Setting up a branch or a limited liability company or a joint venture is a strategic decision. The parent company has to undertake a financial responsibility to run the branch whether in the local market or in a foreign country such as Dubai, UAE. Apart from that, the Branch’s profit or loss will be added to the parent company’s profit and will be taxed in the country of home. Last but not the least, the branch cannot carry out the activity other than the activity mentioned in the MOA of the parent company.
Every foreign investor with an existing company in his home country or anywhere outside the UAE must have pondered over the above factors while setting his feet here. The decision to expand business in foreign markets is a watershed moment in every company’s growth trajectory. Business setup consultants recommend Dubai as the perfect location to open the branch office of a foreign company.
What is a Branch Office, How it differs from a Representative Office?
A branch office of a foreign company can be considered as its extension based in the UAE. The branch offices are allowed to trade in the local UAE market adheres to the same legal identity of its parent company. The branch can get as many as visas possible, subject however limited to the space of the office/factory and activity etc.
Representative offices also come under the ambit of the branches but have a unique difference in comparison with the branch office. Representative offices in the UAE are permitted only for marketing and sourcing the business of the parent company. Unlike the branch office, the representative offices are not permitted to make profits in the UAE local market. The representative office gets only limited visas. Most banks and real estate companies and the government open representative offices in the UAE.
A Step by Step Guide for Opening a Branch office in Dubai
1. Finding a Local Service Agent
Now, move on to the first step, which is a mandatory requirement: find a local service agent’ (LSA). Who is an LSA? What is the role of an LSA in branch office formation in Dubai? The LSA is an Emirati national or a UAE national. The LSA doesn’t have a role in ownership, management or operations at the branch office. An LSA charges for services including license, visa, and permits.
2. Application with the DED
After finishing the first step, move on to apply for the license with the Dubai Department of Economic Development (DED), with the help of the company formation consultant in Dubai, UAE. The business setup specialists will guide the businesses in reserving a trade name with the Dubai DED and securing the initial approval for the branch office from the authority.
3. Approval from the MOE
The key part of the whole application process is obtaining approval from the UAE Ministry of Economy (MOE). Certain documents including the following should be submitted for the MOE approval:
- Certificate of Trade Name Reservation
- Certificate of Initial Approval from DED
- Official Certificate from the country of origin of the parent company
- Resolution by the foreign parent company to open a branch office
- Authorization for representatives
- Copy of agency contract between parent company & LSA
- Tenancy contract with Ijari
All documents of the foreign company including MOA, COGS, POA and Resolution will be attested from the UAE embassy in the country of the origin and also from MOFA (Ministry of the Foreign Affairs) in the UAE and all documents will be translated in Arabic. The businesses are required to pay an initial fee of AED 5000 to the MOE along with a bank guarantee of AED 50,000.
4. License Issuance by DED
The MOE will review the application the approval will be sent to the DED. The applicant in this stage also needs to submit the address of the physical office of the branch company. The DED will issue the license valid for 1 year, which can be renewed after that.
5. Initiate Administrative Processes
After the commercial license is issued by the DED, the investors can pursue other administrative tasks. They can follow up on the processes of obtaining visas, and labour cards for the staff, lease office space, and also open corporate bank accounts. To effectively manage these tasks, hire efficient business set up consultants in Dubai.
Documents Required for Setting up a Branch Office in Dubai
- Passport copies of existing shareholders/business partners
- Passport copy and CV of manager
- Personal information of the shareholders/business partners and the manager
- Verification for trade name registration for the new branch
- Verification for initial activities for the new office branch
- Power of Attorney of the legal representative in order for them to give their services
- A Chamber of Commerce Certificate of the existing main/parent branch
- Profile of main /parent branch company
- An Article of Association of the existing main/parent branch
- A Certificate of Registration of existing main/parent branch
- Lease Agreement Documents with the physical address of the new office branch
- Memorandum of Association of your existing main/parent branch
Advantages of Setting up the Branch of a Foreign Company in Dubai
Setting up a branch here is the best way for foreign businesses to have a perfect understanding of the local market. This understanding of the trading in Dubai is the first step in a long journey of setting up a fairly large company. Apart from this, the following are the major advantages of setting up a branch office in Dubai.
- 100% ownership on the mainland since the UAE national will be a legal service agent
- Cost-effective entry into the UAE market
- Get a foothold in new markets
- Efficient audit trail as all the transactions between branch& parent firm is legally tracked
Why Choose Jitendra Business Consultants?
Jitendra Business Consultants (JBC) come with years of experience in helping foreign clients set up their branch office in Dubai. JBC’s highly qualified team of business setup consultants have in-depth knowledge about local laws and regulations. Clients can enjoy peace of mind as JBC will do all the paper works, registration processes, and obtaining necessary approvals on behalf of the investors.