Setting Up a Branch of Your Company in the UAE

UAE (United Arab Emirates) has become one of the most recognized and well-developed regions worldwide. With its excellent facilities, infrastructure, and work-friendly environment, UAE is a fantastic place to do business. The open economic structure has attracted millions of business minds worldwide to take their businesses to the next level.

The local market of the Middle East, in general, has a lot of potential and room for success when it comes to starting a business. Based on our experience, many international corporations already have real paying clients in the UAE, they use their parent company to initiate business and then decide to expand their influence in the UAE market by opening a branch. Having a branch in the same region, where your potential and current clients are located, will add value to your products/services and help your business to gain trust in the market, and will make your operations faster and more efficient.

A strategic location of the UAE is also an important reason why companies look to it as their key to success. It’s an excellent pathway between the major Eastern and Western countries. It is a focal point for both import and export operations making it a destination worth your time and money. The favorable time zone is a blend of both Eastern and Western business hours that gives access to 2.2 billion customers.

The government has provided tax-free policies and other business incentives that make it a great place to set up your businesses.

After choosing the UAE as their next business target, many entrepreneurs and investors fail to understand the difference between a Branch and a Subsidiary. Each of these legal entities has its importance in its respective purposes. A branch company is a company that is located somewhere other than the company’s head office location. Thus branch is not a separate legal entity. It represents a parent company and carries on the same business under its name. It is entirely under the parent company’s management. A branch company usually has a branch manager who reports directly to and takes orders from a management member of the parent company. On the other hand, a Subsidiary is an independent company despite being under the ownership of a parent company. Thus, a Subsidiary can carry different activities or have a different name from its parent company. You can know more about Subsidiaries in our other blogs for a better understanding.

There are few things that you should be aware of when looking to set up your branch company in the UAE. Knowing how business procedures work here will help you to have a deeper understanding of the local market. Here are few points to help you out:

• NO corporate tax. The rule doesn’t apply to foreign banks` branches and oil companies` branches as well.
• Share Capital is not required. The rule applies to both paid up and authorized capital.
• You are not required to have a UAE partner in terms of ownership for your branch company on the mainland.
• You can have full ownership in the mainland and any Free Zones depending on your preference.
• You can extend your business activities to the MENA region winning more business next door.
• A branch company must conduct the same business activities as its parent company.
• To establish a branch in the mainland, you will need to hire a local service agent (LSA). The agent has to be a UAE national or a company fully owned by a UAE national. It’s for administrative purposes, and you will only have to pay them on an annual basis.
• A branch company must have the same name as its parent company.
• To engage with onshore UAE clients, your branch company, established in any of the UAE free zones, will require the services of an onshore distributor/agent holding an appropriate license.
• A branch company can serve as a link between the commercial dealings of its parent company. Its main purpose can consist of marketing and promotion of its parent company services.
• A Branch company must submit audited financial statements (AFS) of the branch office along with the parent company AFS. Alternatively, you can submit a copy of the consolidated financials of a parent company including the contribution of a branch.
•  When opening a branch company, a parent company needs to translate its corporate documents to English/Arabic. The documents also require attestation from the UAE Embassy in your country. You will have to repeat the process in the Ministry of Foreign Affairs in the UAE.

• Registration Certificate/Trade License: the document must indicate details such as date of registration, the full name of the company, type of company, and jurisdiction where a company is registered.
• Certificate of Good Standing: the document specifies that a company is valid and is in good standing.
• Board Resolution: the document must include the decision of a company to register a branch company in the UAE as well as the information about appointed representatives/managers/officers and authorized signatory of the bank account.
• Memorandum and Articles of Association: to specify the activity of a company, list of shareholders/partners, type of entity, and powers of directors/managers who are signing the Board Resolution.
• Certificate of Incumbency/Extract from Registry: this includes the list of current shareholders, directors, secretary, or officers of the organization.
• UBO Declaration Form: the document mentions the beneficiaries with more than a 5% share in the company.

We recommend you do your market research before going forward with your business ventures. You should be aware of the UAE local market behavior to design a suitable business structure. Your project should agree with your business goals and the targeted areas. It is important to ensure that your products and services easily comply with the nature of the local market.

UAE is the land of opportunities, and you will have to pave your way through to make your business successful. You can know more about the registration process and the UAE business structures by contacting us.

Call for professional advice at +971 55 1479 576 (available on WhatsApp) or email the author of the article Svetlana Kursheva (Corporate Services Manager) at [email protected]