Taxation of holding companies in the territory of the United Arab Emirates

As it has already been mentioned the United Arab Emirates are the country where entrepreneurs may conduct their business activity without the tax burden.

Majority of the emirates divides companies into the two basic categories: companies with the seat in territory of special economic zones (freezonecompanies) and companies with the seat in the continental part of the emirates (on land companies).Shares of the first type of companies must be owned in 100% by the foreign partners. Shares of the “continental” companies in turn may be owned by foreign partners up to the amount of 49%. It is worth noticing that the regulations provide for the possibility of establishing specialised offshore companies, which invest only in securities and property trade.

There is a special economic zone among the emirates constituting the monarchy which deserves particular attention. Its name is Jebel Free Zone also called Jafzaarab لمنطقةالحرّةفيجبلعلي. Jafza is situated in the Dubai emirate and is one of the largest and fastest developing special economic zones in the world. It currently covers about 48 000 km² and almost 7 thousand enterprises have their seat in its territory. Jafza’s authorities stress mainly financial services development, international trade and energy sector.

Establishing offshore companies in the territory of Jefza is regulated by Jebel Ali Free Zone Authority OffshoreCompaniesRegulations.

An established offshore company does not need to meet any of the following requirements in order to receive a licence for registration:

  • the company must not conduct its business activity with the persons possessing the status of the resident of the United Arab Emirates;
  • the company must not own any property located in the territory of the United Arab Emirates;
  • he company must not conduct its business activity in the scope of banking and insurance, and
  • the company must not conduct any other activity forbidden by the authorities of the United Arab Emirates.

However, it must be pointed out that in accordance with the legislature of the emirates, an offshore company will not be treated as the one conducting its business activity with persons possessing the status of the resident of the United Arab Emirates, if these relationships will be of the following nature:

  • legal-advisory;
  • accounting-auditing, or
  • the purpose is the current maintenance of the enterprise’s matters.

The regulations allow the possibility of hiring by the offshore companies the property where their address is. The only property which may belong to the company must be located on the island of Palm or Jumeirah.

The offshore company may be established by a local agent. It must possess at least two directors and one secretary. The regulations do not require the offshore company director to be its shareholder. An individual investor may also become a director or a secretary.