Are you looking to expand your business internationally and open a branch in Dubai? If so, you’re in the right place! We’ll guide you through the process of how to open a branch of a foreign company in Dubai. From understanding the legal requirements to finding a suitable location, we’ll cover everything you need to know to get your business up and running in the UAE’s most dynamic and prosperous city. Keep reading to learn more about the steps you need to take to successfully establish your company in Dubai.
So many foreign businesses are making their way to the United Arab Emirates to open a branch office in Dubai to take advantage of the country’s business-friendly environment. If you are one of them and looking to establish a branch of your parent company in whatsoever country, we’ve got you.
How to Open a Branch of a Foreign Company in Dubai : An Overview
Opening a foreign branch office in Dubai refers to incorporating a branch of a foreign company in Dubai, the economic capital of the UAE. This allows the foreign company to have a physical presence in Dubai and expand its business operations in the UAE and the wider Middle East region. To open a branch office in Dubai, the foreign company must comply with the legal and regulatory requirements of the UAE. This involves registering the branch with the desired jurisdiction and obtaining a commercial license from the authority in charge.
Entering the UAE market is easy and highly cost-effective with a branch setup in Dubai as there is no share capital requirement. Without incurring high upfront costs, operational costs to run branch offices have a high opportunity to grow without capital is a major concern for their business.
Main Reasons to Start a Foreign Branch in Dubai
An extension of the parent foreign company in Dubai is a wonderful move if you wish to establish your presence in Dubai
- Business expansion
- 100% business ownership
- Same business activity as of parent company
- No paid-up capital is required for incorporation (a refundable bank guarantee is there tho)
- Permitted to sign local contracts, issue invoices and hire staff
- Expert assistance from the UAE national agent
- Freedom to conduct business with UAE clients unlike free zone entities
- Cost-effective and safe way to enter a desired market and reach the global market
- No need of appointing a UAE-accredited auditor unlike the LLC
Key Features of a Foreign Branch Company in Dubai
It’s important to know the following fundamental features of a foreign branch company in Dubai before setting off:
- Scope: The scope of a foreign branch in Dubai can range from serving as a sales or marketing office to a fully-fledged business operation that engages in manufacturing, distribution, or other commercial activities. Some foreign branches in Dubai also serve as regional headquarters, managing operations in other countries in the region.
- Ownership: A foreign branch company in Dubai is fully owned by the foreign parent company, which means that it is not a separate legal entity in Dubai.
- Registration: The foreign branch company must be registered with the Department of Economic Development (DED) in Dubai and obtain a trade license to operate in the city.
- Name: The foreign branch company must use the same name as the foreign parent company and must include the words “branch in Dubai” in its name.
- Activities: The foreign branch company can conduct the same activities as the foreign parent company, subject to any restrictions under UAE laws and regulations.
- Liability: The foreign parent company is liable for the debts and obligations of the foreign branch company.
- Bank Guarantee: Each foreign branch must pay a refundable bank guarantee deposit of AED 50,000 to the Ministry of Economy through a local UAE bank. This deposit is held for the life of the license and cannot be withdrawn or used as operating capital.
- Appointment of a UAE-based Auditor: You must designate a qualified accountant resident in the UAE to create a balance sheet and provide annual final accounts of branches while renewing entrance at the Ministry of Economy. The auditor must produce a unified balance sheet if the foreign company has multiple branches.
- Financial Reporting: The foreign branch company must submit annual financial statements to the DED in Dubai, as well as comply with any other reporting requirements under UAE laws and regulations.
- Taxation: A foreign branch company in Dubai is subject to UAE corporate income tax, which is currently set at 15%. However, certain industries may be exempt from taxation, and tax treaties may apply to reduce the tax burden.
- Branch Manager: The foreign branch company must appoint a branch manager who is responsible for the day-to-day operations of the company in Dubai.
- Branch Office: The foreign branch company must maintain a physical presence in Dubai, which may be in the form of a branch office or a representative office.
- Employment: The foreign branch company can employ staff in Dubai, subject to UAE labour laws and regulations. The company must obtain work permits and visas for its employees, and comply with any other employment-related requirements.
What are the u003cstrongu003ebenefits of starting a Foreign Branch in Dubaiu003c/strongu003e
Dubai has been a popular choice amongst businesspersons worldwide to expand their business in the form of a branch. And it’s easy to see why. For starters, the tourism and expat-friendly Emirate is home to over 190 nationalities making up about 90% of its overall population. Plus, the city abounds with business opportunities and has a lot to offer to new entrepreneurs and established businesses and investors. Starting a foreign branch in Dubai can present a number of advantages to a company, including: u003cbru003e1. u003cstrongu003eStrategic Location: u003c/strongu003eDubai is located at the crossroads of Europe, Asia, and Africa, making it an ideal location for businesses that want to access markets in these regions. u003cbru003e2. u003cstrongu003eTax Benefits:u003c/strongu003e Dubai has a very attractive tax regime boasting zero personal income tax and low corporate tax rates which lures businesses looking to reduce their tax burden. u003cbru003e3. u003cstrongu003eBusiness-Friendly Environment: u003c/strongu003eDubai has a pro-business regulatory environment, with streamlined procedures for setting up a company, and a range of incentives and support services for businesses. Not to mention the u003ca href=u0022https://www.dubaibusinessadvisors.com/blog/latest-news-press-releases/7-best-freezones-in-uae-to-start-your-business-2023update/u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003epresence of free zones in abundanceu003c/au003e. u003cbru003e4. u003cstrongu003eInfrastructure: u003c/strongu003eDubai has world-class infrastructure, including modern transportation systems, a well-developed telecommunications network, and advanced logistics facilities. u003cbru003e5. u003cstrongu003eSkilled Workforce:u003c/strongu003e Dubai has a highly educated and skilled workforce, with a large number of expatriates working in the city. u003cbru003e6. u003cstrongu003eGlobal Reach:u003c/strongu003e Dubai is a gateway to the wider Middle East and North Africa region, providing businesses with access to a large and growing market. u003cbru003e7. u003cstrongu003eDiversification Opportunities:u003c/strongu003e Dubai is a diverse and cosmopolitan city, with a thriving tourism industry, a growing healthcare sector, and a range of other industries that offer potential opportunities for businesses.
What are the u003cstrongu003eForeign Branch Registration Options in Dubaiu003c/strongu003e
A branch of a foreign company in Dubai can be registered in either of the two jurisdictions – Mainland and Free Zone. The main differences between a mainland foreign branch in Dubai and a free zone foreign branch in Dubai are related to the legal and regulatory frameworks that govern each type of branch. Let’s explore the key distinctions between the two types: u003cbru003eu003cstrongu003eMainland foreign branch in Dubai:u003c/strongu003e u003cbru003eA mainland foreign branch is a branch of a foreign company that is established in mainland Dubai, outside the free zone areas. u003cbru003eThe mainland branch, just like free zone branches, can also get u003ca href=u0022https://www.dubaibusinessadvisors.com/blog/company-setup/100-ownership-of-mainland-company-is-permitted-now-in-the-uae/#:~:text=Yes%2C%20you%20heard%20that%20right,the%20Federal%20Decree%2DLaw%20No.u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003e100% foreign business u003c/au003eownership in the company without involving a UAE national as a sponsor. However, a local service agent can be appointed for government liaisoning and other admin-related purposes. u003cbru003eThe branch can conduct business with companies in Dubai and the wider UAE without any restrictions. u003cbru003eThe branch is subject to UAE commercial law, including the Commercial Companies Law, which governs the establishment, management, and dissolution of companies in the UAE. u003cbru003eThe branch is required to obtain a commercial license from the u003ca href=u0022https://www.dubaibusinessadvisors.com/blog/business-management/ded-dubai/u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003eDubai Department of Economic Developmentu003c/au003e (DED) and comply with various regulatory requirements, such as obtaining visas for employees and complying with labour laws. u003cbru003eu003cstrongu003eFree zone foreign branch in Dubaiu003c/strongu003e u003cbru003eA free zone foreign branch is a branch of a foreign company that is established in one of Dubai’s free zones, which are designated areas that offer tax incentives, full foreign ownership, and other business-friendly regulations. u003cbru003eThe branch is not required to have a UAE national as a sponsor, and the foreign company can hold 100% ownership of the branch. u003cbru003eThe branch is restricted from conducting business with companies in mainland Dubai or the wider UAE, except through a local distributor or agent. u003cbru003eThe branch is subject to the regulations of the specific free zone in which it is located, which may include its own commercial laws and regulatory requirements. u003cbru003eThe branch is required to obtain a license from the relevant free zone authority and comply with various regulatory requirements, such as obtaining visas for employees and complying with labour laws specific to the free zone. u003cbru003eIn general, mainland foreign branches in Dubai have more freedom to conduct business in the UAE and access the wider market but are subject to more regulatory requirements and restrictions. Free zone foreign branches, on the other hand, offer more favourable tax and ownership regulations but are restricted in their ability to do business outside of the free zone.
u003cstrongu003eProcess of Setting up a Foreign Branch Office in Dubaiu003c/strongu003e u003cbru003eNow that you know the advantages of setting up a branch office in Dubai, here comes the most-awaited question – how to set up a branch office in mainland Dubai? Here’s your step-by-step guide to LLC foreign branch setup in Dubai.
u003cstrongu003eStep 1: Application filingu003c/strongu003e
The foreign investor must submit an application for approval to the u003ca href=u0022https://www.moec.gov.ae/en/homeu0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003eMinistry of Economic and Commerceu003c/au003e in order to establish a branch firm in the UAE. A service agent agreement, which is absolutely necessary for the establishment of the business, is submitted during the filing. Having a UAE agent act as your service agent while establishing a representative office is also crucial.
u003cstrongu003eStep 2: Obtain approval from the relevant authority or the economic departmentu003c/strongu003e
The UAE Ministry of Economy and Commerce will only grant an agreement after receiving clearance from the local Economic Department. As a result, the Ministry will submit the application for approval to the local government.
u003cbru003eu003cstrongu003eStep 3: Obtain UAE Federal Foreign Companies Committee approvalu003c/strongu003e
The application is subsequently forwarded by the Economics Department to the committee for approval, which must next come from the UAE Federal Foreign Companies Committee. A letter of authorization from the Ministry of Economy and Commerce for the commercial activity that the concerned company engages in will also be included in this application.
u003cstrongu003eStep 4: Acquire a license from the Ministry of Economic and Commerceu003c/strongu003e
The branch office will be given the ministerial license following approval from each of the aforementioned authorities. This license, which will be granted by the Ministry of Economic and Commerce, will list the commercial operations that the branch office will carry out.
u003cstrongu003eStep 5: Get a business licenseu003c/strongu003e
The Dubai Economic Department will register the branch office as a foreign company under the Foreign Company Registration. The branch office will only get a business license following this procedure. To u003ca href=u0022https://www.dubaibusinessadvisors.com/blog/business-management/how-to-apply-for-a-ded-licence-in-dubai/u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003eattain the DED’s licenseu003c/au003e you are required to complete the trade license application and submit it along with the required documents. Here’s a series of steps to complete the licensing procedure. u003cbru003eDetermine the type of legal entity before setting up a branch office in Dubai u003cbru003eSelect a suitable office location for your foreign branch in Dubai from a variety of free zones and business districts that cater to different industries. u003cbru003eName your branch office and obtain approval from the relevant authority u003cbru003eRegister the branch office with the DED in Dubai. The registration process includes obtaining a trade license, leasing office space, and obtaining necessary permits. u003cbru003eObtain the necessary visas for employees and family members. u003cbru003eu003ca href=u0022https://www.dubaibusinessadvisors.com/blog/offshore/corporate-bank-account-opening-in-dubai-united-arab-emirate/u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003eOpen a bank account in Dubaiu003c/au003e for the branch office. u003cbru003eHire staff members for the branch office. u003cbru003eAdhere to local rules and regulations.
u003cstrongu003eStep 6: Register with the appropriate commercial authoritiesu003c/strongu003e
The branch officer can register with the commercial authorities in the area to launch his or her firm once all the necessary paperwork and approvals have been obtained from the relevant authorities. It is required that the branch office in Dubai registers with both the Chamber of Commerce and Industry and the Ministry of Economic and Commerce Companies Register.
u003cstrongu003eDocumentation for Foreign Branch Set Up in Dubaiu003c/strongu003e
You must be ready with the necessary documents to open a foreign branch company in Dubai. Here’s the list: u003cbru003eCopy of shareholder’s passport u003cbru003emanager’s resume and passport copy u003cbru003eEach shareholder’s and manager’s individual bio u003cbru003eEvidence of a trade name reservation for a new branch u003cbru003eMemorandum of Association (MoA) for an established business notarized by a UAE notary public u003cbru003eA notary public’s notarization of the articles of association of an established business u003cbru003eThe board of directors decided to open a new branch in a board resolution u003cbru003eTrade authorization for the primary branch issued by the Chamber of Commerce u003cbru003eAuthorization for shareholders’ rights u003cbru003eThe u003ca href=u0022https://www.dubaibusinessadvisors.com/blog/tips/commercial-leasing-guidelines-for-tenants-in-dubai/u0022 target=u0022_blanku0022 rel=u0022noreferrer noopeneru0022u003elease agreementu003c/au003e includes the new branch’s address u003cbru003eCompany profile for the main branch
How can we help?
One of the top business consulting firms in the UAE, Adam Global has assisted many foreign businesspersons in setting up their branch offices in the UAE. We provide the following services once you contact us and give us permission to build a company branch for you in Dubai:
- Obtain a trade license and submit a branch office application
- Represent the client before the authorities
- Start the client’s bank account
- Secure a certificate from the Labor Ministry
- Register with UAE immigration
- Obtain a client leasing permit and fit out an office