Ras al-Khaimah (or more commonly RAK) is a subnational entity – an emirate – of the United Arab Emirates (or more commonly UAE).
The UAE is a federation of hereditary absolute monarchies called emirates, which are led by emirs.
There is an overall government, led by president Sheikh Khalifa (whose full name is Khalifa bin Zayed Al Nahyan), who is also the emir of the emirate Abu Dhabi, where in the capital city of Abu Dhabi is located. The emirs of the other six emirates join the president on the Federal Supreme Council.
The presidency is effectively hereditary.
As an international financial center (offshore jurisdiction), UAE is a complicated one. Taxes are almost unheard of but forming a business is unfortunately not always easy and banking, although of high quality, is difficult to arrange.
Addressing the topic of incorporation and running a business, numerous free-trade zones have been set up and each emirate is sufficiently independent to set up its own laws on incorporation.
RAK is ruled by Saud bin Saqr al Qasimi. The Qasimi family has ruled Ras al-Khaimah since the 1700s. They also rule the emirate of Sharjah, which shares flag with RAK.
Geography and Demography
|Full Name:||Ras al-Khaimah (إمارة رأس الخيمة)|
|Other major languages:||None|
|Type of government:||Absolute monarchy|
|Legal system:||Mix of civil and Islamic law|
|GDP per capita:||50,000 USD|
|Currency:||United Arab Emirates Dirham (AED), pegged at 1 AED = 3.6725 USD|
Incorporation and Business
UAE is a true zero-tax jurisdiction. Resident and non-resident companies are taxed the same: not at all.
Many jurisdictions simply don’t tax non-resident companies and couple this with an easy regulatory framework to attract non-resident companies; for example Cyprus and Gibraltar. The accounting gymnastics utilized for those structures can look worse than incorporating in a jurisdiction that taxes neither residents nor non-residents. While it may be intuitive to bundle Cayman Islands and Bermuda into this group of jurisdictions, neither of them have big companies operating locally (aside from a barely-staffed office here or there to qualify for tax residence).
UAE does. UAE has some of the world’s busiest ports and a lively commercial sector, spanning everything from financial services to manufacturing.
As a whole, UAE enjoys a strong international reputation. It is known that its FTZ and subnational divisions don’t always live up to international standards but this is more or less tolerated. UAE is a necessary ally in the region to many western (and eastern) governments. It does enough to get by without any major reputational backlashes.
RAK is one of these tolerated subnational entities. Companies here can be very secretive and practically impossible to get information out of.
Many compliance officers and risk managers fail to look beyond the country stated in the registered office address of a company, not realizing that there can be a big difference within the UAE.
RAK has quickly become the most popular jurisdiction for non-resident incorporation in the region and is a contender for the top spot for resident incorporations, the #1 spot still held by Dubai.
Costs are higher than many jurisdictions but the price is often worthwhile considering the stability and reputability of the jurisdiction. For those who actually want to establish a presence in a zero-tax jurisdiction, none offer such business-friendliness and value as UAE and perhaps especially RAK.
Because UAE is not a signatory to the 1961 Apostille Treaty, it can be very tedious to open bank account for UAE companies on your own outside of UAE. Unless using a corporate service provider which can place you with overseas banks through their long-standing strong relationship with partner banks, getting documents certified can be a huge time and money sink as it needs to be legalized by an embassy to be valid.
Because of UAE’s peculiar standing and unique conditions, many service providers offer full director services for a relatively modest fee to make companies appear resident in UAE. This can sometimes be successfully deployed to make a UAE company satisfy foreign tax authorities’ tax residency rules and not be deemed a local company. Your mileage may vary. As always, be very careful and seek professional advice.
There are three regulators: the RAK government for regular companies, the RAK FTZ, and the RAKIA (RAK Investment Authority). The latter two are the most commonly used by non-residents and foreigners because of their more easy-going regulations.
Aside from branches of local or foreign companies, there are two types of companies that can be formed in the RAK FTZ.
The RAK-FTZ Free Zone Establishment (FZE) is a a single-owner company, although another person can be the manager of the company.
It is different from the RAK-FTZ Free Zone Company (FZC) which has between two to five owners.
These companies require a license and this can add a lot of cost: Commercial License, Consultancy/Services License, Industrial License, and Educational License. Coupled with the need for local facilities (offices) being required. This can add costs of several thousand AED per year, which is why RAK FTZ companies are not particularly common with non-residents. For those intending to set up an actual presence, this can be quite cost effective.
RAKIA has two business types: free-zone company and non-free-zone company. The difference is that free-zone companies can have more than 49% foreign ownership, are generally more easy-going, but are limited in their ability to trade locally.
Branches are also permitted.
Like RAK FTZ, RAKIA companies must have facilities and a license. There are five license types here: Consultancy/Services, Trading/General Trading, Commercial, Industrial, and Media.
Costs are comparable to FTZ.
RAK Offshore – International Company
I bet you thought we were done. Nope. Not so fast.
In 2006, a new legislation was passed by RAK called the International Companies Regulations 2006, based on the BVI international companies law. This is a special legislation within the RAK FTZ. And it’s the most popular one for non-resident foreigners.
It has the features and requirements one can expect of an IBC-clone but with the reputational advantages of being in the UAE.
A RAK IC needs only one director and one shareholder (can be the same person). Shares must be registered, meaning bearer shares are not permitted.
Contrary to what some believe, RAK ICs can and routinely do bank in the UAE. More on banking later. However, they are generally barred from trading with RAK residents and can only own real estate in the UAE with special permission.
Share capital can be denominated in AED, USD, EUR, or GBP. Other currencies are permitted by special approval, which is usually not that difficult to obtain.
Curiousty, shareholders of a RAK IC can choose a different jurisdiction than RAK or UAE for some aspects of running the business. While this can be advantageous to for example satisfy investors who do not trust the UAE, it is not always recognized in the jurisdiction of choice (i.e. a local court might not honour the request for a hearing due to the company not being incorporated under local laws).
Aside from the oil sector and branches of foreign banks, there is no corporate tax rate anywhere in the UAE.
Required but need not be submitted. Audits are optional.
Varies but generally very secretive.
Banking in RAK is not different from banking in the UAE. There are no banks licensed just in Ras al-Khaimah. Banks are controlled by the Central Bank of the UAE. However, not all banks are present in multiple emirates. This does not mean they are restricted by license; just by internal policy. Enforcement is in some cases left to local authorities.
UAE has adopted the IBAN standard. This can be of a tremendous advantage to entrepreneurs with business partners in the EU. UAE is not a member of SEPA, though.
Cards are often available in multiple currencies, with USD being the most common aside from AED.
The banks are generally easy-going once an account is opened but the banks are more inquisitive than for example Europeans, Americans, and Canadians might be used to from banking at home.
The UAE culture is very personal. It’s important to establish a personal relationship with your contacts at the bank in order to build trust. The same could be said about for example banking in Switzerland, but the difference is that the Swiss banker will be very unlikely to deviate from the policies even after trusting you whereas a banker in the UAE will waive through transactions that perhaps should have been looked at closer.
So just how do you open a bank account in Ras al-Khaimah?
Well, you would begin by expanding your search to banks in the entire United Arab Emirates. For some reason, I come across a lot of people who think that a RAK IC cannot bank in RAK or the UAE. I guess there is some confusion surrounding the restriction on trading in the local economy. Banking does not violate this requirement, although it is wise to be careful about using a RAK IC company to invest in local companies through for example the UAE stock exchange.
A personal visit is required. Yes, sure, there are exceptions but odds are that you don’t qualify. UAE regulators are aware of the volatility and sensitivity of the region. It would be a huge detriment to the kingdom’s finances if it were to become blacklisted by FATF, OECD, US, and the EU for money laundering.
During the Lebanese banking crisis, a lot of capital flowed to UAE, where investors were drawn not just by the financial stability but also the relatively strong banking secrecy. UAE was known as a country that did not give in to international pressure easily.
Today, UAE has signed up for both FATCA and OECD AEOI. Outside of that, secrecy remains strong. The banks are very diligent to satisfy FATCA but OECD AEOI is not taken at all as seriously.
Banks in UAE
As of writing, there are 46 commercial banks in UAE:
- ABN Amro Bank NV
- Abu Dhabi Commercial Bank
- Abu Dhabi Islamic Bank
- Al Ahli Bank of Kuwait
- Al Rafidain Bank
- Al Hilal Bank
- Arab African International Bank
- Arab Bank For Investment And Foreign Trade
- Arab Bank PLC
- Bank Melli Iran
- Bank of Baroda
- Bank of Sharjah
- Bank Saderat Iran
- Blom Bank France SA
- Banque Du Caire
- Calyon Bank
- Al Khaliji France
- BNP Paribas Bank
- HSBC Bank Middle East
- CitiBank NA
- Commercial Bank International
- Commercial Bank of Dubai
- Dubai Islamic Bank
- Dubai Bank PJSC
- El Nilein Bank
- Emirates NBD
- Emirates Islamic Bank
- First Gulf Bank
- Habib Bank Limited
- Habib Bank AG Zurich
- Invest Bank
- Janata Bank
- Lloyds Bank TSB
- Mashreq Bank
- National Bank of Abu Dhabi
- National Bank of Bahrain
- National Bank of Fujairah
- National Bank of Oman
- National Bank of RAK
- National Bank of UAQ
- Noor Islamic Bank PJSC
- Sharjah Islamic Bank
- Standard Chartered Bank
- Union National Bank
- United Arab Bank
- United Bank Limited
There are eight branches of foreign banks:
- Bank of Bahrain & Kuwait
- Barclays Bank
- Doha Bank
- ED & F Investment Products Ltd.
- ICICI Bank
- Korea Exchange Bank
- Standard Bank London Ltd.
- Union Bancaire prive’e (CBI-TDB)
- Westdeutche Landesbank
The UAE Central Bank does a commendable job declaring ownership and making financials on banks it supervises easy to find (for those banks that do publicly share their financials):
- Licensed Banks & Other Financial Institutions’ Ownership
- Links to Banks’ Published Financial Data
- Links to Banks’ Charges in the UAE
Living in Ras al-Khaimah
Life in RAK does not come with the glitz and glamour of Dubai. It’s more relaxed, intimate (stronger sense of community), and has a more varied and accessible outdoors to offer. There is quite a bit of history to see and culture to enjoy in RAK.
It can get very, very hot in UAE. Temperatures well over 40°C (104°F) are common in summer and it rarely dips below 20°C (68°F) at the peak of winter.
RAK, like the rest of UAE, is generally very safe. Foreigners are treated well. While UAE is not as conservative as many other nations in the region, foreigners are expected to follow local customs. Some foreigners find this difficult to comply with, whereas most adapt with ease.
By forming a RAK FTZ company, it is possible to very easily obtain a residence permit. Total costs typically end up being a few thousand USD/EUR for an investor/entrepreneur. Pure shareholders need to show investment of 50,000 AED into the business. There is quite a lot of paperwork required.
All in all, the process takes a couple of weeks to complete. It’s not as fast, cheap, and convenient as Panama, but it is truly tax free.
Note that RAK ICs are not included here. The company must be resident and have activities that take place in RAK.
Residents can apply for citizenship after 30 years (7 years for those of certain Arabic descent), provided that they speak Arabic, have a stable income, and have no criminal record.
Taxation is on consumption and usage and not income.
This can make Ras al-Khaimah incredibly attractive and essentially tax free.
UAE is one of the finest jurisdictions in the world and RAK offers some of the lowest barriers to entrance.
RAK has almost anything the international entrepreneur or investor could want: easy-going offshore companies, free-zone companies, and local companies.
Banking in the UAE as a whole is very good, but one should plan a visit to the bank.
Next week, we move on to Dubai.