RAK, UAE, and traditional tax havens 

What is the difference between the United Arab Emirates (UAE) and other popular tax havens? Why more and more international traders and investors find the UAE to be one of the best places to incorporate offshore companies for various reasons and purposes?

Due to the EU Savings Directive of 2003 and recent US-EU initiatives to wipe out tax havens, many of traditional low tax jurisdictions fall under great pressure. In 1998 The UK parliament has converted British Dependent Territories – such as Bermuda, BVI, Caymans, Gibraltar, Turks & Caicos – to British “Overseas” Territories. And, of course, the UK government in conjunction with the Commission of the European Community (EU) and the Organization for Economic Cooperation and Development (OECD) may apply greater control over its tax haven progeny.

But UAE is not a dependent or “overseas” territory of another country. The United Arab Emirates is a “real” country with a “real economy” with a population of approximately more than 4 million. It has an established history of international trade, finance and business, and today it is one of the fastest growing countries in the world with one of the highest standards of living.

Staying far from the USA and EU, the UAE is not subject to their strict regulations. And being strategically vital to US/Western interests, the UAE will be with great probability left alone for the seeable future.

UAE is not a member of the Organization for Economic Cooperation and Development (OECD) and thus there is no foreign exchange of information. At the same time UAE is not on the OECD “blacklist” of tax havens (nor the FATF blacklist).

UAE has Double Taxation Avoidance Agreements (DTAA) with a number of countries – such as Austria, Belarus, Belgium, Canada, China, Czech Rep., Egypt, Finland, France, Germany, India, Indonesia, Italy, Lebanon, Malaysia, Malta, Morocco, New Zealand, Pakistan, Poland, Romania, Singapore, Sudan, Thailand, Tunisia, Turkey and Ukraine. Double taxation agreements prevent individuals and corporations from paying tax on the same item during the same time period. These agreements determine which of the two states concerned should levy tax in a particular situation.

The United Arab Emirates is a federation of seven independent Emirates and Ras Al Khaimah (RAK) is the seventh Emirate that joined the UAE in 1972. Local corporate legislation is governed by RAK Investment Authority (RAKIA). The companies are regulated under RAK Offshore Regulations 2006.

Speaking about the advantages of RAK offshore jurisdiction we can point the following important aspects:

• Political and economic stability of the jurisdiction;
• The availability of a modern and flexible legislative framework;
• Simple incorporation and filling requirements;
• The availability of Double Taxation Avoidance Agreement (DTAA);
• State of the art banking system;
• State of the art telecommunication facilities.

The following activities could be conducted through RAK offshore company:

• General Trading;
• Consulting and Advisory Services;
• Holding Company;
• Property Owning;
• International services;
• Professional Services.

The fiscal & regulatory benefits of RAK offshore company are wide and in brief can be described as follows:

• 100% Income tax and Corporate tax exemptions;
• No import or export taxes;
• No income, sales or wealth tax;
• No capital gains tax; no VAT (value added tax); no withholding tax;
• 100% repatriation of capital and profits;
• No foreign exchange controls; No restrictions on currency.
• No restrictions on hiring expatriates;
• Proximity to entire Gulf and global markets.

The main features of RAK offshore company are:

• It does not need to have physical offices in the UAE;
• It may have non UAE resident as a director and/or a shareholder;
• It may have corporate director/corporate shareholder;
• It does not require the shareholder/director to be physically present in the UAE for incorporation;
• It may own real estate in the UAE, with prior authorization from RAK Investment Authority;
• It may maintain bank accounts and deposits in the UAE or worldwide;
• It is not obliged to maintain its books and records;
• It may hold shares in other UAE and worldwide companies.

RAK offshore company has several limitations, though:

• It may not carry on business within the UAE;
• It may not obtain UAE Residency Visa;
• It may not do banking and insurance business without special license.

Incorporation of a RAK offshore company is fast and simple. The main statutory regulations could be briefly described as follows.

• It is possible to register RAK International Business Companies bearing the status of “Limited” or “Ltd.”.
• Incorporation is fast and can take only 24 hours.
• Minimum capital is not required for the incorporation of an offshore company. However, it has to be mentioned on the MOA.
• Share capital may be divided into different classes. Bearer shares are not allowed. Shares may be issued fully, partly or nil paid.
• A company may be formed with minimum of one shareholder and there is no limitation as of maximum. Corporate shareholders are allowed.
• No requirement for a local resident to be a Shareholder. A company could be owned by foreign bodies; only proof of residence is required to be submitted.
• Sole directors are permissible. There is no statutory limitation for maximum number of directors. Corporate directors are allowed.
• The director can be a UAE resident or any foreign citizen but he is required to submit the proof of residence and other relevant documents.
• The directors may meet at such times and places within or outside the UAE as the directors may determine to be necessary. Telephone and other electronic meetings are allowed.
• There is no public register of directors, although the company may voluntarily file its register of directors with the Registrar.
• There is no obligation to maintain the company books and records or provide reports on its activities.
• The company must at all times have a Registered office and Registered agent within Ras Al Khaimah.
• A company must have a common seal.

RAK Offshore Company can be registered only through agents who are officially registered as a corporate service provider of RAK Offshore and who have the necessary expertise and skills to run and supply offshore companies. Being such an officially registered corporate service provider Privacy Unlimited collaborates with the RAK Offshore Registrar directly to incorporate the clients within the RAK Offshore legal framework.

Source: lawtax – RAK, UAE, and traditional tax havens

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