Whilst holding property in an offshore company certainly has its benefits if structured correctly; once established many people quickly learn that this is not a suitable holding vehicle for them.
 
When an Offshore Company is not suitable:
 
If you require property finance
Most banks (whether in the UAE or overseas) will only lend to an offshore company that has 3 years trading history. As such, unless you own an existing offshore company that can show 3 years audited accounts - with sufficient profit to service the loan repayments - an offshore company will not be suitable if your require a mortgage to complete the purchase.
 
However, there may still be an option if you are an existing property owner (see below 'utilising exiting assets').
 
If you live in an 'onshore' taxable jurisdiction
If you are resident in an 'onshore' taxable jurisdiction (such as the UK), an offshore company will be deemed resident in the country of its Directors and consequently income and capital gains will be taxed the same as an onshore company of that jurisdiction. This mitigates the tax benefits of the offshore company.
 
However, it is possible for the company to remain offshore if structured correctly (see below 'using nominee Directors').
 
If your are planning to sell the property before moving to a taxable 'onshore' jurisdiction  
If you live in a tax-free jurisdiction and you are only planning to keep the property for a short period of time (or sell it before you move back onshore), then there are no tax benefits to be gained from holding the property in an offshore company.
 
However, there could be alternate benefits to non-Muslims and those looking to avoid transfer fees on larger properties.
 
When an Offshore Company can be used:
  
After reading the above you probably believe that the offshore company option is only pertinent to cash purchasers living in a zero-tax jurisdiction. However, in certain circumstances, these barriers can be mitigated.
 
Utilising existing assets
If you require finance to complete the purchase, an alternate option would be raise the capital on an existing asset. Not only will this allow you to transact a cash purchase on the new property (and consequently purchase it through an offshore company), there are often other benefits to be gained.
 
For example, an individual requires a mortgage of AED 680,000 (approx. GBP 100,000) to complete the purchase of a property in the UAE. They already own a house in the UK which is worth GBP 200,000 that only has a small mortgage remaining on it. This individual could refinance the house in the UK to release the AED 680,000 of equity required. Apart from enabling them to purchase the property through an offshore company, structuring the purchase in this way also:

• Enables them to access interest rates as low as 4.5% - 33% less than is on offer in the UAE

• Enables to repay the loan over 25 years (if they wish) as opposed to a maximum term of 15 years in the UAE

• It secures the loan against a stable housing market with a long-term track record

• It enables them to use established lenders

• It enables them to use cheaper loan protection policies

As another example, an individual owns a low risk USD denominated investment that has recently been valued at $400,000. This individual could borrow against the AED 680,000 required against this asset and benefit from US based lending rates as low as 3% - half those offered locally! Again they would also benefit from a lending environment with a long track record and a choice a repayment terms and options.
 
Additionally, if structured correctly, the released equity can be lent to the offshore company on an interest free basis. This then creates a further debt upon your estate for inheritance tax mitigation. 
 
Using Nominee Directors
Those in ‘onshore’ jurisdictions can often avoid having the offshore company deemed as onshore by employing professional third-party ‘nominee’ Directors.
  
In most countries, a company will only be deemed ‘onshore’ if the Directors are based ‘onshore’ and it is therefore viewed that the company is operated onshore.
 
Nominee Directors are essentially individuals who are based in an offshore jurisdiction and appear to run the company from that jurisdiction. They are not shareholders of the company and have no control over the operations of the running of the company – so long as it does not make them liable to prosecution!
 
In certain offshore jurisdictions, which do not hold a register of shareholders, nominee Directors can be used to ‘front’ the company and ensure that any rental income or capital gain originating from the sale of the property remain free of taxation.