RAK Offshore Company as a Holding Company
Oxford Tax Solutions
06 October, 2015
The following article outlines the pros and cons of using a RAK Offshore company as a holding company. The article evaluates the usage of a RAK Offshore company as a holding company for a United Arab Emirate (UAE) Free Zone corporations as well as a holding company operating according to an offshore model structure. Other features such as estate planning and protection of assets will also be evaluated.
Reasons to Use a Holding Company
A holding company carries a number of benefits including:
Asset Protection - A holding company is used to distribute or allocate a company's assets that is actively engaged in trading activities. Trading Companies have high risk of asset freezing or lawsuits because they work based on contracts and engage in numerous economic activities. A holding company is used to protect assets and thus guaranteeing that the assets of a company will not be accessible to creditors.
Holding companies are used to keep all assets under one roof. This is known as a Top Holding company. A holding company is also used to transfer or relocate shares when the owner of a company dies.
Tax Planning - A holding company may be used to combine and reinvest profits generated from subsidiary companies. By doing so, a holding company can be used to pay taxes is an efficient manner which would benefit the company. Additionally, if structured efficiently, holding companies that are located in tax-friendly countries are advantaged regarding taxation.
Obviously, the aforementioned are only several of the features and benefits that accompany a holding company.
The Benefits a RAK Offshore Company when used as a Holding Company
The main features of a RAK Offshore Company are outlined below:
- The UAE is a tax-free jurisdiction; therefore, companies located within the UAE are not subject to taxation.
- RAK does not require annual audit of the company's finances, which saves both money and time.
- Both the directors and shareholders do not appear on public records, which guarantees their details remain confidential. Due to the fact directors and shareholders details are kept private they are also protected from creditors.
- The UAE's extensive and wide tax treaty network can benefit companies operating within the country.
- The UAE's banking system is effective and efficient.
- The UAE is known internationally for its business-friendly environment.
Why Use a RAK Offshore Company as a Holding Company for a UAE Free Zone Company
After reviewing the general benefits of setting up a company within the UAE and RAK, the article will concentrate on the benefits attributed to having shares in a UAE Free Zone Company in order to explain the reasons a RAK Offshore Company is the best choice to make.
For starters, we have already mentioned the general benefits a RAK Offshore Holding Company provides, such as estate and tax planning, confidentiality and asset protection. Besides the aforementioned advantages, a RAK Offshore Holding Company also guarantees that:
- Companies will not face any legislation problems since it is located within the UAE.
- UAE free zones verify the registered agent's stamp and signature. Therefore, when a new company policy is introduced or a business decision is made, the registered agent holds the power of attorney. This is significant since the majority of free zones within the UAE require an individual that has power of attorney to be present during the incorporation procedure. In this way, the businessperson does not need to spend money on flights and waste valuable time just to be present during the incorporation process. The registered agent has the power to act on behalf of the businessperson. The registered agent can also act on behalf of the businessperson when opening bank accounts and/or any other situations where the presence of the businessperson is required.
- In the UAE, all the company's assets such as real estate property or legal entities are subject to the Sharia Legislation, which is extremely beneficial to foreigners especially in terms of inheritance.
RAK Offshore Company with a International Corporate Structure
A RAK Offshore Company is effective when used as a UAE free zone-based holding company. However, using a RAK Offshore Company that holds an international corporate structure is more complex and needs additional planning.
For starters, in situations where a RAK Offshore Company is used to hold a foreign company's shares, the foreign authorities or banks require to review the original and legal corporate documents. The cost of legalizing documents ranges from 600 to 900 Euro per document. Furthermore, numerous countries do not hold embassies within the UAE which makes the legalization of documents more difficult and complicated. Also, each time an alteration is made in regards to the company's structure, or a certificate of good standing needs to be presented or a new resolution is put in to force, new legislated documents mat be required by the foreign authorities.
Besides the legal documentation, businesspeople must also take into consideration inheritance features. From the UAE's perspective, it is beneficial to use a holding company for the accumulation of assets. However, wealthy individuals may not wish to accumulate all the assets in regards to his/her estate planning.
Moreover, when using a UAE Offshore Holding Company as a subsidiary company for an international corporation, three vital features need to be considered:
- UAE Banks are obligated by the central bank to review all the shareholders legalized corporate documents. As mentioned earlier, the legalization of documents is a costly and complex procedure.
- Several UAE banks and free zone authorities have trouble comprehending large corporate structures.
- RAK FTZ requires annual certificates of good standing from all the shareholders of a company.
Finally, when the company is finally set up and any inheritance issues have been resolved, the outcome is advantageous since businesspeople operate a company within a tax-free, business-friendly and economically stable environment.
A RAK Offshore Company is ideal when set up to be used as a holding company. This is because legal costs and business risks are low and the setting up process is easy and simple. When planning to use a RAK Offshore Company as an international company, the setting up process is more complex and requires additional expenses when it comes to legalizing corporate documents. Nonetheless, once the company has been established and incorporated, it will enjoy operating within a tax-free and business friendly environment.
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