How to Set up a Branch Office in UAE (Step By Step Guide)
Any business that wants to be at the top in its field must first have a worldwide presence to do so. A company’s growth would be at a stop without globalization, even if establishing an impact and generating the most leads in the local market is critical. It is critical to have a presence in one’s own country.
In addition to the many additional benefits, operating a branch in a foreign nation would enable the firm to extend its operations into new areas. To make the most of their investments, investors do extensive due diligence to determine which business structure is most suited to their needs.
In addition, Dubai’s excellent location as a business hub means that opening a branch office in UAE gives your firm a competitive edge. A Foreign Branch Office is registered in the United Arab Emirates and works as an extension of a parent company in another country.
Because it is not a separate legal entity from the parent firm, it must always follow the same corporate policies as the parent. As a subsidiary of its parent firm, it is obliged to get a business license under its own name and for the same kind of activities, it participates in.
The foreign branch office’s role is to serve the parent company’s customers with the products and services it manufactures.
What is Meant by a Branch Office?
The term “branch office” refers to a company’s operations from a place other than the parent company’s headquarters. Smaller divisions, such as accounting, marketing, and HR, are likely to form the bulk of branch offices’ organizational structure.
Overseas companies who want to expand their activities in the UAE while still maintaining their original degree of foreign ownership most often do so via the establishment of a branch office there. The legislation states that branches are not distinct legal entities, but rather extensions of the parent company. As a consequence, the parent company bears the responsibility for any obligations incurred by the branch office.
United Arab Emirates (UAE) is one of the world’s leading commercial and financial centers, with its importance increasing exponentially over the last several years. So it shouldn’t be a surprise that organizations and businesses from other parts of the globe find it necessary to open a branch office in the United Arab Emirates (UAE).
The United Arab Emirates (UAE) has a growing economy, first-rate infrastructure, strategic location, multiethnic workforce, and attractive tax structure that entices companies to open a branch office there.
Why Open a Branch of Your Business in UAE?
The city of Dubai is among the most well-known in the United Arab Emirates (UAE) and is well recognized as a major business hub. Dubai has become a popular site for international business and investment because of the city’s many benefits. People from all over the globe were able to establish enterprises in Dubai because of the government’s openness to foreign investment.
Here are some points
- Easy to Set Up
- Plenty of Choice
- Financial Stability
- Business Friendly Environment
- Ease In Taxation
- Geographical Advantage
- Quality Of Life
Easy to Set Up
Setting up a business in Dubai is easier than ever before thanks to the city’s fast-growing tech infrastructure and friendly government. Dubai business registration is now as simple as a few mouse clicks and a few days.
Creating a company in Dubai is quite simple and requires just a little bit of paperwork. A business consultant in Dubai who is both qualified and experienced is always available to advise and guide you through the process.
Plenty of Choices
In the seven emirates of the United Arab Emirates, there are more than 45 free zones such as SAIF Zone, JLT Free Zone, SHAMS Free Zone, and a variety of mainland alternatives, giving start-up companies a wide range of choices for where to establish their businesses and maximize their chances of success. Each of the seven emirates has good transit connections, and airports are never far away.
There are several factors that contribute to Dubai’s financial stability. Most importantly, the country’s populace is remarkably free of poverty. In reality, 63% of Dubai residents feel they have enough money to cover their basic needs.
As a result of this, Dubai is home to the third-largest population of high-net-worth individuals worldwide. It is one of the key reasons for Dubai’s solid performance because its economy is able to withstand external economic upheaval. As a result, it has the ability to constantly innovate and create new avenues for growth and advancement.
Business Friendly Environment
Commercial activity in Dubai is made viable and profitable by the rules and regulations that the city has placed in place. Regardless matter where a firm is based, the government is a key role in its growth. The government of Dubai has set up a business-friendly climate in order to help enterprises grow.
Because of this, they are able to flourish and last for a long time. When working with PRO services, foreign corporations may typically have their new Dubai company up and running in as little as one month. A professional that provides PRO services has worked extensively with a variety of governmental agencies in the past. In order to keep up with the continuously changing rules and policies, they guarantee that they have the latest information.
Ease In Taxation
One of the most important benefits of establishing a company in Dubai is the absence of any tax obligations. There are no taxes of any kind in Dubai, including personal and corporate taxes, income tax, or any other kind of tax. Certain enterprises, however, may be compelled to pay a VAT of 5% in relation to certain commercial activities.
At the intersection of East and West, North and South, Dubai serves as a natural link between a wide range of businesses involved in the development, production, and distribution of essential goods from across the world.
Dubai’s airports are often listed among the world’s busiest. As a result of their good connection, both airports and seaports are situated in places that are easy to access. This helps companies in the import-export, re-export, and tourist industries.
Quality Of Life
People in Dubai have the rare chance to live side by side with people from many different backgrounds, cultures, and religions. Residents in a place where there is such a wide range of cultural practices have the chance to broaden their horizons and learn about other cultures.
This helps people build and maintain good relationships. High-end services and shopping options also excite Dubai residents all the time. In the long term, starting a business in Dubai will lead to better living conditions.
Types of Branch Offices Setup in Dubai
Branch Office Setup In Mainland
Setting up a branch of a company on Mainland is a complicated process that needs legal documents to be written and signed in the country of the parent company. To open the Branch on the mainland, a local agent needs to be chosen. However, the parent company will own the company in its entirety.
A service agent’s job is to help the company with things like hiring and immigration. They have no financial obligations or liabilities related to the business inside or outside of the Emirate.
- Certification of the legitimacy of the parent company’s corporate papers
- The paperwork is going to be checked by the Department of Economic Development, and then an initial permission certificate is going to be issued. According to the directive issued by the DED, it is also possible to register the name of the firm.
- Immigration privileges are granted to the signatory.
- Creating a Contract Agreement for Local Service Agents and Having It Notarized
- Establishment of a Bank Account
- Registration at the Department of Economic Development
- It’s possible that you’ll need to get special permission from certain outside authorities to carry out certain business activities.
- Contract for the Registration of an Office Premises (Tawtheeq for Abu Dhabi and Ejari for Dubai)
- Following the complete and successful delivery of all required documents, DED will issue the license.
- E- channel Registration
- Making Application for Electronic Signature Card
- The Labor and Immigration file will be opened.
- Submitting an Application for the Quota and Beginning the Visa Process
Branch Office Setup In Freezone
Despite its long history in the oil industry, the United Arab Emirates (UAE) has seen its image drastically change over the previous two decades. With its diverse and all-encompassing business strategy, it has become a global financial centre on par with that of the West’s major economies. Free zones have been formed so as to encourage investment from abroad.
The Free Zone Authority in Dubai, which is responsible for registering businesses and providing licenses, should be contacted by foreign investors interested in starting a company in the Dubai Free Zone. For firm foundation branch registration in UAE Free Zone, the tax regime given by Free Zone makes it preferable; the registration procedure might take anywhere from three days to thirty days depending on the jurisdiction and the sort of activity being done.
Difference In Setting Up Branch Office In Freezone and Mainland
Although free zone branch offices are subject to the registration and licensing requirements of the government in which they do business, they are significantly different from other types of businesses. Additional share capital requirements will be imposed on free zone branch offices operating in Dubai’s free zones.
To set up a branch office on the mainland of Dubai, you don’t need to have a certain amount of share capital. Another notable difference between branches on the Dubai mainland and those established in free zones is that the latter are not allowed to operate within the free zone for which they registered.
Things to Know Before Setting Up a Branch Office in UAE?
Following is a set of required documents in order to set up a Branch Office in UAE:
- Trade name reservation and initial approval forms
- Certificate of Incorporation,
- Memorandum of Association (MOA), Articles of Association (AOA)Board resolution that authorizes the opening of the branch office,
- certificate of good standing
- Power of attorney in favor of General Manager
- Director’s passport copy
- Audited accounts of the parent company for the last two years
- A statement that highlights the company’s establishment aim, main operational activities
- Notarized agreement with the local agent
- Government approval
- License from Ministry of Economic
- Business Licence
- Registration Fees = AED 3500.00
- The license fee depends on the decision
Corporations that don’t live in the country, like those with branches in Dubai, don’t have to pay taxes on income made anywhere else in the world. Because of this, most investors know that Dubai’s tax system is very flexible and friendly and that it doesn’t tax companies’ profits. The profits that foreign banks make in the United Arab Emirates will be taxed if they open branches in Dubai. Corporations will have to pay taxes equal to 20% of their income.
Foreign companies that have a branch in Dubai can take advantage of the UAE’s double tax treaties. As a result, they can get more tax refunds from the local government. Multinational companies with local branches in Dubai have to register for Value-Added Tax (VAT).
Opening a Branch Office in UAE (Step by Step Guide)
In order to open a branch office in Dubai, a foreign investor must first submit an application to the Ministry of Economy. In addition, a service agent agreement must be provided at the time of the application for employment. One of the requirements for setting up a representative office in the United Arab Emirates is to have a service agent who is a UAE citizen.
Consent From the Ministry Of Economy
Dubai’s or the emirate’s Economic Department must approve your branch before an agreement can be reached with the United Arab Emirates Ministry of Economy. This means that the request will be addressed to the appropriate local government body by the Ministry of Economy.
Approval From UAE Federal Foreign Companies Committee
Establishing a branch office in the United Arab Emirates requires approval from the Federal Foreign Companies Committee (UAE). After that, the committee receives the application from the economics department, along with a letter of approval for the firm’s commercial activities from the Ministry of Economic and Commerce.
Getting Licence From Ministry Of Economy
Obtaining a ministerial license is contingent upon the branch office receiving the seal of approval from all of the aforementioned agencies. Detailed information about the business activities of the company is included in the license granted by the Ministry of Economy.
Getting Business Licence
It is at this moment that the registration process for a Dubai branch office of a foreign company begins. The local government will then give the firm a Business License after the registration of the Dubai branch office with the local Economic Department.
Registration With Commercial Authorities
With the proper documentation and approvals, you will be able to establish your Dubai branch office with the appropriate authorities and begin running your business there. The branch office in Dubai must be registered with the Ministry of Economic Companies Register and the Dubai Chamber.
Benefits of Having a Branch Office in UAE
Here are most noticeable benifits
Easy To Setup Branch Office
Businesses may find it difficult to enter new markets, especially international ones, due to the high costs involved. If you open a branch in the United Arab Emirates, this isn’t the case.
Branch offices allow firms to extend their operations without incurring major extra costs since share capital is not required. Although branch offices are often smaller in size than their parent companies, their operating costs are usually less expensive.
There is no corporation tax in the United Arab Emirates, which implies that any money generated by UAE-based branches of foreign corporations is not subject to UAE taxes. This shows that the main company retains all of the money that the branch makes and does not share it with the branch, as would be expected.
Because of this, any money earned in the United Arab Emirates will be taxed in the individual’s home country, regardless of whether or not it is taxed in the UAE itself.
Accounting and auditing are not the only things that might be difficult to handle in a multinational company. The use of a branch office may alleviate a substantial chunk of this problem. Branch offices in the United Arab Emirates are exempt from establishing a distinct financing structure since they are not obliged to provide audited financial statements.
Low Administrative Burden
Nothing is more taxing on an organization than the required audits, which place a heavy burden on resources and create a substantial challenge. Opening a satellite office might eliminate the bulk of this pain. You may start a branch office in the United Arab Emirates in a matter of days since there is no requirement for a separate finance function. Every transaction between a parent company and any of its subsidiaries may be tracked legally.
How can I open a representative office in UAE?
Representative offices can be set up either on the UAE mainland or inside a UAE Free Zone. There are more than 50 different free trade zones in the United Arab Emirates. This gives people living there a wide range of options. A Representative Office does not sell, provide services, or do any other kind of business.
Instead, it promotes and markets the activities of its parent company by gathering information and asking for orders and projects to be done by the parent company’s head office. The decision about where to open the Representative office should be based on a number of things, such as your budget and how busy your business is.
The place where the activities of the parent company will be done should also be taken into account. To set up a representative office on the mainland of the UAE, you will need either a National Service Agent (NSA) or a Local Service Agent (LSA).
What is the difference between a branch and a representative office?
Representative offices are companies set up by a parent corporation to handle marketing and non-transactional commercial activities in a foreign country. Because they aren’t utilized for the company’s primary functions, they’re simpler to set up than a branch office.
Branches are separate offices from the main company that is used to carry out the company’s commercial operations in a new area. Human Resources, Marketing, and Accounting are a few of the many divisions housed inside these buildings. The parent firm has full ownership of the property.
Is a branch office a legal entity?
Even though a branch office has its own business registration number, it is not considered to be a separate legal entity. Instead, it is seen as an extension of the company from which it comes (in this case, a foreign corporation). Unlike a limited business, a branch office gets its money straight from its main office.
Is a representative office a permanent establishment?
No, a Representative Office is not a permanent establishment and has no legal status, which is why it does not have to file regular reports with the government.
In spite of the time and effort it takes to set up a Foreign Branch Office in the United Arab Emirates (UAE), it may be worth the effort for enterprises. In addition, failing to complete the treatment might be a costly and wasteful mistake. Therefore, it is highly advised that you seek the advice of reliable business setup professionals that have experience in this area.