If you’re considering expanding your business internationally and opening a branch in Dubai, you’ve come to the right place. This guide will walk you through the process of opening a branch of a foreign company in Dubai, covering everything from legal requirements to finding a suitable location. Read on to learn the steps you need to take to successfully establish your company in this thriving city.
Opening a foreign branch office in Dubai involves incorporating a branch of a foreign company in 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, including registering the branch with the desired jurisdiction and obtaining a commercial license from the relevant authority.
There are several reasons why foreign businesses choose to start a branch office in Dubai:
- Business expansion
- 100% business ownership
- Same business activity as the parent company
- No paid-up capital requirement for incorporation (a refundable bank guarantee applies)
- Permitted to sign local contracts, issue invoices, and hire staff
- Expert assistance from a 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 to appoint a UAE-accredited auditor unlike an LLC.
Key Features of a Foreign Branch Company in Dubai:
Scope: A foreign branch in Dubai can range from a sales or marketing office to a fully-fledged business operation engaging in various commercial activities.
Ownership: The foreign branch company is fully owned by the foreign parent company and 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.
Name: The foreign branch company must use the same name as the foreign parent company and 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 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.
Appointment of a UAE-based Auditor: A qualified accountant resident in the UAE must be designated to create a balance sheet and provide annual final accounts.
Financial Reporting: The foreign branch company must submit annual financial statements to the DED in Dubai and comply with other reporting requirements.
Taxation: A foreign branch company in Dubai is subject to UAE corporate income tax, currently set at 15%, but certain industries may be exempt.
Branch Manager: The foreign branch company must appoint a branch manager responsible for day-to-day operations in Dubai.
Branch Office: The foreign branch company must maintain a physical presence in Dubai, either as a branch office or a representative office.
Employment: The foreign branch company can employ staff in Dubai, subject to UAE labor laws and regulations.
Benefits of Starting a Foreign Branch in Dubai:
Strategic Location: Dubai’s location at the crossroads of Europe, Asia, and Africa provides access to markets in these regions.
Tax Benefits: Dubai offers an attractive tax regime with zero personal income tax and low corporate tax rates.
Business-Friendly Environment: Dubai has streamlined procedures for setting up a company and provides incentives and support services for businesses.
Infrastructure: Dubai has world-class infrastructure, including transportation systems, telecommunications, and logistics facilities.
Workforce: Dubai has a highly educated and skilled workforce, with a diverse population.
Market Reach: Dubai serves as a gateway to the Middle East and North Africa region, offering access to a large and growing market.
Diversification Opportunities: Dubai’s diverse economy and industries present potential opportunities for businesses in various sectors.
Foreign Branch Registration Options in Dubai:
A foreign company can register a branch in either the mainland or a free zone in Dubai. Mainland foreign branches operate outside the free zone areas and are subject to UAE commercial law. They can conduct business with companies in Dubai and the wider UAE without restrictions but have more regulatory requirements. Free zone foreign branches, on the other hand, benefit from tax incentives and full foreign ownership but are restricted in conducting business outside the free zone.
Process of Setting up a Foreign Branch Office in Dubai:
Here is a step-by-step guide to setting up a mainland foreign branch office in Dubai.
Step 1: Application filing – Submit an application for approval to the Ministry of Economic and Commerce, including a service agent agreement.
Step 2: Obtain approval from the relevant authority or the economic department – Clearance from the local Economic Department is required before the Ministry grants the agreement.
Step 3: Drafting the Memorandum of Association (MOA) – Prepare the MOA, which includes the branch’s activities, capital, and other relevant details. The MOA must be notarized by a notary public in Dubai.
Step 4: Renting an office space – Lease an office space that complies with the requirements of the Dubai Municipality and the Economic Department.
Step 5: Obtaining initial approval – Submit the required documents, including the MOA, lease agreement, and other relevant paperwork, to the Economic Department for initial approval.
Step 6: Trade name reservation – Reserve the desired trade name for the branch with the Department of Economic Development.
Step 7: Final approval and license issuance – After obtaining initial approval, submit the remaining documents, such as the lease contract, MOA, and proof of initial approval, to the Economic Department for final approval and issuance of the trade license.
Step 8: Commercial registration – Register the branch with the Commercial Registry at the Dubai Chamber of Commerce and Industry.
Step 9: Ministry of Labor registration – Register the branch with the Ministry of Labor and obtain labor cards and work permits for employees.
Step 10: Additional permits and approvals – Depending on the nature of the business, additional permits and approvals may be required from relevant authorities, such as the Dubai Municipality or specialized regulatory bodies.
Step 11: Visa processing – Apply for visas for the branch’s employees through the General Directorate of Residency and Foreign Affairs.
Step 12: Opening a corporate bank account – Open a corporate bank account in Dubai to handle financial transactions for the branch.
Please note that the specific requirements and procedures may vary depending on the nature of the business and the jurisdiction within Dubai. It is advisable to seek professional assistance or consult with the relevant authorities to ensure compliance with all legal and regulatory requirements.
Opening a branch of a foreign company in Dubai can be a rewarding venture, allowing you to tap into the UAE’s thriving business environment and expand your operations in the region. By following the necessary steps and fulfilling the requirements, you can establish a successful presence in Dubai and seize the numerous opportunities available.
For further assistance please contact Al Safar & Partners on +971.4.4221944 or by email at reception@alsafarpartners.com – www.alsafarpartners.com
Written By:
Ms. Luminita Rizescu – Partner and specialized in Retail Law, Commercial and Rental Disputes, and Will drafting at Al Safar and Partners Law Firm
