Dubai Land Department have recently announced, (as of January 1st, 2011) that it is has banned the registration of Dubai property in the name of virtually all “offshore companies” or companies not registered onshore in Dubai. The one exception to this “offshore company ban” is the Jebel Ali Offshore Company. This new rule does not effect individuals, only foreign or “offshore” companies looking to purchase property.
The following Q&A is to inform non GCC purchasers and investors, of the implications of the Land Department’s new rules, and how the recent changes will affect foreign companies purchasing and registering property in Dubai.
Openshore does have a convenient method to enable the purchase by a non-Dubai company but only for properties already owned by Openshore. Please discuss with staff if you wish to have details of this process. However, in general, non Dubai companies apart from Jebel Ali Offshore Company cannot buy property in Dubai – See the Q&A below:
- 1. Why would one use a company to purchase a property in Dubai:
There are a number of good reasons why the use of Offshore Companies has become so popular when buying local Dubai property. The most obvious reason would be the avoidance of complicated inheritance procedures. A company does not die. If your property is held in a low cost offshore company, you (and your partner or partners) can own the shares of the company as you see fit. So rather than have your individual names on the title of the property, you have a company name. This is a very easy method for joint investment, for confidentiality, and for organising ones assets under a manageable structure (and in many cases, in a Common Law structure).
- 2. So the only “Offshore Company” that I can currently use to buy property in Dubai, is the Jebel Ali Offshore Company?
Correct. This applies only in Dubai. For example, you can still buy property in Abu Dhabi through a BVI company. The Dubai Lands Department decision of Jan 1st 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.
- 3. But can a foreign company own the Jebel Ali Offshore Company?
Yes. You can for example, use a BVI company, or a common law Trust, to hold the shares of your Jebel Ali Offshore Company. You will still need to clearly show the Lands Dept evidence of the ultimate individual owner(s), with attested share certificates and passport copies.
- 4. What about if my property is not yet delivered? I have signed the purchase agreement before January 2011 in my personal name, can I now switch to a company name?
The Dubai Lands Department have an interim property register, and main property register. Until your property is listed on the actual main property register (which happens after handover), then it is possible to change the title from an individual name to a Jebel Ali Offshore Company, providing you can show that there is no change in the beneficial ownership (i.e. the same individual on the initial agreement, is the same owner behind the company).
- 5. But will there be an additional transfer fee, if the sale and purchase agreement is not currently in the name of a Jebel Ali Offshore company?
In order for the registration of title to take place, the developer of the property must issue a No Objection Certificate consenting to the registration in the name of the Jebel Ali Offshore Company. As mentioned above, 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 Dh3-5,000, to issue the No Objection Certificate.
If the developer and Jafza both issue NoCs to the Land Department authorising 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 are the same as those mentioned in the original sale agreement.
- 6. What if my BVI company already holds the title deeds to my property in Dubai?
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.
- 7. Does Jafza allow offshore companies to own property anywhere in Dubai?
From the 2006 Circular that Jafza issued, it stated that Jebel Ali offshore entities could own property in any project in Dubai that were owned by Dubai World, Dubai Holdings and Emaar Properties.
Whilst we understand that there is no restriction on any freehold property, Jafza offshore companies must still obtain a “No Objection Certificate” from Jafza, in order to register title at the Land Department.
To date, we have not ever had a refusal for an “NOC”, when clients are looking to own property outside the projects listed on the 2006 circular.
- 8. How is the Jebel Al Offshore Company set up, how much will it cost me?
Set up is fairly straightforward, with the normal due-diligence required on all proposed Directors and Shareholders. It will take about 4-5 days in incorporate, and requires the shareholders of the company to visit the freezone and sign (or provide a Power of Attorney to someone to act on their behalf).
The cost at set up is USD$4,950, and annually there is a registered agent fee of $1950. Sovereign Dubai is one of the oldest registered agents with Jafza, and we have a dedicated corporate services department of 25 people who are there to assist with all company formation enquiries.
- 9. What if I want to sell my property, and it is owned by the company, how do I do it?
You have two choices here, you can either sell the property OUT of the company, by simply signing the sale documents as a Director of the company, or you can sell the shares of company, (assuming the company only holds one asset, which is the house). The Lands Dept WILL need to be notified of the change in beneficial ownership of the company, with certified documents to be provided from Jebel Ali Freezone (all of which we can assist with).