Guide to Corporate Tax for Offshore Companies in UAE
Are you the owner/shareholder in an offshore company registered in UAE? This blog is for you to make your understanding clear about the Corporate Tax in UAE for your Offshore Company.
In the UAE, Offshore Companies can be formed under the following authorities;
• Ras Al Khaima Free Zone Authority
• Jebel Ali Free Zone Authority
• Ajman Free Zone Authority.
Mainly, people are opening and operating offshore companies for holding of assets/ investments/shares, doing international businesses etc. Offshore companies have a closed registry whereas the data are not available in the public domain. An investor who wants to protect their personal data is choosing company formation in Offshore.
Offshore Company can open bank accounts in UAE, and hold assets inside UAE (Example: - Real Estate assets). Apart from this, offshore Companies can neither conduct any business inside the country nor open a physical office in UAE nor take employees under the company in UAE.
With the inception of Corporate Tax in UAE, many people have one question in their mind - What is the status of an offshore company under the UAE Corporate Tax Law? In this article, let us discuss in detail and make a clear understanding for those who have already established offshore companies and those who are planning to start an offshore company.
The Corporate Tax Law published in the month of December 2022 has not given any indication about offshore companies. The Corporate Tax Law explains Free Zone companies and conditions for a Free Zone Company to get 0% Corporate Tax.
A question raised here is regarding the legal status of offshore companies. Some experts interpreted an Offshore Company as a natural person based on the JAFZA Offshore Companies Regulations No.13 which was published in 2023. The regulation explains that an offshore company has the capacity, rights and privileges of a “natural person”. Through this, declaring Offshore Company for UAE Corporate Tax purposes has become a question mark.
As part of clarifications, UAE Tax Authority published Cabinet Decision No.100 of 2023, and Ministerial Decision No.265 of 2023 which gave a lot of insights regarding how a Free Zone company can get 0% Corporate Tax in UAE. If you wish to read regarding this, please click here to access the detailed article with a lot of insights.
Most of the offshore company owners had the understanding that offshore companies are not subject to UAE Corporate Tax due to the limited access of offshore companies in the UAE market. Example: - Offshore companies cannot access UAE ports, and cannot do business inside UAE.
Federal Tax Authority, UAE published a decision which gave a clear idea about the registration deadline for UAE companies which are already established and new companies which are going to be established. FTA Decision No.3 of 2024 was published on 22, February 2024 in the Official Gazette and came into effect on 01, March 2024. This decision explained the Corporate Tax deadline for a company which is already established before 01, March 2024 and licenses issued after 01, March 2024. Furthermore, the FTA Decision No.3 of 2024 explained the Corporate Tax registration deadline for natural persons and the deadline for non-residents as well.
This decision escalated another question which is connected with the legal status of an offshore company, whether natural person or juridical person. Federal Tax Authority, through their seminar and webinars clarified that any company established as per the UAE regulation which has a limited liability in their Memorandum of Association is considered as Juridical Person.
Finally, FTA published a public clarification (CTP001) for FTA Decision No.3 of 2024 and through this document, FTA explained as many examples as possible to determine the Corporate Tax registration for companies.
The clarification is specified as below:-
Registration timeline for juridical persons that are Resident Persons- A juridical person that is a Resident Person shall submit a Tax Registration application for Corporate Tax taking into consideration the date it was incorporated, or otherwise established or recognized under the applicable legislation in the UAE. This includes a Free Zone Person incorporated, established or otherwise registered in a Free Zone. This equally applies to “Offshore Companies” that are incorporated, or otherwise established or recognized under the applicable legislation in the UAE.
Here, being owner of an offshore company, you can take a conclusion as follows;
➥Offshore companies which are registered in UAE are subject to Corporate Tax registration before the deadline. Please read the article by clicking the link to understand the deadline for your offshore company (FTA Decision No.3).
➥Offshore Companies shall file tax the Corporate Tax returns and declare the profit of the company. Standard Corporate Tax rules are applicable for offshore companies.
➥The conditions for a Free Zone company for eligibility of 0% Corporate Tax can be applied by an offshore company as well since offshore companies are considered as Free Zone persons.
To learn more about Corporate Tax for Offshore Companies in UAE, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.