silxdigital2024-04-09T11:53:07+04:00
How to set up a branch of a foreign company in Dubai
When considering expanding your business internationally, Dubai stands out as a strategic choice. Its robust economy, favourable tax policies and strategic location, between the East and the West, make it an ideal hub for businesses looking to tap into markets across Europe, Asia, and Africa.
Foreign companies looking to establish a presence in the emirate can choose from several options, including setting up a subsidiary, a branch office or incorporating a new business entity. Among these, a branch office stands out as a particularly efficient pathway for several reasons. A branch office acts as an extension of the parent company, offering a straightforward and efficient means to enter the UAE market, allowing companies to directly engage in business activities under the parent company’s name. This approach not only facilitates a direct connection with the local market but also retains the company’s global identity.
This article is designed to guide you through the nuances of setting up a company branch office in Dubai, focusing on the procedural and regulatory steps required to operationalise your business swiftly and efficiently in this lucrative market.
Key features of a branch office
A branch office acts as a direct and unincorporated extension of its parent company, permitted to undertake the same business operations in a different region. Since a branch office does not possess a distinct legal identity, it’s viewed as one and the same with its parent company. This means all its contractual dealings and obligations are managed and upheld by the parent company itself.
Such an office is eligible to engage in commercial activities within the UAE. However, the range of its operations must directly correspond with the activities of the parent company established in its country of origin.
Why set up a branch office in Dubai?
Strategic Gateway: Situated at the crossroads of the emerging economies of Asia and Africa, Dubai serves as an unparalleled strategic gateway. This prime location offers businesses a springboard into the MEASA (Middle East, Africa, and South Asia) market, providing access to a vast and varied customer base.
Favourable Tax Landscape: The financial advantages of setting up shop in Dubai are significant, especially when it comes to taxation. The absence of personal income tax means individuals are free from the complexities of tax registration and reporting, creating a straightforward financial environment for both employers and employees. Also, with a federal corporate tax rate set at a competitive 9%, one of the lowest globally, businesses can enjoy greater profitability.
Operational Control and Ownership: A branch office in Dubai not only facilitates market entry but also ensures that foreign businesses retain 100% ownership and control over their operations. This model allows the parent company to maintain its operational ethos and business practices, ensuring consistency and quality across borders.
Cost-Effective Market Entry: Compared to other business structures, setting up a branch office in Dubai is a cost-effective strategy for entering the UAE market. The absence of a share capital requirement significantly reduces initial financial outlays. Additionally, the only expenses incurred are related to licence registration, visas, and other administrative costs, making it an economically viable option for businesses planning to extend their reach to the UAE.
The Legal Landscape for Branch Office Setup in Dubai
Business Activities Consistency: The scope of activities of a branch office in Dubai must mirror that of its parent company. This ensures that the branch acts as a true extension of the company, maintaining the integrity and focus of the business.
Liability and Taxation: It’s important to note that the parent company bears full liability for the branch office’s debts and obligations. Additionally, the income generated by the branch is considered as income of the foreign parent company and is subject to taxation in the country where the parent company is based.
Financial Requirements and Guarantees: Unlike some other business structures, establishing a branch office in Dubai does not come with a minimum share capital requirement, making it a financially accessible option. However, a refundable bank guarantee of AED 50,000 is necessary throughout the licence duration, which serves as a fiscal safeguard but cannot be utilised as working capital.
Incorporation Timeline: The journey from submitting the initial documents for approval to the issuance of the business licence typically spans around 2 months. This time frame can vary, so planning for potential delays is wise.
Ownership and Sponsorship: Recent updates to the commercial companies’ law have streamlined the process for foreign businesses. Engaging a national service agent is no longer a prerequisite for the registration of a branch office, allowing for 100% foreign ownership. This means that foreign companies can retain full control over their local operations.
How to set up a branch office in Dubai
1. Background Check
A crucial initial step involves conducting a Know Your Customer (KYC) process for all shareholders and signatories of the branch. This process requires submitting a comprehensive set of documents, including passports, proof of address, and possibly bank reference letters, to verify the identities and legal standings of the individuals involved.
2. Board Resolution and Power of Attorney (POA)
You’ll next need to submit soft copies of the parent company’s legal documents. These are essential for drafting the Board Resolution, which authorises the opening of the branch, and the Power of Attorney, granting specific individuals the authority to act on behalf of the company in Dubai.
3. Authentication and Translation of Documents
Key documents from the parent company, such as the certificate of incorporation, must undergo notarisation, apostille (for countries part of the Hague Apostille Convention), and possibly embassy attestation in the country of origin. Additionally, these documents require a professional Arabic translation.
4. Department of Economic Development (DED) Initial Approval
The process continues with reserving a trade name for the branch and submitting an application form alongside supporting documents to the DED for initial approval. These include:
- Certificate of Incumbency
- Certificate of incorporation
- Memorandum of Association / Articles of Association
- Trade licence of the parent company
- Passport copies of the General Manager
5. Lease Office Space
Following DED’s initial approval, businesses must secure physical office space. This is a prerequisite for moving forward, as the office address needs to be listed on the commercial licence application.
6. Obtain Commercial Licence
To secure a commercial licence from the DED, businesses must submit the required documents, including the lease agreement for office space, the DED’s letter of approval, and any additional documents requested during the initial approval phase.
7. Open a Bank Account
Opening a corporate bank account in the UAE requires presenting the commercial licence, share certificates, and KYC documents of the shareholders and signatories. Each bank may have its specific requirements, so it’s advisable to consult directly with the bank for a detailed list.
8. Final Registration with the Ministry of Economy (MoE) and Federal Tax Authority (FTA)
The last steps involve registering the branch office with the MoE and obtaining a tax registration number from the FTA. These registrations are crucial for legal operations and tax compliance within the UAE.
How can Global Link help?
Global Link has over 16 years’ experience working with local and global businesses, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.
We can guide you through every step of setting up your branch office in Dubai. From initial background checks and document preparation to obtaining your commercial licence and finalising your registration with the Ministry of Economy and Federal Tax Authority, we are here to simplify the process. Our team will handle the intricacies of legal documentation, office leasing, and bank account opening, ensuring a seamless transition into the Dubai market.
If you need advice on this or any other aspect of company incorporation or visa acquisition, please get in touch with us on +971 4 553 9901 or email us at [email protected] and we will be happy to assist you.