Branch office represents the parent company with the same activity and same trade name where one can promote or market the product and services of the parent company and conduct the business activities in the local market to make the profit.
A company can open its branch office in Dubai for a different enterprise such as trading, consulting, tourism etc. Though it is not allowed to carry out any activities which its parent company is not permitted to. A branch office in Dubai is ideal for tightly regulated industries like Banking, Financial Services and Insurance.
Why Open a Branch Office in Dubai?
Foreign companies can procure a formal presence in the UAE via the establishment of a branch office in Dubai. Well, unlike the case with a local limited liability company, a branch office can be established with 100 per cent non-UAE national ownership and have the same legal identity as its parent company and conducts business under the name of its parent company.
The salient features of UAE business setup:
- Branch offices are regarded as fully-fledged businesses.
- Branch offices are permitted to perform contracts or conduct other activities as specified in its license
- Foreign entities are allowed to establish wholly owned branches in the Emirate but must have a UAE national who is a ‘Service Agent’.
The local service agent must be a UAE national or a company wholly owned by UAE nationals set out in an agency agreement signed before a local notary public.
Types of the foreign branch office in Dubai
The main differences between the two types of business:
- Free zone branch offices will be subject to the registration and licensing requirements imposed by the authority in which it will operate
- Free zone branch offices will be subject to specific share capital requirements in Dubai free zones whereas, there are no minimum share capital requirements on setting up a branch office in Dubai mainland
- Free zone branches are restricted to completing their activities in the free zone they were registered
The Companies Law, in the article (313) allows a foreign company to exercise its main activity in the UAE by opening a branch or a representative office.
The foreign company which opens a branch in the UAE may exercise freely the activities for which it is licenced whereas a representative office may practice only promotional activities for the products and services provided by the parent company.
To engage a foreign branch to conduct its operation at Dubai, it should obtain a licence from the Ministry of Economy before receiving the license from the Department of Economic Development.
It is now allowed for foreign professional and service companies to open their Branch in Dubai without Ministry of Economy registration
Alternatively, a foreign party may establish a representative (rep) office.
- The function of rep offices is limited to promoting its parent company’s activities. This means that a representative office is only permitted to perform such operations as gathering information, soliciting orders, and marketing projects to be conducted by the company’s head office.
- This type of office is also limited in the number of employees that they sponsor (usually three to four). Representative offices require the appointment of a service agent who is a UAE national and who would provide the parent with services such as obtaining permits and licenses.
Guidelines for selection of Branch Offices in Dubai
With several global companies and corporates setting up a branch office in Dubai, the potential has already been tested. Following a few guidelines shall only make the process more feasible and help you decide on better business set up. When choosing to set up a branch office in Dubai, one must consider:
- The branch office will be required to complete the same activities of the foreign company;
- The parent company must apply for the necessary licenses with the Dubai authorities;
- The branch office is not considered a separate legal entity from the foreign company;
- The parent company will be liable for the obligations and debts of the Dubai branch office;
- From a taxation point of view, the branch office will be taxed on the income earned in the UAE
- The Dubai branch office must bear the same name as the parent company.
Standard Documentation for Registering a Foreign Company Branch
A foreign company is required to submit the following documents (standard) to the concerned authority(s) and obtain necessary approvals for registering the branch in Dubai.
The below documents are required From the parent company
- Certificate of Incorporation.
- Memorandum and Articles of Association.
- Board Resolution.
- Audited Financial Accounts.
- Power of Attorney (issued in favor of the company-appointed General Manager).
- Bank Guarantee issued in favor of the Minister of Economy and Planning; said bank guarantee, which must be in the amount of AED 50,000, must be renewed every year.
- A ‘Service Agent’ agreement with a UAE national
The location proposed to be utilized by the branch office must be approved. Also, certain fees have to be paid prior to the issuance of a license.
How to Establish a Branch Office in Dubai?
The below steps can be followed to obtain a license for establishing a branch office in Dubai
1. The foreign entity must file an application for the issuance of a license with the Ministry of Economy and Commerce. Along with the application, the entity must submit a Service Agent Agreement entered into with a 100% UAE-owned company or a UAE national.
2. The Ministry of Economy and Commerce will then forward the application to the Economic Department to secure the local government’s approval.
3. From the Economic Department, the application will be forwarded to the Federal Foreign Companies Committee for approval. At this stage, the application must bear a note from the Ministry of Economy and Commerce indicating the activities the branch office will be permitted to be undertaken in the Emirate.
4. Once the approval of the Federal Foreign Companies Committee is obtained, the required Ministerial license will be issued by the Ministry of Economy and Commerce. In the said license, activities to be engaged in by the foreign branch office is indicated.
5. The branch office is then entered in the Commercial Register of the Economic Department. Here, the required license is issued.
6. After the issuance of the required license from the Economic Department, the branch office is entered in the Ministry of Economy and Commerce Foreign Companies Register.
7. Last stop is at the Dubai Chamber of Commerce and Industry, where the branch office is registered.
Our branch office setup services in Dubai comes with a wholesome offering derived from years of professional experience and liaison with public departments, rendering end-to-end procedural solutions for foreign business entities. Our pan-UAE presence allows you to start a branch office in Dubai or any other emirate quickly.
We at Commitbiz Management Consultants have our team of experts to help firms set up their office in Dubai and the rest of the UAE. Contact us should you have any small or big concern regarding setting up a branch office in Dubai