Summary
Are offshore companies in the UAE, like those incorporated through RAK ICC or JAFZA Offshore, subject to corporate tax? The answer is no longer a simple yes or no. This article clarifies the updated 2025 rules under UAE corporate tax law and explains when offshore entities may be taxed, and when they may still qualify for a 0% rate.
Key Takeaways
- Offshore companies are within the scope of UAE Corporate Tax.
- Some can still qualify for 0% corporate tax, if certain conditions are met.
- Income sourced from the UAE mainland is taxed at 9%.
- Filing obligations and Economic Substance Regulations (ESR) may apply.
Why This Matters Now
When the UAE introduced federal corporate tax in June 2023, there was significant uncertainty about whether offshore companies, especially those registered in jurisdictions like RAK ICC or JAFZA Offshore, would fall under the new tax rules.
As of 2025, the rules and how it applies have now been clarified. Offshore company owners now need to reevaluate their structures and obligations to remain compliant and avoid unexpected penalties.
What Is an Offshore Company in the UAE?
In the UAE, an offshore company typically refers to an entity registered in a free zone that prohibits direct business within the UAE mainland. Common offshore jurisdictions include:
- RAK ICC (Ras Al Khaimah International Corporate Centre)
- JAFZA Offshore (Jebel Ali Free Zone Authority)
- Ajman Offshore
These companies are often used for:
- International trading
- Holding shares or intellectual property
- Global investment and wealth planning
- Real estate ownership (outside UAE)
Does UAE Corporate Tax Apply to Offshore Companies?
Yes, but the application depends on the nature of the company’s income and compliance with specific conditions.
Offshore companies are legally considered UAE-incorporated entities, and are therefore within the scope of corporate tax. However, they may qualify for a 0% tax rate if they meet the requirements of a Qualifying Free Zone Person (QFZP).
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What Is a Qualifying Free Zone Person?
A Qualifying Free Zone Person (QFZP) is a company that meets the following criteria:
- Incorporated in a designated free zone, such as RAK ICC or JAFZA
- Maintains adequate economic substance in the UAE
- Does not elect to be taxed under the standard regime
- Earns only qualifying income, such as:
- Income from other free zone entities
- Foreign-sourced income
- Passive income like dividends or capital gains
Once a company earns any income from the UAE mainland, it risks disqualification and becomes subject to the standard 9% corporate tax rate on taxable income over AED 375,000.
What Happens If You Don’t Qualify?
If your offshore company:
Then it will be treated as a regular taxable entity, subject to 9% tax on profits exceeding AED 375,000, and required to file corporate tax returns.
Common Misconceptions in 2025
| Misconception | Reality |
| Offshore companies are always tax-free | Only if QFZP status is maintained |
| Filing isn’t necessary if no tax is due | Corporate tax filing may still be required |
| Passive income means exemption | Substance and compliance rules still apply |
| Corporate tax only applies to mainland entities | Offshore companies can also be taxed |
Economic Substance Requirements (ESR)
Offshore companies that carry out relevant activities, such as holding businesses, intellectual property, financing, or shipping, must comply with the UAE’s Economic Substance Regulations (ESR). This includes:
Not complying may result in fines, loss of 0% tax eligibility, and automatic reporting under international tax cooperation frameworks.
What Should Offshore Companies Do Now?
If you own or manage an offshore company in RAK ICC, JAFZA Offshore, or similar jurisdictions, here are the next steps:
Review your corporate tax exposure
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