Category: Corporate

Introduction

The Dubai Multi Commodities Centre (DMCC) has introduced two new license categories: the Special Purpose Vehicle (SPV) and the Holding Company. These structures provide individuals, families, and businesses with cost-effective and flexible ways to manage assets, organize investments, and oversee group operations without the burden of maintaining a traditional office space. In this article, you’ll learn what SPVs and Holding Companies are, why these new licenses matter, their benefits, costs, and tax implications, as well as how LYLAW can help you navigate the legal process.

What is an SPV?

A Special Purpose Vehicle (SPV) is a company created to hold and manage assets. It does not engage in day-to-day business activities but instead provides a protective legal framework to limit liability and separate risks.

SPVs are often used to hold:

• Real estate
• Shares or investments
• Intellectual property
• Structured finance assets

By separating ownership and risk, SPVs make it easier for investors and families to structure assets without exposing themselves to unnecessary liabilities.

What is a Holding Company?

A Holding Company is designed to own and manage subsidiaries, businesses, or investments. Its primary role is not to trade or provide services but to centralize governance and protect assets.

Common uses include:

• Managing companies and group operations
• Overseeing succession planning and wealth preservation
• Providing centralized compliance and governance
• Improving tax and cost efficiency

This makes Holding Companies particularly attractive for family businesses and multinational groups.

Key Benefits of SPV and Holding Company Licenses in DMCC

DMCC’s introduction of these licenses is significant because they reduce barriers that once limited such structures to select free zones like DIFC, ADGM, JAFZA Offshore, and Meydan.

Some of the standout benefits include:

• No physical office lease required (a DMCC-registered address is still mandatory)
• Lower startup and ongoing costs
• Faster incorporation due to limited operational scope
• Recognition under international corporate governance standards
• Tailored solutions for family offices, investment vehicles, property owners, and global groups

Comparative Costs: New DMCC Licenses vs. Standard Company Setup

Setting up an SPV or Holding Company in DMCC is significantly cheaper and simpler than a standard DMCC entity.

Note: Extra costs apply for legal drafting, opening bank accounts, and compliance filings.

What It Takes to Form a Company in the UAE

Generally, forming a company in the UAE involves several steps: choosing a legal structure, leasing office space, meeting minimum capital requirements, applying for a license, securing approvals, setting up immigration if visas are needed, and complying with ongoing requirements such as audits and renewals.

For many operational businesses, this process is worthwhile. But for those simply looking to hold property, manage investments, or structure family wealth, the new SPV and Holding Company options offer a much simpler route.

Corporate Tax Implications

With the UAE’s Federal Decree-Law No. 47 of 2022 on corporate tax, all companies are now subject to taxation, including those in free zones. However, DMCC entities may still qualify for a 0% corporate tax rate, provided they carry out qualifying activities and restrict onshore UAE dealings.

This makes SPV and Holding Company structures not only cost-effective but also tax-efficient—an important factor for investors and families consolidating wealth.

How can LYLAW help with legal representation for SPV and Holding Company setups?

The launch of these new licenses is a game-changer for anyone looking to protect assets, plan succession, or streamline group management in the UAE. However, the setup still requires careful legal navigation to ensure compliance with DMCC regulations and UAE’s broader corporate tax framework.

At LYLAW, we help clients evaluate whether SPVs or Holding Companies suit their goals, draft the necessary documentation, and guide them through the DMCC registration and compliance process. With our expertise in UAE corporate law, we ensure your structure is both legally sound and strategically aligned with your objectives.

In 2023, the Jebel Ali Free Zone Authority (JAFZA) introduced notable amendments to its offshore company framework. The JAFZA Offshore Companies Regulations 2023 replaced key provisions of the previous 2018 Regulations, most significantly revising Article 14, which historically restricted JAFZA offshore companies from conducting business within the United Arab Emirates (UAE).

These changes reflect a regulatory shift that expands the types of activities JAFZA offshore entities may undertake, including potential engagement in onshore business operations, subject to licensing and regulatory approvals.

Background: Prohibited vs. Permissible Activities under the 2018 Regulations

Under the JAFZA Offshore Companies Regulations 2018, Article 14.1 expressly prohibited offshore companies from:

• Directly carrying out any commercial activity in the UAE,
• Holding a lease for UAE property (except in designated freehold areas),
• Conducting banking, insurance, or other regulated financial services,
• Engaging in any activity restricted by the Authority.

At the same time, Article 14.2 carved out certain exceptions, allowing JAFZA offshore companies to:

• Engage UAE-based legal, accounting, and consulting services,
• Maintain books and records within the UAE,
• Hold director or shareholder meetings in the UAE,
• Own property in designated freehold areas,
• Own shares in UAE operating companies,
• Open UAE bank accounts.

Article 14.3 allowed offshore companies to engage in business activities in the UAE—but only with the appropriate license from the competent authorities.

2023 Amendments: Key Changes to Article 14

The Offshore Companies Regulations 2023 revise Article 14 in a way that significantly alters the earlier restrictions.

Now, under Article 14.1, an offshore company:

“shall be permitted to conduct lawful business activities as permitted by the Registrar from time to time.”

This marks a clear departure from the previous blanket prohibition. The new provision implies that offshore companies may now carry out business activities in the UAE, provided such activities are:

• Lawful under UAE law,
• Permitted by the JAFZA Registrar, and
• Licensed or authorized by competent authorities, where applicable.

The revised Article 14.2 continues to allow the engagements previously permitted—such as owning shares, holding property, and maintaining bank accounts—while Article 14.3 reiterates the requirement for appropriate licenses or permits for any business activities conducted in the UAE.

Comparison Table: Article 14 Under Old vs. New Regulations

Implications for Offshore Entities

The amended Article 14 provides greater flexibility for JAFZA offshore companies by removing the general prohibition on UAE-based commercial activity. Instead of a blanket restriction, the approach now reflects a permit-and-license model, contingent on:

• The nature of the business activity,
• The Registrar’s discretion, and
• Approvals from competent UAE regulators.

While onshore engagement is now more accessible, companies must still navigate applicable regulatory and sector-specific requirements, particularly for financial services, insurance, media, education, and other regulated sectors.

These reforms may enhance the utility of JAFZA offshore entities for purposes such as:

• Holding company structures to manage shares in UAE and international subsidiaries,
• Investment vehicles participating in UAE-based or cross-border projects,
• Lightweight representation for foreign businesses seeking a presence in the UAE without full operational infrastructure,
• Asset holding and property ownership in designated freehold areas.

Importantly, it remains a requirement that JAFZA offshore companies can only be registered and managed through JAFZA-approved registered agents. All formation, corporate maintenance, and official interactions with JAFZA must be carried out via such agents.

Conclusion

The 2023 revisions to JAFZA’s Offshore Company Regulations—particularly the restructured Article 14—represent a measured shift in the regulatory landscape. By permitting certain business activities within the UAE, subject to licensing and Registrar approval, these changes broaden the potential use cases for JAFZA offshore companies.

While the reforms offer greater flexibility, they also reinforce the importance of regulatory compliance. For companies exploring JAFZA offshore structures, legal due diligence remains a necessary step in determining the feasibility and scope of their intended operations.

Yamalova & Plewka FZCO is a JAFZA-registered agent and is fully authorized to assist with the establishment, licensing, and ongoing management of JAFZA offshore companies. For tailored legal advice or support, please contact us at www.lylawyers.com.