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Dubai: Offshore Legal and Tax Regimes

Forms of Offshore Operation

This page was last updated on 10 March 2021.

Companies approved for operation in the Jebel Ali Free Zone are granted one of the following types of licences, renewable annually for as long as the company holds a valid lease from the Free Zone Authority:

  • A General Trading Licence allows the holder to import, distribute and store all items as per Jafza rules and regulations.
  • A Trading Licence allows the holder to import, export, distribute and store items specified on the licence.
  • An Industrial Licence allows the holder to import raw materials, carry out the manufacture of specified products and export the finished product to any country.
  • A Service Licence allows the holder to carry out the services specified in the licence within the Free Zone. The type of service must conform to the parent company's licence, issued by the Economic Department or Municipality of the relevant Emirate in the UAE.
  • A National Industrial Licence is designed for manufacturing companies with an ownership or shareholding of at least 51% AGCC (Arabian Gulf Co-operation Council).

A Free Zone Establishment - or FZE - is an establishment formed and registered in Jebel Ali and regulated solely by the Free Zone Authority.

Such establishments must have a capital of at least AED1 million and liability will be limited to the amount of paid-up capital. A FZE need only have a single shareholder and is an independent legal entity.

Any company, organisation or individual wishing to form a Free Zone Establishment must submit a completed application form to the FZE Department of the Free Zone Authority. A decision on whether permission has been granted will be given within 30 days of receipt of the application and any other information and documentation required.

If permission is granted, the Authority will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its Special Licence.

In mid-2008, over one-quarter of Dubai's GDP was generated by the Jebel Ali Free Zone, which at that time had over 6,000 companies operating within the zone.

The Dubai Internet City is regulated by a law passed in 2000, and is formally known as Dubai Technology, Electronic Commerce and Media Free Zone. The privileges offered to its occupants are very similar to those applying in Jebel Ali. In line with Dubai's liberal economic policies and regulations, Dubai Internet City offers foreign companies 100% tax-free ownership, 100% repatriation of capital and profits, no currency restrictions, easy registration and licensing, stringent cyber regulations, protection of intellectual property.

The Dubai International Financial Centre (DIFC) was launched in 2003 and began operations in late 2004. It was intended to fill a significant gap in the market for international Shariah banking, fund management and life assurance. The proposed regulatory framework was published for industry consultation in June, 2003. Philip Thorpe, chief executive of the DIFC Regulatory Authority, explained that: "We have...made good use of our freedom to create a single, logical framework - in contrast to older-established jurisdictions, who often have to make (do) and mend within existing frameworks which may gradually become more complex and less relevant."

In July, 2003, the UAE Federal Cabinet approved a Federal Decree allowing the DIFC a large degree of sovereignty. In addition to confirming the appointment of General Sheikh Mohammed bin Rashid Al Maktoum, UAE Defence Minister and then-Crown Prince of Dubai (now Ruler) as the President of the DIFC, the decree officially created the DIFC Financial Services Authority, the DIFC Judicial Establishments and the DIFC Registrar of Companies.

The DIFC has a separate set of laws called the Commercial Code, comprising a comprehensive set of regulations like company law, legislation on property rights, including laws on security and collateral, title to goods and securities, commercial transactions and contracts, and insolvency.

In January, 2004, the Dubai Financial Services Authority (DFSA) announced that 12 new laws relating to operations within the Dubai International Finance Centre (DIFC) had been put in place. Chief executive officer of the DFSA, Philip Thorpe explained that:

"The 12 new laws have been drafted by the DFSA to world-class standards, using the best examples of legislation from around the globe. They are clear and concise, and will provide certainty as to the rights and obligations of the financial institutions and other companies who will operate in or from the DIFC."

The laws (to which the DFSA has provided access on its website) are:

  • Regulatory Law; 
  • Companies Law; 
  • Law on the Application of Civil and Commercial Laws in the DIFC; 
  • Law Relating to the application of DIFC Laws; 
  • Limited Liability Partnership Law; 
  • Contract Law; 
  • Insolvency Law; 
  • Arbitration Law; 
  • Data Protection Law; 
  • Commercial Court Law; 
  • General Partnership Law; and 
  • Markets Law.

In June 2005, five new laws dealing with legal obligations, employment and security interests in relation to the Dubai International Financial Centre were enacted.

The new legislation comprised:

  • Employment Law No. 4 of 2005. This law provides for minimum employment practices comparable to established international standards, so as to promote fair treatment of employees and employers;
  • Law of Obligations No. 5 of 2005. This law creates a framework for claimants to seek recovery for non-contractual claims and sets out the rules as to when obligations arise and how disputes involving them are resolved;
  • Implied Terms in Contract and Unfair Terms Law No. 6 of 2005. This law provides for fairness and certainty in contracts governed by the laws of the DIFC by providing terms and conditions not normally included in contracts and assures the necessary framework for their enforcement;
  • Law of Damages and Remedies No. 7 of 2005. This law creates the structures necessary to assure the recovery of damages and other forms of relief to claimants within the DIFC; and
  • Law of Security No. 9 of 2005. This law defines various forms of security interests as collateral for repayment of debts and prescribes the process for their perfection and enforcement.

Then in November 2005, the DIFC Trust Law 2005, which provides a comprehensive framework for the creation of trusts in the DIFC, was enacted. Consisting of ten major sections, the legal framework encompassed matters such as choice of governing law, place of administration, creation, validity and modification of a DIFC trust, office of trustee, and duties and powers of trustees.

The Trust Law, DIFC Law No. 11 of 2005 followed closely the enactment in September of the Personal Property Law No. 9 of 2005, which defines the rights and obligations of parties in relation to property other than real estate (land and buildings) located in the DIFC, and the Law Relating to the Application of DIFC Laws (Amended and Restated) No. 10 of 2005.

In 2006, both the Companies Law and the Limited Partnerships Law were amended.

In February 2008, the new DIFC arbitration law was enacted by Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. The new law facilitated the establishment of the DIFC's Arbitration Centre and adopted the UNCITRAL Model Law, with amendments aimed at improving its provisions. The reform also widened the scope of arbitrations which the law governs, to include all types of arbitrations and parties opting to arbitrate at DIFC.

In November 2008, the DIFC released its proposed updates on Companies Law and Insolvency Law for public consultation.

The Companies Law has been updated to include the registration requirements laid down by the DIFC Registrar of Companies. The Insolvency Law has been updated to include changes in applications and procedures for winding up Protected Cell Company (PCC) structures used by insurers to provide an easy and cost-effective way for smaller organizations to establish captive insurance units.

Also in November 2008, the DIFC announced that it had enacted new regulations that enable companies within the financial district to quickly form Special Purpose Company (SPC) structures. The new regulations allow companies to create SPCs for facilitating both Islamic and conventional transactions as well as vessel registrations. Transactions that can be facilitated by the new law include acquisitions and financings. Under the law, Special Purpose Companies can be easily structured and incorporated, while enjoying exemptions from some filing and disclosure rules relating to conventional companies in DIFC.

In December 2012, the DIFC Authority confirmed the enactment of four new laws, the Employment Law Amendment Law, the Real Property Law Amendment Law, the Data Protection Amendment Law, and the Non-Profit Incorporated Organisation Law, by Sheikh Mohammed Bin Rashid Al Maktoum, the ruler of Dubai.

The Non Profit Incorporated Organisations Law introduces a new regime for non-profit organisations whose purpose is to support the growth and development of the financial services sector in the DIFC. Under the new legislation, non-profit organisations wanting to establish in the DIFC will have to incorporate as bodies corporate, founding members have to be residents of the UAE and they may only carry on authorised activities as defined in the Non Profit Incorporated Organisations Law.

The amendments to the Employment Law, Real Property Law and Data Protection Law seek to provide greater legal certainty by addressing a number of deficiencies and impracticalities which have been identified since the establishment of the DIFC in consultations launched in December 2011.

The four laws will come into force on December 23, 2012 and have been made available online. The Board of Directors of the DIFC Authority also made regulations under the Non Profit Incorporated Organisations Law and the Data Protection Law, which will also come into force from this date.



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