The Commercial Companies Act No. 8 of 1984 and Ministerial Decision No. 69 of 1989 establish that a foreign company’s branch office is a separate entity, representing the parent company and conducting business under its name.
In the UAE, the Ministry of Economy and Commerce issues licenses for foreign company branches, allowing them to continue business or establish a branch. Local agents must apply for initial approval from the Ministry of Economy and Commerce. In this blog, we focus on procedure and benefits of opening branch of foreign business in the UAE.
Essential conditions to open a foreign business branch in the UAE
A clean track record in the home country signifies responsible business practices. Adhering to legal requirements is crucial for success in the UAE market. To establish a business in the UAE, foreign companies must meet these certain conditions.
- Home ground legitimacy
- Legal parent company
- A reputable business history
- Trade license from the DED
- Full adherence to the UAE laws and regulations
Procedure to register your foreign office’s branch in the UAE
The process is customized to your specific business requirements. It needs a UAE national or UAE national-owned company. The step-by-step process for establishing a business in Dubai involves the following.
- Defining your company’s activities
- Selecting a location within the mainland or a specific free zone, and appointing a Local Service Agent (LSA) to facilitate communication with government authorities.
- Foreign companies in the UAE must prepare required legal documents, as well.
- They must submit an application to the DED or a relevant authority.
- Obtain additional licenses and permits if needed.
- Once registered, they can officially begin business operations in Dubai.
- Remember, this process may vary depending on the legal structure of the company.
Different types of foreign branch offices in Dubai, UAE
Businessmen can choose from four types to find the most suitable option for expanding their business to the UAE.
Representative Office
Representative offices in Dubai are cost-effective and run by the parent company. They are limited to supporting and sourcing products for the parent company, not allowing profit in the emirate, and outsourcing all work back to the parent company.
Corporate Stakeholder
Corporate stakeholders allow a single stakeholder to hold a share with a license, similar to having multiple corporate owners.
Subsidiary Office
Companies under subsidiaries are treated as separate entities from their parent company and should be organized within Dubai. The subsidiary takes overall responsibility for its operations. A branch office in Dubai is controlled by the parent company and can carry out similar business activities as the parent company. To set up a foreign branch office in the UAE, it must register with the Ministry of Economy and follow the necessary registration charges.
Branch Office
A branch company operates a parent company within or outside Dubai, adhering to the rule of a single owner, unlike a corporate stakeholder.
Certificates and approvals to open a branch office in the UAE
Here are some certificates and approvals required to establish branch of foreign business in the UAE.
Certificate of Incorporation Dubai (COI)
The Certificate of Incorporation Dubai is a crucial document issued by the free zone authority, confirming the legal existence of a foreign company within the free zone, while a COI is not typically required for foreign company branches outside the free zone.
Approval from the Ministry of Economy UAE
The Ministry of Economy is requesting that all necessary documents be submitted for formal approval. After receiving approvals from specialists, the Ministry of Economic and Commerce will issue a ministerial permit for the branch office’s business exercises.
Required Documents
The required documents include the following.
- Competent authority license
- A bank guarantee (AED 50,000)
- Attested authorization for the director
This guarantee by a UAE bank is automatically renewable upon the Minister of Economy’s order.
Approval from UAE Federal Foreign Companies Committee
The UAE Federal Foreign Companies Committee must approve the application, which is then sent to the board of trustees and includes a license letter from the Ministry of Economic and Commerce for the business movement.
Note: The branch office must register under the Foreign Company Registration by the Economic Department. It should obtain a Business License after obtaining necessary documentation and approvals from specialists. In the UAE, the branch office must also register with the Ministry of Economic and Commerce Companies Register and the Chamber of Commerce and Industry.
Cost of opening a franchise office in the UAE
The cost of a branch office in Dubai Mainland ranges from AED 10,000 to AED 50,000 annually. Also, there are additional costs like salaries, operational expenses, and legal fees. Free zones offer competitive pricing, with license fees ranging from AED 15,000 to AED 25,000 annually. Office rents ranges from AED 25,000 to AED 75,000 per year.
Tips to make a branch office in the UAE successful
A Dubai branch office offers 100% ownership, global brand presence, no local sponsor requirement, financial responsibility on parent company, and versatile operations in mainland, free zones, or offshore locations. Follow these tactics to ensure the success of your Dubai branch office.
- Conduct thorough market research to understand local customer behavior, preferences, and trends
- Build strong local connections with business leaders, trade organizations, and government officials
- Ensure compliance with local regulations and tailor your offerings
Key takeaways and future forecast
- Dubai is promoting emerging technologies like AI, blockchain, and automation through initiatives like the Dubai Future Foundation.
- The city aims to become a global hub for clean energy and green technologies, driving businesses to adopt sustainable practices.
- Dubai’s strong digital infrastructure and diverse consumer base make it an ideal location for e-commerce businesses.
- The UAE’s “We the Emirates 2031” vision focuses on social, economic, investment, and development aspects, aiming to strengthen its position as a global partner.
Understanding Dubai’s legal framework to expand your foreign business is one of the major challenges. By collaborating with a reputable business setup company, you can easily overcome these hurdles. For more detailed information, consult business setup firms in the UAE like KWS ME right now.
