How to set up a holding company in Dubai

Holding companies in Dubai represent a highly strategic and attractive option for investors aiming to optimise asset management and enhance their investment portfolio. These entities appeal primarily to international investors and large conglomerates looking to benefit from Dubai’s favourable economic policies, including comprehensive tax exemptions and robust legal protections. Setting up a holding company in Dubai allows investors to consolidate their operations under one umbrella, providing efficiency and ease in management across diverse business activities and sectors.

This article looks at the process of setting up a holding company, the benefits it offers and other important considerations.

What is a holding company?

A holding company, often referred to as a parent company or umbrella company, is an entity established to own shares in other companies, which are known as subsidiaries. Unlike typical operational businesses, a holding company does not engage directly in selling goods or services or in daily business operations of its subsidiaries. Instead, it exercises control over these entities, managing them through centralised administration and overseeing their overall management. The primary role of a holding company is to provide strategic direction and handle administrative tasks, which can offer advantages such as asset protection, risk management, and tax efficiencies. This structure is frequently used to consolidate control of various companies, safeguard assets, and streamline group-level financial and legal activities.

Strategic Benefits of Holding Companies in Dubai

Asset Management

Holding companies in Dubai provide an efficient framework for managing and consolidating control over subsidiaries and investments. By centralising ownership, holding companies allow for streamlined oversight and strategic alignment across various entities. This structure facilitates effective deployment of resources, coordinated policy implementation, and simplified internal transactions, which can lead to enhanced operational efficiencies and increased asset protection.

Risk Mitigation

One of the critical advantages of a holding company is the ability to segregate operational risks from the investment assets. This separation ensures that liabilities arising from the activities of subsidiaries do not impact the holding company directly. As a result, assets owned by the holding company are shielded from creditors and legal claims against the subsidiaries. This legal and financial isolation helps in maintaining stability and reducing overall risk exposure within the corporate group.

Economic Zones

Dubai offers specialised economic zones like the Dubai International Financial Centre (DIFC) and other free zones, which are particularly beneficial for holding companies. These zones provide a regulatory environment that supports financial services and asset management companies with advantages such as 100% foreign ownership, repatriation of profits, and competitive tax regimes. The DIFC, for instance, also offers a robust legal framework based on English common law, which is particularly attractive to global financial entities looking to establish their holding structures in a stable and secure jurisdiction.

Tax Benefits

There are tax benefits to structuring group companies with a holding company, especially should the holding company be incorporated in the UAE. Companies can take advantage of the lower tax rates that the UAE offers. Subsidiaries can transfer their profits to the holding company and the holding companies can file consolidated tax returns which can potentially reduce the tax liability.

Share Capital Requirement

This is dependent on which jurisdiction the holding company is incorporated in, but there is the option in the UAE to set up a holding company with no share capital.

Setting Up a Holding Company in Dubai

Setting up a holding company in Dubai involves a straightforward process, whether you choose to establish it on the mainland or in one of the free zones. Each option has unique advantages and steps that need to be followed:

1. Mainland Setup

• Business Activity Selection: Decide on the specific activities your holding company will oversee. This decision will impact the type of licence required.
• Legal Form and Structure: Choose the appropriate legal form for your holding company, such as a Public or Private Shareholding Company.
• Trade Name Registration: Reserve a trade name through the Department of Economic Development (DED) that complies with UAE regulations.
• Initial Approval: Obtain initial approval from the DED, indicating your intent to form a holding company.
• Document Submission: Submit required documents, including the company’s Memorandum of Association (MOA), to the DED for final approvals.
• Office Space: Secure office space as DED mandates physical office requirements for mainland companies. The office size influences the number of visas you can apply for.
• Licensing and Registration: Once all approvals are secured, finalise the registration to receive your business license from the DED.

2. Free Zone Setup

• Choose a Free Zone: Select a free zone that best suits your business needs based on location, costs, and sector specialisations. Dubai International Financial Centre (DIFC), Jebel Ali Free Zone (JAFZA), and Dubai Multi Commodities Centre (DMCC) are popular choices for holding companies.
• Business Activity and Legal Form: Like mainland setups, decide on the business activities and choose a legal form, such as a Free Zone Establishment (FZE) or Free Zone Company (FZCO), which both offer 100% foreign ownership.
• Trade Name Registration: Register a trade name within the free zone authority.
• Documentation: Submit necessary documents, which typically include a business plan and the company’s Articles of Association.
• Office Space: Depending on the free zone, you might be required to lease physical office space or you may utilise flexible desk options.
• Licensing: Apply for and obtain a business licence from the free zone authority, which often comes with fewer restrictions compared to mainland licences.

General Considerations

• Bank Account: After the company is legally registered, open a corporate bank account in one of Dubai’s reputable banks.
• Compliance and Legalities: Ensure compliance with UAE’s anti-money laundering laws and other relevant legal requirements.

Both mainland and free zone setups offer significant advantages such as tax benefits, strategic geographic positioning, and a robust economic environment conducive to business growth. The choice between a mainland and a free zone setup will depend on the specific needs of your holding company, including desired business scope, preferred legal structure, and the level of interaction with the local UAE market.

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 advise you on setting up a holding company in Dubai, helping you choose the best jurisdiction, assisting with preparation of all the required documentation and providing support through the incorporation process and beyond, liaising with all relevant parties on your behalf to ensure a swift and seamless business setup.

If you need advice on holding companies or for any other company incorporation, visa or PRO service, 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.