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For any business to set a benchmark in its respective sector, it is crucial to establish an international presence. While creating an impact and generating maximum leads in the domestic market is significant, but without globalisation, the growth of a company would become stagnant. Opening a branch in a foreign location would increase the business opportunities by extending their operations into other markets in addition to other numerous benefits. One of the key benefits of setting up a branch in Dubai is that the country allows 100 % foreign ownership and permits to perform all activities similar to the parent company. Since the branch office is primarily an extension of an existing business, the entire responsibility of the business operations relies on the parent company whether or not based in the UAE.
A business owner can choose from 4 different categories and consider the one which would be the most effective for their business.
The parent company in this category can either operate in Dubai or any other geography. Company branches which are classified under corporate shareholder allow an individual shareholder to hold a stake along with the license. It is also possible to have multiple corporate owners.
One of the most common set-ups, a branch company can also have a parent company operating either within Dubai or outside. However, unlike a corporate shareholder, a branch company follows the rule of a sole proprietorship.
The most cost-effective among all branch types, representative offices too can have their parent company operating either within or outside of Dubai. The major difference between the representative office branch from others is that their business activities are limited to promoting and sourcing work for the parent company. They are not allowed to make a proﬁt in the UAE and must outsource all work back to the parent company.
Operations of companies under the subsidiaries branch function in a unique way. They are considered as a separate legal identity to the parent company and must be arranged within Dubai. Since the parents of the subsidiaries can be either in or out of the UAE, but the management must be based in Dubai, the subsidiary assumes the total liability for its actions and business activities.
While setting up a branch office in Dubai has numerous benefits like establishing a foothold in the local market, fetching your business global identity and yet having the complete ownership, here are some of the other crucial benefits which will invoke your desire to ‘Dubai-ofy’ your business.
For any business operation to remain in profit, the tax benefit is one of the key aspects to be considered. For companies which opt for Dubai to set up their branch in can avail advantage of the UAE’s 0% corporate tax rate.
To keep a constant track of the audit especially in MNCs is a tedious task. However, businessmen setting up a branch office in the UAE can enjoy the added advantage of legal tracking of every monetary transaction that happens between the parent company and the branch office.
When a business operation is not confined to just one geography, it is quite cumbersome to manage business activities effectively. However, this can be avoided when setting up a branch in the UAE as there is not usually a need for a separate ﬁnance function within UAE branch oﬃces as they are not required to submit audited accounts.
Since there is no share capital requirement to set up a branch office in the UAE, entering new markets is highly cost-effective. Without incurring high upfront costs, running costs to operate branch offices have a high opportunity to grow without capital is a major concern for their business.
Primarily there are two main types of branch offices which can be set up in the UAE: Dubai Mainland and Free Zone branches. Let’s take a look at the main differences between the two categories:
Now that you know of the incredible benefits and advantages that setting up a branch office in the UAE which can be availed, the next step would be to understand the structure and guidelines to follow for the same.
To start a branch company in the UAE, an application must be filled out by the foreign investor which will go to the Ministry of Economic and Commerce for approval. A service agent agreement is provided during the submission which is highly essential for the setting up of the business. It is also important to have a UAE agent as your service agent during the process of establishing a representative office.
Only post the approval of the Economic Department of the locale will the UAE Ministry of Economic and Commerce will provide an agreement. Thus, the Ministry will send out the application to the local government for consent.
The next approval must come from the UAE Federal Foreign Companies Committee and the application is then forwarded by the economics department to the committee. This application will also consist of a permit letter from the Ministry of Economic and Commerce for the business activity dealt with by the concerned company.
Post the approvals from all the above-mentioned authorities, the ministerial license will be provided to the branch office. This license will be issued by the Ministry of Economic and Commerce and will comprise of the business activities which will be performed by the branch office.
The branch office will be registered under the Foreign Company Registration which will be registered by the local Economic Department. It will be after this step will the branch office obtain a Business License.
Once all the documentation and approvals are taken from the respective authorities, the branch officer can register with the commercial authorities in the region to start his/her business. It is mandatory for the branch office in the UAE to be registered with the Ministry of Economic and Commerce Companies Register and the Chamber of Commerce and Industry.
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