A Dubai Mainland Company is a popular choice for business setup in Dubai due to its benefits. However, foreign owners only get 49% ownership, with a local sponsor holding the remaining 51%. To avoid this, foreign companies can open a branch office in Dubai, allowing for full ownership.
Dubai Mainland Company is the most common type of business entity in the emirate of Dubai. It has several benefits for which many foreign investors choose this basic type of structure for their company formation. But there are few shortcomings in this type of business formation also. The most important one is that foreign company owners only get 49% shares of Dubai Mainland Company while local sponsor holds remaining 51% shares of a foreign company. But a foreign company can easily avoid this condition and gain complete ownership of its business by opening a branch office in Dubai.
What is a Branch Office in Dubai, UAE?
Any entrepreneur looking to get a strategic advantage in the booming UAE market faces a variety of choices. Although many prefer free zone or traditional mainland setting, a branch office is a perfect choice if you are looking for a foothold in the local market whilst also maintaining 100% control of your company.
In most cases, the parent organization, whether located in the UAE or overseas, is directly responsible for the commercial operations of the division. And the branch office is just an extension of the existing business. Aside from the case of a division that is deemed to be entirely independent, the branch office does not have a separate legal status from the parent corporation. In the same way, while most branch offices are permitted to participate in the local UAE market, they can only conduct similar business activities to the parent company.
There are many great reasons to think about opening up a company branch office – from a favorable tax rate to a foothold on the door of a new sector. But first let’s look at the different types of a branch office that you may set up in the Emirate, and what each is allowed to do.
Types of Branch Offices in Dubai, UAE
Mainland Branch Office
- Operates within Dubai’s local market.
- Engages in all business activities of the parent company.
- Requires a local service agent.
Free Zone Branch Office
- Operates within Dubai’s free zones.
- Enjoys tax exemptions and 100% foreign ownership.
- Limited to free zone and international activities.
What is the difference between Branch and Representative Offices?
| Aspect | Branch Office | Representative Office |
|---|---|---|
| Scope of Activities | Engages in commercial activities, including sales and revenue generation, functioning as an extension of the parent company. | Limited to non-commercial activities such as promoting the parent company and conducting market research; cannot generate revenue or do business in Dubai. |
| Legal Structure | Operates within the parent company’s scope, can sign contracts, and generate profits but does not have a separate legal identity. | Acts as a promotional and administrative entity with no separate legal identity and cannot conduct independent transactions. |
| Licensing and Regulations | Requires a commercial license to conduct full business operations, subject to local company regulations. | Requires a specific license limited to non-commercial activities, regulated by the DED. |
| Financial Operations | Can conduct financial transactions and repatriate profits to the parent company. | Cannot handle financial transactions like invoicing or collecting payments; funded by the parent company. |
Factors to Consider When Establishing a Branch Office
When choosing to set up a branch office in Dubai, one must consider:
- The branch office mirrors the foreign company’s activities
- Necessary licenses must be obtained from Dubai authorities
- The branch office is not a separate legal entity
- The parent company is liable for the branch’s obligations
- UAE income is subject to tax for the branch office
Steps to Open a Branch Office in Dubai
Appoint a Local Service Agent (LSA)
To set up a branch office in Dubai, foreign companies must appoint a Local Service Agent, who is either a UAE national or a wholly UAE-owned company. The LSA handles administrative tasks and ensures compliance with UAE regulations.
Obtain Initial Approval from the Ministry of Economy (MOE)
Submit an application to the Ministry of Economy in Dubai for initial approval, including details about the parent company and the intended business activities. Key documents required include the certificate of incorporation, memorandum of association (MOA), and power of attorney.
Register Your Trade Name
Choose a trade name that aligns with your parent company’s brand and complies with UAE regulations. The name must be unique and meet specific criteria set by the Dubai Department of Economic Development (DED).
Apply for a Commercial License from the DED
Once initial approval is granted, apply for a commercial license from the DED. This license authorizes the branch office to engage in full commercial operations within Dubai.
Finalize Documentation and Setup
Submit all required documents, including the notarized Local Agent Agreement, attested board resolution, and passport copies of the company’s investors. Ensure all paperwork is accurate to avoid delays. Lastly, complete the registration of the branch office at the Dubai Chamber of Commerce and Industry, which finalizes your branch office setup in Dubai.
Open a Corporate Bank Account
After obtaining the commercial license, open a corporate bank account in Dubai to manage financial transactions related to your business operations.
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Requirements for Opening a Branch Office
- Branch or representative of the foreign company is required to submit a bank guarantee of AED 50,000 in favor of Ministry of Economy as it is a part of the license processing procedure.
- To open a branch or representative office in Dubai, a manager must be appointed to represent the company; the manager must have an approved motion by the Board of Directors to open the branch.
Benefits of Setting up Branch Office in UAE
Setup a Branch Office in Dubai
How Riz & Mona Consultancy Can Help?
Riz & Mona Consultancy is renowned as one of the top business setup consultants in Dubai, with over 15 years of experience facilitating a wide range of businesses throughout the UAE. Our deep connections with government officials and key authorities, combined with our extensive expertise in consultancy, streamline the process of establishing your business in Dubai. Additionally, we offer comprehensive financial, legal, and corporate services to support our clients throughout their business endeavors.
We are here to provide comprehensive support in setting up a Branch Office in Dubai, from preparing your documents to completing the process. Connect with us now to begin your journey with a FREE consultation!
FAQS
How do the regulatory requirements for a branch office in Dubai compare to those in other global business hubs?
Dubai’s regulatory requirements are business-friendly, with fewer bureaucratic hurdles compared to cities like London or New York, making it quicker to establish a branch.
What are the potential challenges foreign companies might face when setting up a branch office in Dubai, and how can they be mitigated?
Challenges include complying with local regulations and cultural differences; these can be mitigated by working with experienced local service agents and legal advisors. to transfer profits back to their home country with no withholding taxes or restrictions on the amount.
How does the process of repatriating profits from a Dubai branch office work, and what are the tax implications?
Profits can be repatriated without restrictions, and Dubai offers a tax-free environment, ensuring full financial flexibility for foreign companies.
What are the best practices for choosing a Local Service Agent (LSA) when setting up a branch office in Dubai?
Choose an LSA with a strong local network, a solid reputation, and a clear understanding of your industry to ensure smooth operations.
What role does the Dubai Chamber of Commerce and Industry play in supporting branch offices of foreign companies?
The Chamber provides resources, networking opportunities, and advocacy, helping foreign companies comply with regulations and connect with local businesses.