Dubai Foreign Branch Office

Setting up a branch office in Dubai for a foreign company is a relatively easy process. These branch offices are an extension of their foreign parent company, registered outside the UAE and may engage in the activities similar to the parent company. The branch office represents the parent company and operates under its name with the purpose of promoting and marketing their products.

Foreign Branch Office

For international companies looking at expansion into the UAE and GCC market, there are several available routes: incorporating a new entity, operating a subsidiary or opening a representative or branch office.

Among these options, a branch office is a particularly appealing method of market entry due to its ability to conduct business operations while offering the flexibility to operate without requiring full incorporation. This approach allows companies to establish a significant presence in the UAE with relatively lower costs and administrative burdens, leveraging the established reputation and resources of the parent company.

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Setting up a Branch Office of a foreign company in Dubai is easy, and an attractive prospect as it can be 100% foreign owned, provided a local service agent (like Sovereign PPG) is appointed. A Branch Office is an extension of a foreign parent company registered outside of the UAE. It is a fully-fledged business, permitted to perform contracts or conduct other activities as specified in its licence. A foreign Branch Office may only engage in activities similar to those of its parent company.

Under Commercial Companies Act No 8 of 1984 and Ministerial Decision Number 69 of 1989, a Branch Office of a foreign company is not considered a separate entity. It simply represents the parent company and carries out business under its name. The purpose of the Branch Office is to promote and market the products of the parent company, offer services to its customers and enter into transactions and conclude agreements in the name of the parent company. The branch company is not allowed to partake in any activities disallowed to its parent companies.

Features of a Branch Office in Dubai

Unlike subsidiaries, which are separate legal entities or representative offices which are limited to non-commercial activities such as market research, a branch office is a direct and unincorporated extension of its parent company, permitted to conduct the same business activities in a foreign jurisdiction and generate revenue under the parent company's name.

Since the branch isn’t recognised as a separate legal entity, it cannot enter into any contracts or agreements independently and the parent company assumes all contractual obligations and liabilities of the branch.

Foreign Branches in Dubai

Foreign branches in the UAE have additional requirements. They are required to appoint an auditor from a list of approved auditors and provide a bank guarantee of AED 50,000.

Should a foreign branch in Dubai fail to submit these requirements within 30 days of being issued their foreign branch license will attract a penalty of AED 100,000.

Please note that these requirements do not apply to local branches.

More Information about Dubai Foreign Branches:

  • Activities – as a Branch Office, you are entitled to undertake the commercial activities of your parent company, although some activities are restricted (for example trading. In which case you would be required to set up as an LLC).
  • Liability and tax – the Branch Office is not a separate legal entity, and therefore the foreign parent company is 100% liable for the actions of the branch and the revenue of the branch will be taxable (in the country where the relevant foreign parent is resident) as the income of the foreign parent.
  • Sponsor/National Service Agent – each foreign Branch Office requires a local sponsor. The local sponsor has no equity participation or liability for the business, nor can the person represent the Branch Office or participate in its management.
  • Bank Guarantee – As a foreign Branch Office, you will be required to deposit a refundable bank guarantee of AED50,000 for the duration of your licence and this cannot be withdrawn or used as working capital.

How to Open a Branch Office in Dubai

1. Determine eligibility

    The first step is for the parent company to demonstrate financial stability and a solid operational history. This provides the assurance that the branch can sustain its activities and meet local business standards. There may also be other additional requirements depending on the sector and strictness of its compliance standards.

    2. Choose the right location

      In Dubai, businesses can set up onshore or in one of the emirates many free zones. The choice depends on your business needs and the type of activities you plan to engage in.

      Mainland companies benefit from unrestricted access to the local market and the allowance to participate in government contracts. However, the setup process tends to be more costly than in free zones and there is often more regulatory scrutiny and stricter compliance requirements.

      Free zones, on the other hand, offer a simpler setup process, access to industry specific resources and tax exemptions, but are generally restricted to trading within the confines of the free zone or internationally.

      3. Legal requirements and documentation

        To open a branch office in Dubai, you’ll generally need the following documents:

        • Parent company certificate of incorporation
        • Board resolution authorising the opening of the branch
        • Memorandum of Association outlining the nature of the business
        • Articles of Association
        • Passport and visa copies of the Management (entry permit if not resident)

        These documents will also need to be translated into Arabic and attested by the Ministry of Foreign Affairs and Ministry of Justice in the UAE.

        4. Licensing and registration process

          Registration of the branch involves applying to the Department of Economic Development (DED) in Dubai or the relevant free zone authority. First you must obtain initial approval which confirms that the Dubai authorities have no objection to your business activity. The next step is reserving a trade name. This will typically mirror the parent company’s but will often require additional specifications to denote that it’s a branch. After the trade name is reserved, you’ll need to submit all the required documentation for review. Once these are approved, you’ll receive final approval to begin operations. Be prepared for associated fees and expect this process to take several weeks, depending on the complexity of your business activities and the specific requirements of the selected jurisdiction.

          5. Office space and staffing

            Securing appropriate office space is required to complete the registration process. Options vary from flexi-desks in free zones to traditional office spaces in commercial areas of the mainland. Hiring staff involves complying with the UAE labour laws, which include obtaining employment visas for any foreign workers. The specifics will depend on the number of employees and the nature of their contracts.

            Advantages of Sovereign PPG being your National Service Agent:

            • As your service provider, we will use our experience to handle all the necessary paperwork to establish your business in a timely manner. This includes applying for visas and licences, obtaining labour quotas, translation services and assisting with the opening of corporate bank accounts.
            • 100% Management Control.
            • 100% Financial Control.
            • 100% control of profits.
            • Fixed annual fee.
            • Simple 3 month exit strategy [no penalties].
            • Full Management Team on hand 24/7.
            • Suitable for entrepreneurs, SMEs and MNCs entering the UAE market.
            • Transparency, reliability and realistic timelines enabling you to be fully informed at all times.

            How Can Sovereign PPG help?

            Setting up a branch office in Dubai involves several crucial steps, from ensuring eligibility and choosing the right location to fulfilling legal requirements and securing proper licensing. The process can be complex, so it's advisable to seek professional assistance to navigate these steps effectively.

            At Sovereign PPG, we can assist you with this, guiding you through every step of the process, from gathering documentation and initial registration with the relevant authority to obtaining your branch office registration and ensuring compliance with all local and international regulations.

            If you need assistance with this or with any other related company setup, restructuring, local partner or PRO support matter in Qatar, Abu Dhabi, Dubai, the wider UAE, Saudi Arabia, Bahrain, or Oman, then please do get in touch with us on +971 (0)4 456 1761 for Dubai, email us at SovPPG@SovereignGroup.com or complete the contact form below and we will be delighted to assist you.

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