The regulations of business setup in Dubai allow foreign companies to enter the region through corporate structures such as a branch, subsidiary and representative office. However, many foreign investors are confused between these three forms of company formation in Dubai. Selecting the wrong type of entity for company registration in Dubai may derail your business plans. Business setup consultants in Dubai can advise you on how to select the ideal legal structure for your business.
In this article, we will let you understand the basic difference between a branch, subsidiary and representative office in Dubai. Keep reading to know further:
Business Setup in Dubai: What is a branch office?
You need to know what it means before setting up a branch office in Dubai. A branch office is a regional office of a parent company created to promote its business in the country and establish a regional presence. The branch office of a company in Dubai is not considered a separate legal entity. The following are the feature of a branch office in Dubai:
- A branch office is allowed to carry out the commercial activities performed by its parent company. However, some activities such as trading are restricted.
- Since the branch office is not a separate legal entity, the foreign parent company will be 100% liable for the actions of the branch. Moreover, the revenue earned from the branch will be taxable (in the country where the relevant foreign parent is resident) as the income of the foreign parent.
- Each branch office established in Dubai requires a local service agent (LSA), who will have no equity participation or liability for the business, nor can the LSA represent the Branch Office or participate in the company’s daily operations
- Foreign branch offices in Dubai are required to deposit a refundable bank guarantee of AED50,000 for the duration of their license and it cannot be withdrawn or used as working capital
Company registration in Dubai: What is a subsidiary?
As per the regulations of business setup in Dubai, a subsidiary is owned and controlled by its parent company (holding company). However, unlike the branch office, subsidiaries have a separate legal identity. They can have their own independent financial liability as well.
A subsidiary can be managed from abroad or from the UAE but the management and manpower of the subsidiary must be located in the UAE. Compared to a branch office, a subsidiary has more freedom with its activities. Business setup consultants in Dubai can help businesses to establish a subsidiary.
Company formation in Dubai: What is a representative office?
As per the regulations of business setup in Dubai, foreign companies can establish a representative office whose objective is limited to the study of markets and production capabilities without engaging in any commercial activity. Since representative offices are not allowed to carry out any business activity, companies use such a structure for promotional or marketing activities. Moreover, representative offices are not allowed to make any profits.
However, the cost of maintaining a representative office in Dubai is much lower than a separate full-fledged company. Companies mainly set up a representative company in Dubai to easily establish a regional presence. Business setup consultants in Dubai can advise you on the legal requirements for opening a representative office.
Where to set up a branch/subsidiary/representative office in Dubai?
The process of business setup in Dubai is generally regarded as a strategic decision as the business owners need to choose between the mainland Vs free zone options. Foreign businesses can set up their branch/subsidiary or representative offices in the mainland or free zones. If you want to set up your business in Dubai mainland, a license must be obtained from the Department of Economic Development (DED). Similarly, you need to approach the relevant free zone authorities to register your company in any of the 40 plus active free zones in the UAE. Making this strategic decision can be hard for businesses but business setup consultants in Dubai can help them out.
Consult with the Best Business Setup Consultants in Dubai
The process of business setup in Dubai allows foreign investors to establish their presence in the region by setting up branch offices, subsidiaries and representative offices. Choosing the right way to branch out may be tough for foreigners but business setup consultants in Dubai such as Jitendra Business Consultants (JBC) can make it easier for them. JBC has helped out thousands of foreign businesses to establish their regional presence in Dubai, which is regarded as the gateway to the Middle East.
Our team is highly qualified with ample knowledge about the UAE immigration laws and labour laws. We can make the process of company registration in Dubai easier by enabling you to meet key requirements such as bank account opening, document drafting, visa processing etc. JBC can also help you navigate Economic Substance Regulations (ESR), Anti-Money laundering (AML) and Ultimate Beneficial Ownership (UBO) regulations. If you are ready to branch out into Dubai, consult with JBC as soon as possible.
