Few subjects in UAE corporate structuring attract as much misinformation as the permitted scope of activity of a company registered with the Ras Al Khaimah International Corporate Centre (RAK ICC). Online commentary routinely asserts that an offshore company "cannot invoice UAE clients" or, conversely, that it is "tax-free." Both propositions are wrong. This note sets out the correct legal position by reference to the primary legislation: the RAK ICC Business Companies Regulations 2018, Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, and Federal Decree-Law No. 8 of 2017 on Value Added Tax.
Three propositions, properly understood, resolve most of the confusion. First, the restriction on RAK ICC companies is territorial, not personal: the Regulations restrict the conduct of business activities within the UAE without an appropriate licence; they do not prohibit contracting with, or invoicing, UAE-based counterparties where the activity is performed from outside the UAE. Second, notwithstanding the "offshore" label, a RAK ICC company is a UAE juridical person and a Resident Person for Corporate Tax purposes, with mandatory registration and filing obligations. Third, precisely because it is UAE-incorporated, the company benefits from the AED 375,000 mandatory VAT registration threshold that a genuinely foreign supplier does not enjoy.
1. The Legal Framework
RAK ICC is a corporate registry of the Government of Ras Al Khaimah, established pursuant to Emiri Decree No. 4 of 2016 and administering, among other instruments, the RAK ICC Business Companies Regulations 2018 (the "Regulations"). Companies incorporated under the Regulations — commonly described as international business companies or offshore companies — are expressly excluded from the scope of the federal Commercial Companies Law and are instead governed by the Regulations, a framework drawn substantially from common law models.
The Regulations are the governing instrument. As at the date of this note, the Registrar has issued no policy, circular, practice note or compliance guideline that imposes any restriction on dealings with UAE-based customers beyond what the Regulations themselves provide. The full body of RAK ICC rules and regulations is published on the Registrar's website and may be consulted directly.
2. What Regulation 40 Actually Requires: The Place-of-Performance Test
The operative restriction is found in Regulation 40 of the Regulations. Its structure is frequently misread. Regulation 40 does not enact a prohibition on transacting with UAE persons. It enacts a conditional licensing requirement: a company that conducts a business activity within the UAE must first have obtained all appropriate licences to conduct that activity from the competent authorities of the UAE, and must comply with applicable UAE laws as they apply to companies incorporated outside the UAE. The Regulations thereby place a RAK ICC company, for licensing purposes, in the same position as a foreign company.
The legal trigger is therefore the place where the business activity is conducted, not the identity or location of the client. A foreign company may lawfully contract with and invoice a UAE customer on a cross-border basis without holding a UAE licence; what it may not do is carry on business within the UAE without one. The same analysis applies to a RAK ICC company. Where consulting, advisory, information technology or comparable professional services are rendered entirely remotely from outside the UAE — with no premises, personnel or operations onshore — the company is not conducting a business activity within the UAE, no licence is required, and the company may lawfully issue invoices to its UAE-based clients, including companies established in free zones such as DMCC.
Conversely, where the services are in substance performed within the UAE — for example, by personnel physically working from the UAE or through onshore premises or operations — the licensing requirement in Regulation 40 is engaged and an appropriate licence must be obtained before the activity commences. The test is one of substance: describing an activity as "remote" does not assist where the individual performing it is sitting in the UAE.
3. Permitted Touchpoints That Do Not Constitute Carrying On Business
The Regulations expressly preserve a set of administrative connections to the UAE that do not amount to carrying on business. A RAK ICC company must at all times maintain a registered agent licensed by RAK ICC and a registered office, and it may, without engaging any licensing requirement, maintain professional contact with legal consultants, accountants and management companies; maintain its books and records in the UAE; hold meetings of its directors or members in the UAE; maintain UAE bank accounts for its routine operational transactions; hold shares in UAE mainland and free zone companies; and hold real property in areas designated for offshore ownership. These statutory safe harbours are administrative in character and do not extend to the active supply of goods or services within the UAE.
Separately, the Regulations impose sectoral prohibitions of general application: a RAK ICC company may not carry on banking business, or business as an insurer, reinsurer, insurance agent or insurance broker, or other regulated financial services activity, absent the appropriate regulatory licence. These prohibitions attach to the nature of the activity, wherever performed.
The legal trigger is the place where the business activity is conducted — not the identity or location of the client.
4. Where a Licence Is Required: The Free Zone Commercial Licence Route
Until recently, a RAK ICC company whose intended activity engaged the licensing requirement had little choice but to incorporate a separate onshore or free zone entity. That changed with Ras Al Khaimah Emiri Decree No. 12 of 2024, amending Emiri Decree No. 4 of 2016, pursuant to which RAK ICC is authorised to issue Free Zone Commercial Licences to its companies, together with a registered address within the Ras Al Khaimah Economic Zone (RAKEZ).
The practical significance is considerable. An existing RAK ICC company may now, without re-incorporation or re-domiciliation, obtain a commercial licence covering its intended activities, establish operations within RAKEZ, and service UAE clients without restriction. A licensed RAK ICC company that satisfies the conditions of the Qualifying Free Zone Person regime — including adequate substance and qualifying income — may further access the 0% Corporate Tax rate available to free zone persons under Federal Decree-Law No. 47 of 2022 and its implementing decisions. The choice between remaining a pure offshore vehicle and taking a Free Zone Commercial Licence is therefore a structuring decision that should be taken deliberately, by reference to where the activity will in fact be performed.
Related Insights
RAK ICC: a complete guide to Ras Al Khaimah's International Corporate CentreThe foundational guide in this series: what RAK ICC is, its common-law framework, company types and core uses.UAE Corporate Tax: A Comprehensive Guide for 2026 and BeyondThe full Corporate Tax picture: rates, Resident Persons, registration, filing and reliefs.Free Zone Tax Benefits in 2026: What's Left After the QFZP RulesThe Qualifying Free Zone Person regime — substance, qualifying income and the 0% rate.5. Corporate Tax: A UAE Resident Person, Notwithstanding the Offshore Label
The description of RAK ICC companies as "offshore" has led many to assume they sit outside the UAE Corporate Tax regime. They do not. A RAK ICC company is a juridical person incorporated in the UAE and is accordingly a Resident Person under Article 11(3)(a) of Federal Decree-Law No. 47 of 2022 (the "Corporate Tax Law"), taxable on its worldwide income.
5.1 Registration and Filing Are Mandatory Regardless of Revenue
Every RAK ICC company must register for Corporate Tax with the Federal Tax Authority. The administrative penalty for late registration is AED 10,000. An annual Corporate Tax return must be filed within nine months of the end of each tax period pursuant to Article 53 of the Corporate Tax Law, supported by financial statements. These obligations apply irrespective of whether any tax is ultimately payable.
5.2 Rates and the AED 375,000 Threshold
Under Article 3 of the Corporate Tax Law read with Cabinet Decision No. 116 of 2022, taxable income up to AED 375,000 is taxed at 0%, and the excess at 9%. The threshold operates as a bracket rather than a cliff: a company with taxable income of AED 500,000 pays 9% on AED 125,000 only. It bears emphasis that the threshold applies to taxable income — the accounting net profit as adjusted under the Corporate Tax Law — and not to revenue.
5.3 Small Business Relief
A resident taxable person whose revenue does not exceed AED 3,000,000 may elect for Small Business Relief under Article 21 of the Corporate Tax Law and Ministerial Decision No. 73 of 2023, available for tax periods ending on or before 31 December 2026. The election deems the person to have derived no taxable income for the period and permits simplified filing, while relieving the person of transfer pricing documentation requirements.
5.4 Related Parties and Connected Persons
Transactions between a RAK ICC company and its Related Parties must satisfy the arm's length standard in Article 34 of the Corporate Tax Law, with Related Parties defined in Article 35 by reference to kinship, ownership of 50% or more, and control — including the ability to exercise significant influence over the conduct of the business. In addition, under Article 36, payments or benefits provided by a taxable person to a Connected Person — defined to include an owner, a director or an officer of the taxable person, and their Related Parties — are deductible only to the extent they correspond with market value and are incurred wholly and exclusively for the business. The Federal Tax Authority's Public Clarification CTP010 confirms that "director" and "officer" are assessed on a substance-over-form basis, by reference to actual authority and decision-making power rather than formal title. Structures in which an individual invoices, through a personal vehicle, an entity of which he is an owner, director or officer therefore attract market-value scrutiny on the paying entity's side, together with a Connected Persons disclosure in the tax return where such payments exceed AED 500,000 in the period.
6. VAT: The Threshold Advantage of UAE Incorporation
Services supplied by a RAK ICC company to a UAE-established customer are within the scope of UAE VAT under Article 2 of Federal Decree-Law No. 8 of 2017 (the "VAT Law"), with the place of supply in the UAE. The designated zone regime applies to goods only; services are in all cases treated as supplied within the UAE, and attract the standard rate of 5% where the supplier is registered.
Registration, however, is where incorporation status matters decisively. Because a RAK ICC company is established in the UAE, its mandatory registration obligation is governed by the threshold in Article 13(1) of the VAT Law: registration is required only where the value of taxable supplies exceeds AED 375,000 over the preceding twelve months or is expected to exceed that amount within the coming thirty days. By contrast, a non-resident supplier enjoys no threshold whatsoever: under Article 13(2), a person without a place of residence in the UAE that makes taxable supplies here must register from the first dirham, save where the obligation to account for the tax falls on a registered recipient under the reverse charge mechanism. UAE incorporation therefore places the RAK ICC company in a materially more favourable VAT position than invoicing UAE customers from a genuinely foreign entity.
Voluntary registration is available under Article 17 of the VAT Law once taxable supplies or taxable expenses exceed AED 187,500. Whether voluntary registration is advisable is a commercial judgement: business customers recover the VAT charged to them, so registration carries no pricing disadvantage in business-to-business supplies and enables recovery of the company's own input tax; the countervailing consideration is the ongoing periodic compliance burden.
| Item | Position |
|---|---|
| Invoicing UAE clients, services performed wholly outside the UAE | Permitted; no UAE licence required (Regulation 40) |
| Business activity conducted within the UAE | Licence required before the activity commences — e.g. the RAK ICC Free Zone Commercial Licence (Emiri Decree No. 12 of 2024) |
| Corporate Tax status | UAE Resident Person — Article 11(3)(a), Federal Decree-Law No. 47 of 2022; worldwide income |
| Corporate Tax registration and filing | Mandatory regardless of revenue; return due within nine months of period end (Article 53); AED 10,000 late-registration penalty |
| Corporate Tax rate | 0% on taxable income up to AED 375,000; 9% on the excess (Cabinet Decision No. 116 of 2022) |
| Small Business Relief | Election available where revenue ≤ AED 3,000,000, for tax periods ending on or before 31 December 2026 (Ministerial Decision No. 73 of 2023) |
| VAT on services to UAE customers | Within scope; standard rate 5% where the supplier is registered |
| Mandatory VAT registration | Only where taxable supplies exceed AED 375,000 over the preceding twelve months (Article 13(1), VAT Law) |
| Voluntary VAT registration | Available once taxable supplies or expenses exceed AED 187,500 (Article 17) |
7. Common Misconceptions, Corrected
"A RAK ICC company cannot invoice UAE clients." Incorrect. The Regulations restrict conducting business activities within the UAE without a licence; they do not prohibit invoicing UAE-based customers for services performed from outside the UAE.
"RAK ICC companies are tax-free." Incorrect. A RAK ICC company is a Resident Person under Article 11(3)(a) of the Corporate Tax Law, must register with the Federal Tax Authority, and must file annual returns. Whether tax is payable depends on taxable income, not on the offshore label.
"No tax is payable, so no filing is required." Incorrect. Registration and filing obligations apply regardless of the amount of taxable income, and the penalty regime is enforced.
"The AED 375,000 Corporate Tax threshold is a revenue threshold." Incorrect. It applies to taxable income — net profit as adjusted under the Corporate Tax Law — and it operates as a 0% bracket, with 9% charged only on the excess.
"VAT never applies to offshore companies." Incorrect. Supplies to UAE customers are within the scope of VAT; what the company enjoys, as a UAE-established person, is the AED 375,000 mandatory registration threshold in Article 13(1) — a threshold denied to non-resident suppliers by Article 13(2).
"Remote means non-UAE." Not necessarily. The place-of-performance test is one of substance. Services delivered "remotely" by an individual physically present in the UAE are performed within the UAE, and the licensing requirement in Regulation 40 is engaged.
Frequently Asked Questions
Can a RAK ICC company provide consulting services to a DMCC company?
Yes, provided the services are performed entirely from outside the UAE, with no premises, personnel or operations onshore. Where the activity would be conducted within the UAE, an appropriate licence — such as the RAK ICC Free Zone Commercial Licence introduced under Emiri Decree No. 12 of 2024 — must be obtained first.
Does a RAK ICC company have to register for UAE Corporate Tax?
Yes. As a UAE juridical person it is a Resident Person under Article 11(3)(a) of Federal Decree-Law No. 47 of 2022. Registration with the Federal Tax Authority and annual filing under Article 53 are mandatory regardless of revenue; the late registration penalty is AED 10,000.
Is any Corporate Tax payable if taxable income is below AED 375,000?
No. Taxable income up to AED 375,000 is taxed at 0% under Cabinet Decision No. 116 of 2022, and an eligible company may additionally elect Small Business Relief under Ministerial Decision No. 73 of 2023 where revenue does not exceed AED 3,000,000, for tax periods ending on or before 31 December 2026.
Must a RAK ICC company register for VAT?
Only where its taxable supplies exceed AED 375,000 over the preceding twelve months or are expected to do so within the coming thirty days (Article 13(1), Federal Decree-Law No. 8 of 2017). Voluntary registration is available above AED 187,500 under Article 17.
Where can the governing regulations be verified?
The RAK ICC Business Companies Regulations 2018 and the full body of RAK ICC rules are published by the Registrar at rakicc.com. The Corporate Tax Law, the VAT Law and their implementing decisions are published by the Federal Tax Authority at tax.gov.ae.
- The restriction in Regulation 40 of the RAK ICC Business Companies Regulations 2018 is territorial, not personal: it conditions conducting business within the UAE on licensing — it does not prohibit invoicing UAE clients for work performed from outside the UAE.
- Where the activity would in substance be performed within the UAE, a licence must be obtained first — and since Emiri Decree No. 12 of 2024, RAK ICC itself can issue a Free Zone Commercial Licence with a RAKEZ registered address, without re-incorporation.
- A RAK ICC company is a UAE Resident Person under Article 11(3)(a) of the Corporate Tax Law: registration and annual filing are mandatory regardless of revenue, with an AED 10,000 late-registration penalty.
- The AED 375,000 threshold is a 0% bracket on taxable income — not revenue — with 9% charged only on the excess; Small Business Relief is available by election where revenue does not exceed AED 3,000,000, for periods ending on or before 31 December 2026.
- As a UAE-established person, a RAK ICC company enjoys the AED 375,000 mandatory VAT registration threshold that a non-resident supplier is denied — the non-resident must register from the first dirham.
Polaris Perspective
Polaris Corporate Services is a licensed Trust and Corporate Service Provider based in the Dubai International Financial Centre, and a registered agent and partner of RAK ICC, advising on corporate structuring, licensing and tax compliance across RAK ICC, RAKEZ, DIFC, ADGM and the wider UAE. We advise on the permitted scope of RAK ICC structures, obtain Free Zone Commercial Licences under the 2024 framework, and handle Corporate Tax registration, Small Business Relief elections and annual filings. This article is part of our ongoing RAK ICC series — the complete guide to RAK ICC maps the territory. To discuss a specific structure, speak to our team.
ContactThis publication is provided for general information only and does not constitute legal or tax advice. The legislation cited is that in force as at July 2026. Specific advice should be obtained before acting on any matter covered in this note.