RAK Offshore Company Formation Made Easy

The Government of UAE released Cabinet Decision No. (58) of 2020 on 24 August 2020 regarding the beneficial owner procedures (“Cabinet Decision”), which applies to RAK offshore companies. The Cabinet Decision mandates that offshore companies have to declare the information about Ultimate Beneficial Owners (“UBOs”) to the relevant licensing authority. This means that RAK offshore companies have to disclose UBO details to the Ras-Al-Khaimah International Corporate Centre (RAK ICC).

If your RAK ICC company does not file UBO information, then the company owners can invite penalties of up to AED 100,000. Considering this backdrop, it has become essential to answer the burning questions related to UBO declarations. In this article, we have attempted to answer the key questions about UBO declarations:

1. Who is a UBO?

Any individual that ultimately benefits from a company is a UBO. A UBO is an individual that has ultimate control over a business. A UBO for a RAK offshore company is identified after considering certain factors. By definition, UBOs are persons who ultimately own or control the company. The control can be exercised by holding shares or voting rights. As per the Cabinet Decision, a UBO is any individual having minimum 25% shareholding of the company (whether through direct or indirect ownership), along with voting rights. UBOs can also appoint or dismiss directors / managers.

So, what all does the UBO declaration consist of? A declaration made by a RAK offshore company for its UBO includes generally the names of directors / managers acting in accordance with the instructions of another person. The declaration also includes the information about partners and shareholders to the extent of their voting rights and the date they acquired ownership of the RAK ICC company.

2. Who should declare UBOs?

All companies in UAE must declare their UBO information. It does not matter if the company is registered with the mainland, free zone or offshores. RAK offshore companies have to timely disclose the details of their UBOs, even though they are registered in UAE but operate outside of UAE.

3. Where to file UBO details?

Each type of company has a different authority with which they are required to submit UBO details. This is because companies in UAE are differentiated on the basis of their registration with the mainland, free zones or offshores. Any UAE offshore company has to declare the information of the UBO to the offshore registration authority that has issued the license of the company. The licensing authority for UBO declaration for companies registered in Ras Al Khaimah is the RAK ICC.

Various deadlines are issued by the Government of UAE and RAK ICC for filing and updating the details of UBOs for RAK offshore companies. It is very important that RAK ICC companies file their UBO details with the given deadlines. This will help your offshore company avoid penalties.

4. What to include in the UBO declaration?

The below mentioned UBO details should be disclosed to RAK ICC by RAK offshore companies:

• Identification details of the UBO. This includes – name, nationality, date, place of birth and address.
• Details of identity card, the country of issuance, date of issuance, and date of expiry.
• Date and basis on which a person became the UBO.
• Date on which a person ceased to be the UBO, if applicable.

Any amendment in the information of a RAK offshore company’s UBO, shareholders, or directors must be notified to RAK ICC within fifteen (15) days of the said change.

5. How vital is UBO disclosure?

The Government of UAE released the Cabinet Decision to bring transparency and accountability in business transactions in UAE by developing dependable procedures in respect to beneficial owner data.

The Government of UAE issued the Cabinet Decision to avoid financial crimes in UAE. One example of financial crime is money laundering. Money laundering takes place through formation of shell companies, wherein these companies attempt to conceal the names of the people gaining ultimate benefits. To fight this, UBO declaration is vital for any economy to examine a flow of legitimate money. Shortcoming in screening of UBOs can put at risk violation of local UAE laws and can also damage the UAE economy.

6. What are the penalties?

RAK offshore companies can be penalised by the Ministry of Economy, UAE if they do not declare UBO details within the prescribed deadlines. The punishment depends on the number of times a company commits a particular violation. A written warning is presented if it is the first time. After the second time, fines are imposed on a company. Upon the third and final occurrence, the Government of UAE may not only impose fines but also temporarily suspend the license of the RAK Offshore company.

Some examples of the penalties are given here:

• If the company does not maintain a register of UBO data – fines up to AED 100,000 and suspension of the trade license for at least twelve (12) months.
• If the company does not maintain a register of partners / shareholders – fines up to AED 100,000 and suspension of the trade license for at least twelve (12) months.
• If the company fails to provide additional information requested by the registrar – fines up to AED 10,000 and suspension of the trade license for at least one (1) month.

Many other violations regarding details of shareholders, liquidators, filing and much more are given in the Cabinet Decision. Therefore, all companies must follow the governmental regulations, and timely file UBO declarations.

7. How can InZone help?

InZone assists in company formation and compliances of RAK ICC companies. InZone’s lawyers specialise in laws concerning UBO declarations. We can help companies timely file their UBO data. Feel free to contact us for your RAK ICC company’s UBO filing.

The UAE is one of the few offshore jurisdictions that have implemented the Economic Substance requirements of the Organization for Economic Co-operation and Development (OECD) and the European Union Code of Conduct Group on Business Taxation. The introduction of the Economic Substance Regulations (ESR) in the UAE means that the country is now fully compliant with the international tax commitments on tax cooperation. The result of this compliance is that the UAE is now one of the very few offshore jurisdictions named on the ‘whitelist’ of the European Union.

According to the UAE Cabinet of Ministers Resolution No. 31 that implemented the ESR, all business established in the UAE (including the offshore companies) that conduct any Relevant Activities (listed below) will fall within the scope of the ESR. This means that these businesses will be required to maintain a certain economic presence in the UAE in connection with the activities undertaken by them.

What are Relevant Activities under ESR?

The Relevant Activities that fall within the scope of the ESR are:

• Banking Business
• Insurance Business
• Investment Fund management Business
• Lease – Finance Business
• Headquarters Business
• Shipping Business
• Holding Company Business
• Intellectual property Business (“IP”)
• Distribution and Service Centre Business​

No impact on businesses ‘not’ carrying out Relevant Activities

Any businesses that do not carry out any of the Relevant Activities are not required to maintain any economic substance in the UAE. These businesses are outside the scope of the ESR. They can carry on their operations without the requirement to file any economic substance returns to the RAK ICC.

RAK offshore companies gaining more popularity

As a result of the implementation of the ESR in the UAE, RAK ICC has emerged as one of the most sought-after offshore jurisdictions in the world for the formation of offshore companies.

RAK ICC is well positioned to provide all necessary support and infrastructure to the offshore companies registered with it to enable them to meet the economic substance requirements. These mechanisms include setting up subsidiaries through RAKEZ free zone (through premium product of the RAK ICC), opening branch offices and using outsourcing solutions.

The developments on ESR have also resulted in a number of companies registered in other offshore jurisdictions migrating to RAK ICC. Everchanging shareholder priorities have ensured a strong shift from other offshore centres to RAK ICC. As part of this redomiciliation, companies maintain their existing legal status along with their operational and banking history. This is also seen as one of the best means to meet their ESR requirements.

The introduction of ESR provides a strong platform to RAK ICC to attract more shareholders from other jurisdictions in a country that has substance and is cost-effective.

Which jurisdictions are on EU blacklist?

According to the revision released on 27 February 2020, the following jurisdictions are on the blacklist of the EU as being non-cooperative jurisdictions:

• American Samoa
• Cayman Islands
• Fiji
• Guam
• Oman
• Palau
• Panama
• Samoa
• Seychelles
• S. Virgin Islands
• Vanuatu

Accordingly, RAK ICC has a significant competitive advantage as an offshore corporate registry due to its compliance with international standards and being located in the UAE which is fully compliant with the economic substance requirements of the EU and OECD.

How we can help you?

We assist our clients in:

• Determining whether the company in question is in scope of the ESR
• Identifying risks of non-compliance
• Filing the ESR notifications
• Meeting the economic substance test
• Filing ESR returns

Given the Covid-19 situation, RAK ICC has changed its procedures to allow RAK offshore company registration without having the original signed company documents to be submitted.

Earlier, shareholders and directors residing outside the UAE were required to send us originals of the following documents by courier:

1. Memorandum and articles of association.
2. Director consent letter.
3. Agent appointment letter.
4. Duly notarised specimen signatures of shareholders and directors.

The entire process of RAK Offshore company formation can thus be completed in the comfort of your home.

The above process is now applicable to all shareholders and directors regardless of their residence (i.e. inside or outside the UAE).

RAK ICC has ensured to maintain high standards of service during the current situation. The overall process for the completion of RAK Offshore company formation should require less time as we would not require the original company documents to be couriered to us by you.

We are offering a minimum discount of AED 7,000 on RAK ICC company formation packages during this time.

RAK ICC Foundations have been launched in 2019 by the RAK ICC to offer a comprehensive framework for investors looking to protect and manage their wealth in the UAE and around the world. The legal framework for these Foundations is provided in RAK ICC Foundations Regulations 2019.

At a basic level, a Foundation is a legal entity established with the RAK ICC that provides an option to the investor to achieve various wealth distribution structures including estate planning and asset protection. The Founder establishes a Foundation to hold assets for the benefit of the qualified recipient.

A Foundation is quite similar to a Trust, a concept that is commonly used in common law jurisdictions. The fundamental difference between a Foundation and a Trust is that the Foundation is incorporated as a legal entity. Foundation thus has a distinct legal personality that separates liability while allowing full control of assets.

A Foundation also has a perpetual existence that continues to operate even after the death of the Founder. The Council of Members or the Guardian (as per their appointment) continue to operate the Foundation for the benefit of the qualified recipient. A qualified recipient in a Foundation is similar to a beneficiary appointed in a Trust.

Here are some of the possible structures of RAK ICC Foundations with RAK offshore companies:

Shares of RAK Offshore Company

A Foundation can be established by the Founder to own shares of a RAK offshore company. The offshore company based in the UAE can then in turn either own other assets around the world. The offshore company can undertake any business activities outside the UAE. Under this structure, any dividends of the offshore company flow back to the Foundation and are distributed to the qualified recipient.

Real Estate Assets

RAK ICC Foundations are not permitted to directly own real estate properties. However, the Founder can set up a RAK offshore company as a wholly owned company of the Foundation. The offshore company can then in turn own real estate properties either in the Emirate of Dubai or Ras Al Khaimah. The income of the real estate properties continues to flow to the qualified beneficiary through the offshore company.

Bank Accounts

Bank accounts can be set up in the name of RAK ICC Foundations where the funds can be kept by the Founder. The funds can be applied for the benefit of the qualified recipient.

Estate Planning

RAK ICC Foundations can be used as an effective tool for estate planning by the investors. The Council of Members can control the decision making in relation to the assets owned by the Foundation. These assets may either by owned by the Foundation directly or through a RAK offshore company. The assets can also be sold or otherwise managed in the best interests of the qualified recipient.

The above structures are the most common structures used for the RAK ICC Foundations. However, Foundations can also be used in a variety of other ways to ensure that the objectives set out in the Foundation charter are met.

InZone establishes RAK ICC Foundations and provides comprehensive advice to its clients around the world on the available structures.

Recently, the Ras Al Khaimah International Corporate Centre released a statement, as per which, the RAK ICC does not require corporate shareholders to furnish a Certificate of Good Standing for the below services:

1. Addition / removal of the Nominee Board Member / Trustee.
2. Preliminary onboarding of an agent.
3. Annual return filing.
4. Amendment to the share capital of a company.
5. Renewal of a company license.
6. Incorporation of a company.
7. Transfer of domicile of a company.

However, there is a caveat to this. A Certificate of Good Standing is not required only in cases where the name of the corporate shareholder is displayed on the National Economic Register of UAE. In such cases, the screenshot of the National Economic Register displaying the details of the corporate shareholder must be submitted to RAK ICC, in lieu of a Certificate of Good Standing.

RAK ICC has exempted the submission of the Certificate of Good Standing to facilitate the ease of doing business and to reduce the cost of doing business.

National Economic Register

UAE’s National Economic Register is a centralised registry of UAE consisting of the details of all the companies registered in UAE. The general details of a company found on the National Economic Register would include the name of the company, name of the shareholders, registered address of the company, business activities of the company, among others.

A UAE company on the National Economic Register can be found by entering the below details:

1. Company name.
2. Company’s license number.
3. Company’s CBLS number.
4. The business activity of the company.

For further inquiries about RAK ICC company formations, contact InZone today.

Opening a bank account is a necessary component of any offshore business setup. It is important to understand the bank’s requirements, follow the correct procedures, and prepare the necessary documentation. If the aforementioned things are not done right, the bank might reject your application for opening the account. Through this article, we aim to simplify all aspects of opening a bank account for offshore companies in the UAE.

Major banks for offshore company accounts in the UAE

The UAE has a well-defined network of local and international banks specializing in offshore banking. Below we have listed some local and international banks that are considered amongst the best to open accounts for offshore companies in the UAE.

Local Banks

• Mashreq Bank
• RAK Bank
• ADCB
• Abu Dhabi Islamic Bank
• Ajman Bank
• Banque Misr
• Dubai Islamic Bank
• Emirates Islamic
• Emirates NBD
• First Abu Dhabi Bank

International Banks

• Bank One (Mauritius)
• Nevis International (St. Kitts and Nevis)
• Caye International (Belize)
• Euro Pacific (Puerto Rico)
• Interpolitan Money (United Kingdom)
• DSBC Bank (Lithuania)
• ABC Bank (Mauritius)

Every bank in the UAE, whether local or international, has its own terms and conditions, timeframes, document requirements, and way of charging fees. You must thoroughly evaluate each of these aspects before opting for a bank. Below we have explained the required documentation and account opening process that is general to almost all local and international banks in the UAE. Depending on the bank you choose, you may be asked for additional documentation and/or follow additional procedures.

Documentation Required for opening a bank account for an offshore company in the UAE

• Passport copies of shareholder(s)
• Emirates ID and visa (applicable for the UAE residents)
• UAE entry stamp for non-residents (for local banks only)
• Certificate of incorporation
• Memorandum of association and Articles of association
• Register of members
• Share certificates
• Board resolution (if any)
• Power of attorney (if any)
• Trade license of home-country business (if applicable)
• Statements of your business account for the last six (6) months (if applicable)
• Statements of your personal account (if you do not have a pre-existing business)
• Recent utility bills (within the last three (3) months)
• Business plan
• Contracts (if available)
• Client invoices (if available)

Process for Setting up Bank Accounts for Offshore Companies in the UAE

1. You must file the account opening application with the desired bank. It is recommended to file applications with multiple banks so that you have alternative options in case your application is rejected by one bank.
2. An initial verification is conducted by the account manager at the bank.
3. You are required to sign the bank documents. In all cases, local banks require your physical presence in the UAE for the signing procedure whereas international banks outside the UAE may permit remote signing.
4. The final verification is conducted by the compliance and other relevant departments at the bank.
5. Post verification, your application for account opening is either approved or rejected.
6. Upon successful approval of your application, you will be required to deposit the minimum balance required by the bank within the specified timeframe.

Maintenance of Bank Accounts for Offshore Companies in the UAE

Once your bank account is successfully opened, you are required to deposit a specified minimum amount in order to activate it. The minimum balance must be maintained throughout. If your account balance is less than the prescribed minimum, you will incur additional monthly maintenance fees. The specified minimum balance and the fee for not maintaining it differ from one bank to another. While the minimum balance ranges from AED 10,000 to AED 100,000, the monthly maintenance charge could be anywhere from AED 50 to AED 500.

Why opt for a Registered Agent to Open Offshore Bank Accounts?

Though the required documents remain more or less the same, the step-by-step procedure and duration to open bank accounts for offshore companies in the UAE differ from one bank to another. While you can always carry out the extensive formalities and open a bank account on your own, there is always a possibility that your efforts will go in vain. It may be simply because the bank you opt for, is not suitable for your requirements or perhaps does not open accounts for your company type.

This is where the need to have professional assistance onboard arises. To open a bank account, your UAE offshore company must be registered in the first place. Offshore company registration in the UAE can be done only through registered agents with offshore jurisdictions. Once this is done, the registered agent will guide you through the entire process of opening the bank account.