Dubai’s real estate market is easily among the most flourishing in the whole world; with modern skyscrapers gracing its skyline combined with strategic location and tax-free privileges, it has become the number one choice for outside investors. Policies in the UAE attract individuals and businesses from all corners of the world on purchasing properties in Dubai. However, it is not that straightforward when it comes to offshore company formation in Dubai. Can offshore companies own property in Dubai? This question calls for an understanding of the legal intricacies pertaining to property ownership in the city.
This blog on “Can an offshore company own property in Dubai” will explore those legalities, exceptions, and alternative means that are available to offshore business companies on entering the Dubai property market.
What Is An Offshore Company?
An offshore company is basically one that has been incorporated in a jurisdiction other than the UAE for the reason of enjoying tax advantages, confidentiality, and protection of assets. The British Virgin Islands (BVI), Cayman Islands, or Ras Al-Khaimah International Corporate Centre (RAKICC) are some of the most sought-after offshore jurisdictions. Offshore companies typically own investments, administer assets, or arrange international trade transactions. These businesses can experience numerous advantages-perhaps lower taxation, limited liability, and a shield from the local legal framework. These offshore companies typically have no right to acquire property in Dubai.
Legal Framework for Ownership of Property in Dubai
The property-related regulations of Dubai are embodied in Law No. 7 of 2006, which governs real estate ownership, including but not limited to foreign investors. This law restricts foreign ownership in specific “freehold” areas. The freehold areas are demarcated developments in which offshore companies and other non-UAE nationals are permitted to buy property. Broadly speaking, property rights can be grouped into three categories:
- Freehold: Complete ownership of both the land and the property;
- Usufruct: The right to use and derive benefit from the property for a fixed period.
- Leasehold: The right to lease property for a specified term without full ownership.
Offshore companies, in general, are mainly restricted from holding property outside these freehold areas, which limits their ability to buy real estate in Dubai.
Can Offshore Companies Own Property in Dubai?
Offshore companies registered outside the UAE face significant challenges in owning property directly in Dubai. This restriction is designed to prevent illegal activities, including money laundering, and is enforced by the Dubai Land Department (DLD). The DLD has stringent vetting processes for entities purchasing property to ensure compliance with local laws and regulations.
As it stands, offshore companies cannot directly own property in Dubai unless they are registered in specific jurisdictions that have agreements with Dubai, allowing ownership within certain freehold zones. Therefore, while offshore companies cannot own property outright in all areas, there are exceptions and alternatives that may allow them to do so.
Exceptions and Alternative Ownership Structures
Several free zones and special arrangements provide exceptions that enable offshore companies to own property in Dubai under specific conditions.
JAFZA Offshore Companies
Offshore companies incorporated in the Jebel Ali Free Zone Authority (JAFZA) have the right to own property within Dubai’s designated freehold zones. These zones include high-end residential developments, commercial properties, and luxury apartments.
However, ownership within JAFZA is restricted to freehold areas, and the property must be used for investment or business purposes. This makes JAFZA a popular option for foreign investors seeking to own property in Dubai.
RAKICC Offshore Companies
Companies registered with Ras Al Khaimah International Corporate Centre (RAKICC) also have access to property ownership within specific freehold zones in Dubai. Like JAFZA, the property owned by RAKICC companies must be used for business or investment purposes. These companies must provide documentation such as incorporation certificates and prove their good standing to the Dubai Land Department for approval.
RAKICC companies are also subject to anti-money laundering (AML) and know your customer (KYC) requirements, which are enforced rigorously by the UAE government.
ADGM and DIFC Entities
Other free zones in the UAE, such as the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC), offer more flexible legal frameworks for companies registered within them. Companies within these zones may be able to own property in designated freehold areas, typically for commercial purposes.
Both ADGM and DIFC are known for their common law-based legal infrastructure, making them appealing for international businesses. However, ownership is still restricted to the freehold areas, and companies must comply with the regulations of their respective free zones.
Regulatory and Compliance Considerations
For offshore companies to purchase property in Dubai, they must adhere to stringent regulatory requirements, particularly around anti-money laundering (AML) and know your customer (KYC) rules. These regulations are essential to prevent illegal activities such as money laundering and financing terrorism.
Offshore companies must submit documents to the Dubai Land Department, including proof of company registration, a certificate of good standing, and proof of compliance with the relevant regulations from their jurisdiction. Failure to comply with these requirements may result in penalties or even the cancellation of property rights.
Practical Steps for Offshore Companies
If an offshore company wishes to own property in Dubai, several steps must be followed to ensure compliance:
- Choose the Right Jurisdiction: Offshore companies must be incorporated in a free zone such as JAFZA or RAKICC that permits property ownership.
- Consult Legal and Real Estate Professionals: It is important to engage with local experts who understand the legal framework for property ownership in Dubai.
- Submit Documentation: The Dubai Land Department requires various documents, including company registration certificates and proof of good standing, to proceed with the property registration.
- Register the Property: Once approved, the offshore company can proceed with the property registration under its name, subject to local laws and regulations.
Although offshore companies face restrictions on directly owning property in Dubai, they can access certain freehold zones through specific jurisdictions such as JAFZA and RAKICC. It is crucial for foreign investors to understand the legal and regulatory requirements before making an investment. By carefully selecting the right jurisdiction and following all necessary steps, offshore companies can navigate the complexities of Dubai’s property market and successfully invest in real estate.
With the right legal guidance and due diligence, offshore companies can still take advantage of Dubai’s thriving real estate market, making it a lucrative destination for international investors. For more information regarding this connect with Damaar’s expert consultants and we will help you through all major steps.
