Establishing a branch office in Dubai offers an attractive opportunity for foreign companies looking to expand their presence in the Middle East. The branch office serves as an extension of the parent company, allowing it to conduct business activities similar to those in its home country.
What is a Branch Office?
A branch office operates under the name and regulations of the parent company. This means that the parent company retains full responsibility for the branch’s activities and liabilities.
The branch can engage in various business activities permitted under the license they avail from the relevant authorities.
To open a branch of a foreign company in Dubai, you must navigate several legal requirements. This includes appointing a local service agent (LSA), who is usually a UAE national or a company wholly owned by UAE nationals. The LSA plays a crucial role in obtaining necessary permits and visas by ensuring compliance with local laws.
Step-by-Step Process of Opening a Branch Office in Dubai
For setting up a branch office in Dubai, you must follow the steps mentioned below:
1. Choose the Location
Companies can opt between Dubai’s mainland or one of the many free zones located in the Emirate. The benefit of setting up a branch office on the mainland is that it allows you to engage directly with the local market.
If the branch office is opened in a free zone, benefits like 100 percent foreign ownership can be enjoyed. However, there are certain restrictions when operating within the free zone and international markets.
2. Adhere to Legal Requirements
Understanding the legal framework is essential when setting up a branch office in Dubai. You need to register with the Dubai Department of Economic Development (DED) and fulfill the regulations that are laid down to obtain the relevant trade license.
3. Appoint a Local Service Agent (LSA)
An LSA is mandatory for all mainland businesses in Dubai. They act as a legal representative and handle local administrative tasks.
4. Prepare and Submit Required Documents
Gather all the relevant documents and submit them to the relevant authority.
5. Obtain Initial Approval
Once the documents are submitted, the application is reviewed. If everything is in order, initial approval is provided.
6. Register the Branch Office
The next step involves registering the branch office and availing the trade license and other relevant permits from the concerned authorities.
7. Open a Corporate Bank Account
Choose a reputable bank in Dubai for opening a corporate bank account.
Benefits of Setting Up a Branch Office in Dubai
There are certain benefits of setting up a branch office. Let us take a look at them:
- 100 percent foreign ownership ─ Foreign companies can establish branch offices without the need to have a local partner, thereby enjoying full ownership.
- Access to local markets ─ A branch office acts as a direct channel to local markets. This enables foreign companies to engage directly with consumers, build brand image, and quickly adapt to local market dynamics
- No minimum capital requirement ─ Establishing a branch office does not require significant initial capital investment when compared to other business entities.
- Simplified operations ─ A branch office can operate under the same legal framework as its parent company.
- Tax incentives ─ The UAE government offers favorable tax conditions, including no corporate tax on most business activities, making it an economically attractive destination.
Business setup in Dubai, especially in the case of a branch office, provides foreign companies with an effective way to expand their operations. With careful planning and adherence to local regulations, businesses can leverage this opportunity for growth and increase their presence in the market.