Overview

A RAK DAO company offers an interesting blend of legal recognition, operational flexibility, and a suitable environment for Web3 innovation. It features no taxes, strong privacy, and a straightforward setup process, it’s well suited to decentralized projects.

The RAK DAO was launched in 2023 in the emirate of Ras Al Khaimah, UAE and is intended to be a magnet for Web3 innovators. RAK DAO companies have no minimum capital requirements, and have access to a concentration of technology and finance partners. RAK DAO runs its ‘Builder’s Oasis’ , an 8-week accelerator for Web3 startups.

Use Cases

Rak Dao Free Zone Companies are aimed at profit making organisations and have a typical company structure. The main use case is as a commercial activity around digital assets, blockchain development, virtual asset services and other tech focused activities. These companies permit foreign ownership, repatriation of profits, and shareholders may distribute funds as they wish.

Web 3.0 Start Ups

Entrepreneurs in blockchain, AI, gaming, or DApps can establish a RAK DAO company to utilize the free zone’s infrastructure and access to funding opportunities.

Asset Management

entities can hold and manage both on-chain and off-chain assets.
Working across borders. A RAK DAO company helps to simplify multi-jurisdiction business activities for global projects.

Non Profits

Not to be confused with a ‘RAK DAO Association’, which is a not-for-profit legal wrapper for use by DAOs (decentralised autonomous organisations) for decentralised governance.

Tax Status

As of June 1, 2023, the UAE imposes a 9% corporate tax on business profits exceeding AED 375,000. However, RAK DAO companies can benefit from a 0% corporate tax rate if they meet certain conditions:​

Qualifying Income: The income must be derived from permitted free zone activities.​

No Mainland Business: The company should not conduct business with the UAE mainland.​

Regulatory Compliance: Adherence to Economic Substance Regulations (ESR) and other compliance requirements is mandatory.​

If a RAK DAO company engages in commercial activities with the UAE mainland or earns non-qualifying income, it becomes subject to the 9% corporate tax on profits exceeding AED 375,000.

VAT

The UAE has implemented a 5% VAT system since 2018. RAK DAO companies generally benefit from VAT exemptions due to their free zone status. However, VAT obligations arise under certain conditions:​
Mainland Transactions: Supplying goods or services to customers in the UAE mainland or other emirates subjects the company to VAT.​ Importation of Goods: Importing taxable goods into the UAE mainland incurs VAT.​

Exceeding Threshold: If taxable supplies to customers outside the free zone exceed AED 375,000 in the past 12 months or are expected to exceed this threshold in the next 30 days, VAT registration with the Federal Tax Authority (FTA) becomes mandatory.

Privacy

The RAK DAO company offers a high degree of confidentiality. There is no public register of directors, or of shareholders. The register of UBOs - individuals with 25% or greater stake is held by the registering agent and not publicly visible. However it is accessible to the local authorities. This is a relatively high level of privacy and appeals particularly to Web3 founders and builders for whom privacy is a key issue.

There remains a requirement to comply with internal governance rules or providing necessary information to regulators or banks when required.

Onboarding

Setting up a RAK DAO company is designed to be streamlined. Otonomos assists with the preparation of all information and required documentation.

An application will require a Memorandum of Association, a business plan, and if issuing tokens white paper and tokenomics details. A registration fee is payable at this point. But no minimum capital is required.

RAK DAO will review the application, with a trade license being issued within seven working days, if the submitted documentation is complete.

Once the licence has been issued, the company can access the RAK DAO’s ecosystem, should they require coworking spaces, banking services, or visa support.

KYC Verification Process

Know Your Customer (KYC) verification is required for a RAK DAO company. This is especially true for those involved in financial activities, or for issuing tokens. RAK DAO initial registration does not require as detailed a KYC procedure as many other jurisdictions, however the subsequent activities including opening a UAE company bank account, do require it.

The initial process requires individual verification of key stakeholders including a copy of their passport, valid for at least six months, and proof of address such as a utility bill or bank statement dated within three months. Shareholders who are corporate entities must provide a certificate of incorporation, articles of association, and identity of its UBOs with identity documents.
Proof of funds may be requested for banking or token-related activities, but is not an initial KYC requirement. In cases of intended token issuance, an audit of smart contracts, and a legal opinion on token classification are required. Banks or regulators request enhanced due diligence for high-risk activities.

Entity Maintenance

A RAK DAO company has little administrative overhead given its free zone status. Companies must maintain accurate records of members, transactions and assets, but there is no requirement to file a financial statement. The annual requirements include the renewal of the business licence, for which there is a fee. Most companies will not be required to submit an economic substance regulations notification with the exception of holding companies and intellectual property focused businesses which are required to file an ESR notification. There is no minimum capital requirement. Companies should ensure ongoing adherence to RAK DAO regulations, such as cybersecurity audits for token-related activities and notification of any material changes.

Renewal Periods

RAK DAO companies must renew their business license each year. The renewal process is straightforward, and may require the submission of updated documents. RAK DAO provides reminders and support to ensure timely renewals, and your service provider can help you with this. Not renewing in time will incur penalties or suspension of the license.

All required renewal payments can be made from within the Otonomos Dashboard.

Reporting

Reporting requirements for RAK DAO companies are light compared to traditional jurisdictions. The main requirement is to maintain the business licence, the only reporting requirements are regarding changes in key personnel. There are no financial statements or tax reporting requirements.

Shutting Down Your Entity

To dissolving a RAK DAO company the steps include:
Reach out to Otonomos to initiate the process. Settle any outstanding fees or liabilities. Liquidate and distribute assets. RAK DAO processes the closure, typically within a few weeks, canceling the trade license.