Opening an offshore company for an online business

Offshore in the internet business has been attracting increasing interest among Russian entrepreneurs in recent decades. How can one register such a company in the UAE and use an offshore scheme to reduce the tax burden? Let's figure it out.

Features of opening an offshore for online business

An offshore company is a legal entity registered in one of the states or parts of its territory where non-resident firms can enjoy preferential tax and licensing regimes if their business activities are conducted outside of that country. In most offshore jurisdictions, companies are not required to undergo audits or provide financial reporting. They either do not pay corporate income tax or pay it at a low rate.

You can register a new offshore company or buy a ready-made one.

When opening an offshore corporate organization for infobusiness or other types of online activities, several points should be considered:

• Legislative regulation of e-commerce continues to remain imperfect and contradictory in almost all countries.
• Measures against offshore companies and attempts to minimize taxes using them are constantly being taken in developed countries.
• Many banks and payment systems refuse to work with firms registered in offshore zones, which complicates online commerce as it is impossible without acquiring.

The United Arab Emirates is included in the list of states and territories recognized by the Ministry of Finance of the Russian Federation as an offshore zone. UAE jurisdiction has a positive reputation worldwide. It is not included in international blacklists or grey lists of offshore zones. This country has signed agreements on the avoidance of double taxation with more than 50 states.

Features of offshore zones in UAE free economic zones

One hundred percent foreign ownership is allowed for an offshore. An offshore company must be registered in one of the UAE's free economic zones. The most advantageous for doing business are Jebel Ali Free Zone, Ajman Free Zone, and International Corporate Centre. Dubai Internet City (DIC) specializes in online business. Almost all offshore zones will require confirmation of financial viability. Nominal capital transferred to an account in one of the country's banks can serve this purpose.

Non-residents can open businesses remotely on par with residents. The amount of authorized capital depends on the free economic zone. In Dubai, it ranges from 0 to 300,000 dirhams (approximately $83,000).

Minimal requirements are imposed for financial and accounting reporting. Communication with relevant government agencies is conducted online.

The timeframe for establishing an offshore depends on the zone and ranges from two weeks to 40 working days. During this time, a package of documents is prepared, reviewed, and processed.

Features related to the specifics of online business

In addition to registering a legal address in one of the UAE's free economic zones, it is necessary to transfer a domain there, purchase hosting space, and set up a virtual office.

It is also necessary to choose a payment system. For turnovers of up to $20,000, DalPay is suitable, and for turnovers exceeding $50,000, Merchant is recommended.

Stages of opening an offshore company for online business

Offshore companies for online business are registered in the form of IBC. Their employees and owners cannot apply for a resident visa. Companies are prohibited from leasing commercial real estate within the country outside of a specific free economic zone.

The following set of documents will be required for registration:

• Articles of incorporation;
• Memorandum of association;
• Information about the founders (full name and address);
• Information about the amount of authorized capital, nominal value of the company's share, and number of shares.

Registration is done online on the website of the chosen free economic zone. After submitting the application, the applicant is provided access to a unique portal account. A special application with instructions and an online service calculator is launched for them. The application is reviewed by the administration of the free economic zone, whose representatives then contact the applicant.

What is needed to open an account in an offshore bank

Opening an account in an offshore bank in the UAE is not an easy task. The problem is that there are lists of countries (e.g., Syria, Ukraine, Iran) whose residents are not allowed to open accounts in the Emirates at all. Difficulties may also arise for residents of countries classified as high risk. These include citizens of Cyprus, Russia, Malta, China, etc. They can only obtain approval for opening an account in a UAE bank for an offshore company by carefully preparing a set of documents, including:

• Bank statement from the parent company and/or founder's account with documents confirming some of the transactions;
• Business plan of the company with forecasts regarding future turnover, potential suppliers, and customers;
• Legal documents on the company's registration in the UAE;
• Passports of the owners;
• UAE entry stamp in the founder's passport;
• Documents confirming the existence of a similar non-offshore business in the Emirates or another country within the past three years, along with verified financial reports.

Depending on the specific bank, the list of documents for registering an online business may vary.

It is essential to meet with the banker in person. Opening an account for an offshore company cannot be done online or through intermediaries.

Funds can be transferred abroad from a bank account in the Emirates without restrictions. There is no currency control in this country.

You can obtain offshore registration services for online businesses in the United Arab Emirates from The Level Consulting company. We will assist with account openings and provide legal support.

Tax Requirements

In the UAE, there is a federal tax authority, FTA. Starting from June 1, 2023, a 9% levy is planned to be introduced in the legislation of the Emirates for all companies with annual income of 375,000 dirhams ($102,100) or more. The exceptions include enterprises engaged in mining of natural resources and foreign banks.

Offshore companies registered in the United Arab Emirates that provide internet services, such as infobusiness, are fully exempt from paying taxes in this country.

By registering an offshore internet business in the Emirates, owners of companies whose activities are related to providing online services will be able to conduct business in the most comfortable conditions and increase their profits.