Gabriel Oprea January 24, 2025January 24, 2025 Following the enactment of the Emiri Decree No. (12) of 2024 Regarding the amendment of Emiri Decree No. (4) of 2016, the Ras Al Khaimah International Corporate Centre (“RAK ICC”) has introduced important changes that impact offshore companies (“Offshore Companies”) and aim to offer operational flexibility and valuable tax incentive. What are the recent changes? The key development is that RAK ICC is now authorized to register and issue Free Zone Commercial Licenses for Offshore Companies. This marks a significant shift, as until now, Offshore Companies were not eligible to obtain these licenses directly from RAK ICC. Therefore, under the new framework, Offshore Companies registered with RAK ICC can now acquire a Free Zone Commercial License, enabling them to establish operations within the RAKEZ Free Zone and leverage the business opportunities and tax incentive available in this jurisdiction. Tax Benefit: The Key Advantage By acquiring a RAK ICC Free Zone Commercial License, Offshore Companies may become eligible for a key benefit under the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”). Therefore, Offshore Companies can avail to a 0% Corporate Tax rate, provided they meet the criteria for Qualifying Free Zone Persons (QFZP), in the sense of Corporate Tax Law, and fulfil the following cumulative conditions: Register with RAK ICC and establish an economic substance within the area. This process ensures that such Offshore Companies are recognized as bona fide entities operating under the jurisdiction of RAK ICC, thereby becoming subject to its regulations and entitled to its associated benefits. Engage in Qualifying Activities and Earning Qualifying Income. Offshore Companies must be involved in specific qualifying activities (e.g., holding of shares and other securities, fabrication of products or substances, logistics services, reinsurance services, fund management services, manufacturing or treatment of goods and materials, trading of qualifying commodities, etc.). Adhere to the UAE’s Transfer Pricing Regulations. These regulations ensure that transactions between related entities are conducted at arm’s length, or at fair market value, in accordance with established standards. Adhere to the de minimis requirements. Such conditions pertain to the permissible level of income generated from non-qualifying activities. While some income from non-qualifying activities, such as renting out office space, may be permitted, it should not form a substantial part of the Offshore Companies’ business operations. The specific thresholds and calculations for these conditions will be established by the relevant authorities. What are the options for setting up in RAKEZ? For Offshore Companies looking to establish a business address within the RAKEZ Free Zone, there are a few flexible options available: Registered Agent’s Address: Offshore Companies can choose to use the address of a Registered Agent, or a branch of that Agent, that is already based in the RAKEZ Free Zone. Co-Working Spaces: For businesses that prefer a more flexible and cost-effective option, there are co-working spaces available in the RAKEZ Free Zone, which can be used as an official business address. Leasing Office Space: If a business needs its own dedicated space, leasing office space within RAKEZ is also an option to consider. How can Registered Agents help? Registered Agents play a crucial role in supporting Offshore Companies in their establishment within the RAKEZ Free Zone. Therefore, Registered Agents offering registered address services to their clients have the following options available: For RAK ICC Agents registered and licensed by RAKEZ: Such Agents may continue to assign a RAKEZ Free Zone address to their clients. For RAK ICC Agents registered and licensed in UAE Mainland or other UAE Free Zones (other than RAKEZ): There are (2) two options available: Branch setup: Set up a branch within RAKEZ Free Zone and assign the branch address to clients. Referral: Agents who prefer not to establish a RAKEZ branch may refer their clients to RAKEZ to register and obtain a designated Free Zone address under one of the available options. Ultimately, the recent grant of authority to RAKICC to issue commercial licenses marks a significant shift in the regulatory framework. As a result, Offshore Companies seeking to establish their presence in the RAKICC will have the opportunity to benefit from tax incentive as well as operational advantages, positioning the zone as an increasingly attractive option. However, in order to fully understand and capitalize on these benefits, it is essential for Offshore Companies to consult with experienced tax lawyers, considering their specific circumstances and ensuring full compliance with applicable law.
