The latest JAFZA Offshore Company Regulations of
2018 (‘Regulations’) introduced new provisions in Part 17 that enable existing
offshore companies in the Jebel Ali Free Zone (‘JAFZ’) to convert their legal
status from ‘offshore companies’ to an operating ‘free zone company’
(’Conversion’).
Although, introduced in 2018, in practice, JAFZA
only recently began accepting applications for this process of Conversion. No
such Conversion was permitted prior to these newest Regulations.
The purpose of permitting Conversion is to allow
offshore companies the option to operate as any other free zone company in JAFZ,
which includes the following changes from offshore:
1) Legal status will
be changed to either FZE (Free Zone Establishment with one shareholder) or FZC
(Free Zone Company with two or more shareholders), hence the end of company’s
name will be changed from “Limited” to “FZE” or “FZC”;
2) New Memorandum and
Articles must be signed in compliance with the JAFZA Companies implementing
Regulations 2016;
3) The company will
obtain JAFZ license to practice licensed activities (chosen from the list of
permitted activities in JAFZ);
4) The company must
rent premises in JAFZ (office, warehouse, land, etc);
5) The company must
appoint manager (instead of Director/s in offshore company) for the day-to-day
operations of the company and the manager’s residency should be sponsored by
the converted entity and salary be paid through the WPS system ;
6) The company will
have an immigration file and shall be permitted to obtain expatriate visas;
7) The company will be
able to get tax residency certificate which is not possible through an offshore
company structure.
The process of Conversion is similar to that of
incorporating a new operating company in JAFZ with the added requirement of
returning the original offshore company documents to JAFZA and a 14 day
publication period to all interested parties in the local newspaper notifying
the change in legal form of the offshore company. In practice it can take up to
eight weeks for the Conversion to be completed.
On Conversion the offshore company continues its
commercial legacy in a different corporate form without having to wind up and
set up a new free zone company. All rights and obligations of the offshore
company, arising prior to the Conversion, will continue ‘as is’ thus enabling
it to continue with its existing commercial relationships with third parties.
This option of Conversion might interest offshore
companies in JAFZ that:
· wish to switch to operating entities, hire employees, rent physical
office space in JAFZ without losing their commercial legacy; and
· wish to obtain a tax resident certificate from the UAE Ministry of
Finance which currently cannot be obtained by offshore companies.
The process of Conversion is certainly an
interesting step by JAFZA. As the offshore companies’ agent in JAFZ we inform
our clients of such option. Should you be interested or have some questions
regarding Conversion or JAFZ offshore, please let us know.