The use of offshore companies has become very popular between Dubai property investors of foreign origins. The most obvious reason for it is the avoidance of complicated inheritance procedures.
A company does not die and doesn’t need a will, written according to the local regulations. If the property is held in an offshore company, investors and their partners can own the shares of it as they mutually agree. On the title of the property, it will be written the company name, but not the individual names. Such method for joint investment is very suitable for organizing one’s assets under a manageable structure in confidentiality.
In Dubai, the only ‘offshore company’ that can be currently used to buy property is the Jebel Ali offshore company. In Abu Dhabi, investors still can buy property under the name of a British Virgin Islands company.
The Dubai Land Department decision of January 1, 2011, has confirmed that it will not register property title to any foreign company, unless that company is registered offshore with the Jebel Ali Freezone (Jafza).
Foreign companies, however, still can own the Jebel Ali offshore company. Investors can still use a BVI company or a common-law trust to hold the shares of a Jebel Ali offshore company.
In case that the property has been already bought off-plan under an individuals’ name, it can still be registered under a company name later. The Dubai Land Department has an interim property register, and a main property register. Until the property is listed on the actual main property register, which happens after the handover, it is possible to change the title from an individual name to a Jebel Ali offshore company, provided you can show that there is no change in the beneficial ownership (which means the individual on the initial agreement is the owner behind the company as well).
In order for the registration of title to take place, the developer of the property must issue a no objection certificate (NoC) consenting to the registration in the name of the Jebel Ali offshore company.
Normally, the developer will want to see clear evidence that the person named on the sale and purchase agreement is the same person as the beneficial owner behind the new Jebel Ali offshore company. The developer normally charges an administration fee, which should not be more than Dh3,000 – Dh5,000, to issue the NoC.
If the developer and Jafza both issue NoCs to the Land Department authorizing the registration in the name of the Jafza offshore company, it is normal that the registration can be completed without charging an additional transfer fee, again provided that the ultimate beneficial owners of the new Jafza offshore company is the same as those mentioned in the original sale agreement.
The recent changes to the policy only apply to registrations of titles taking place from January 1, 2011, and do not affect any that took place prior to that date.
Through the 2006 Circular that Jafza issued, it states that Jebel Ali offshore entities can own property in any projects in Dubaithat was owned by Dubai World, Dubai Holdings and Emaar Properties.
The set up of an off-shore company is fairly straightforward, with normal due diligence required on all proposed directors and shareholders. It will take about four to five days to incorporate, and requires the shareholders of the company to visit the free zone and sign an agreement or provide a power of attorney to someone to act on their behalf.
The cost for setting up an offshore company is $4,250 (Dh15,598), and annually there is a registered agent fee of $1,950 (Dh7,157).
If the investor decides to sell the property that is owned by the company, there are two choices: he can either sell the property out of the company, by simply signing the sale documents as a director of the company, or he can sell the shares of the company, assuming the company only holds one asset, which is the house.
