA in less than ten days.
Ultimate Beneficial Ownership for JAFZA Offshore Companies
Offshore companies incorporated under JAFZA are required to disclose their Ultimate Beneficial Owner (UBO). In addition, they should also maintain a Real Beneficiary Register (RBR) and a Partners of Shareholders Register (PSR). A company undergoing liquidation is also required to meet the UBO rules. Failing to meet the UBO obligations will result in hefty penalties.
A UBO is defined as either of the following:
- Any person who owns or ultimately controls the company through direct or indirect ownership
- Whoever owns at least 25% of the entity’s share capital or has 25% or more of the voting rights
- Whoever holds ownership powers through other means like the right of appointment or dismissal of Managers
Economic Substance Regulations for JAFZA Offshore Companies
Companies incorporated under JAFZA offshore are required to annually assess whether they are subject to Economic Substance Regulations (ESR). If the companies have conducted any of the nine relevant activities, they must meet ESR requirements such as ESR notification, ESR Report filing and meeting the Economic Substance Test. The nine relevant activities under ESR are Banking, Insurance, and Holding Companies. Headquarters business, Investment Fund Management, Lease-Finance business, Shipping, Intellectual Property business, Distribution & Service Centre business.
JAFZA has adequate resources and infrastructure to help the companies meet the ESR test, such as adequate full-time employees, directors & managers, adequate premises, assets etc. These assessments should be made every year, and the obligations must be met annually. Failure to meet the ESR obligations will land the companies in serious legal troubles, including penalties and sharing of information with foreign competent authorities. Registered agents in Dubai can assist the companies with annual assessments ad filing requirements.
Hire the Best Registered Agents in Dubai for Offshore Company Formation
Foreign investors prefer JAFZA offshore company formation due to zero taxes, 100% ownership, ability to open bank accounts and own real estate properties in Dubai. However, the investors need to hire registered agents in Dubai, such as Jitendra Business Consultants (JBC), to set up an offshore company. JBC has a good reputation with all the free zone authorities in the UAE, including JAFZA. We can provide the investors with a premium office address at JBC’s premises in JAFZA. JBC can undertake all the administrative tasks for the companies. Apart from that JBC can help the companies avoid ESR, and UBO penalties by properly meeting the obligations.