BRANCH/REPRESENTATIVE OFFICE IN DUBAI

Dubai Mainland Company is a popular type of business entity among foreign investors in Dubai due to its various advantages. However, one significant limitation of this business formation is that foreign company owners can only hold 49% of the shares, while the local sponsor holds the remaining 51% of the shares.
 

To overcome this restriction and gain full ownership of the business, foreign companies can opt for setting up a branch office in Dubai. This option allows them to avoid the condition of having a local sponsor and take complete control of their business operations. Establishing a branch office can be an attractive option for foreign companies looking for more control and flexibility in their business dealings in Dubai.

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Branch Office in Dubai

 

For entrepreneurs seeking to gain a competitive edge in the thriving UAE market, they face various options. While free zones or conventional mainland structures are popular choices, a branch office is an ideal option for those who desire to establish a presence in the local market while retaining 100% control over their company.

In most instances, the parent company, regardless of its location in the UAE or abroad, is directly accountable for the commercial operations of the branch office. This office serves as an extension of the existing business, without having a separate legal identity from the parent corporation. As a result, while most branch offices are permitted to operate in the local UAE market, they are restricted to conducting similar business activities as the parent company.

Establishing a company branch office offers numerous benefits, from favorable tax rates to a gateway into a new industry. However, before making a decision, it is crucial to understand the different types of branch offices that can be set up in the Emirates and the activities they are authorized to undertake.

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Types of Branch Office

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There are four distinct types of branch offices that can be set up in the UAE, each having different features and conditions. Choosing the right type of branch office depends on the nature of your business activities, company structure, and other relevant factors.

1. Corporate shareholder: This type of branch office allows an individual shareholder to have a stake in the company along with the license. The parent company can be located in the UAE or abroad.

2. Branch company: This is the most popular type of branch office in the UAE. The parent company is the sole owner, and there is no need for share capital. The branch office uses the parent company's articles of incorporation.

3. Representative office: This is the most economical type of branch office. The parent company can be located in the UAE or abroad. The primary function of a representative office is to promote and source jobs for the parent company and is not allowed to make a profit in the UAE.

4. Subsidiary: This type of branch office is considered a separate legal entity from the parent company and must be managed from within the UAE. The parent company may be located in the UAE or abroad, but the management of the subsidiary must be in the UAE.

 

Difference between Branch and Representative Offices

Branch offices and representative offices are different in their purpose and operations. Branch offices are fully-fledged operations of a parent company that conduct the same business activities and have the same legal status as the parent company. Representative offices, on the other hand, are limited to promoting and sourcing jobs for the parent company and are not allowed to make a profit in the UAE.

 

Factors to Consider When Establishing a Branch Office

 Beforesetting up a branch office in Dubai, these factors must be taken into consideration:

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• The branch office must conduct the same operations as the parent company.

• The parent company must obtain the necessary licenses from Dubai's regulatory bodies.

• The branch office does not possess a separate legal identity from the foreign company.

• The parent company will be responsible for the financial obligations and liabilities of the Dubai branch office.

• The branch office's income generated in the UAE will be taxed.

 

Steps to open a Branch Office in Dubai

The steps to open a branch office in Dubai include:

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• Choose the appropriate business activity and obtain necessary licenses

• Find a local sponsor or service agent if required

• Secure a physical office space

• Register the branch office with the Dubai Department of Economic Development (DED)

• Obtain a trade license for the branch office

• Register for VAT (Value Added Tax) if applicable

• Submit all required documents, including proof of the parent company’s incorporation, articles of association, and proof of ownership

• Pay all applicable fees

• Once approved, receive the certificate of incorporation for the branch office.

 

Benefits of Setting up Branch Office in UAE

 

When a foreign company establishes a branch or representative office in Dubai, it has full ownership and control of the business without the need for local sponsors. Only a local service agent is required to handle administrative tasks. The branch office can conduct business activities and earn profits, while a representative office can only promote and market the products and services of its parent company, offering a valuable presence and introduction in Dubai and the UAE.

 

Requirements for Opening a Branch Office

 

When opening a branch or representative office in Dubai, a bank guarantee of AED 50,000 must be submitted to the Ministry of Economy as part of the licensing process. Additionally, a manager must be appointed to represent the company, and they must have authorization from the Board of Directors.

 

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