A Branch Office is an extension of a foreign parent firm based outside of the United Arab Emirates, in which a commercial enterprise is conducted. It’s a full-fledged company with the authority to undertake contracts and engage in other activities stipulated in its license.
Only activities like those of the parent firm are permitted for an overseas branch office. Setting up a foreign company’s branch office in Dubai is simple and desirable because it can be 100 percent foreign-owned if a local service agent like MSZ Consultancy is selected. Organizations might use a branch office to test a new market before expansion.
Article 313 of the Companies Law in the United Arab Emirates allows a foreign firm to perform its primary business by establishing a subsidiary or a branch office in Dubai and other emirates.
The significant difference between branches and a representative office is that a branch allows a foreign company to do the same operations for which it is licensed. In contrast, a representative office can only conduct promotional activity for the parent company’s products and services.
The issuing body for a branch office will be the Ministry of Economy (MoE). As part of the license procedure, the foreign company’s branch or representative must submit a bank guarantee of AED 50,000 in favor of the Ministry of Economy.
To open a branch or representative office in Dubai, the parent company must appoint a manager to represent its branch office, and the management must have a resolution authorized by the Board of Directors.
Branch and Representative Office – Details at Glance
• Branch offices are allowed to exercise the activities (Licensed) of their parent entity. You have the right to carry out the business activities of your parent firm as a Branch Office. However, some activities are restricted (for example, trading). You’d have to form a limited liability company (LLC) in that instance.
• Branch Companies are permitted to enter contracts and conduct local business.
• Tax and Liabilities – Because the Branch Office is not an independent legal entity, the foreign parent business is fully responsible for the branch’s activities, and the branch’s revenue is taxed (in the country where the relevant foreign parent is based) as the foreign parent’s income.
• Representative offices are only for promoting the business of their parent companies and are not allowed to conduct and transact any local business.
• Bank Guarantee – You will be required to deposit a refundable bank guarantee of AED50,000 as a foreign Branch Office for the period of your license, which cannot be withdrawn or utilized as operating capital.
• In some cases, additional approval is required for the Branch of a foreign company from the Ministry of Economics.
Opening a Branch Office in Dubai: A Step-by-Step Guide
• Arrange a National Service Agent (NSA) – sometimes known as a Local Service Agent – appointment (LSA).
• Prepare an application or formal letter request to open a branch office by preparing the necessary paperwork, filling out the application form, and delivering it to the Dubai Economy. The application will contain information about the company’s share capital, headquarters, business nature, the name of the general manager in the UAE, and certain required papers.
• Gather all the required permits.
• For some company activities such as healthcare, electronics (mobile) trading, education, and others, a few permits are required to open a branch office in Dubai. The application must be approved by the Ministry of Economy, which will analyze the requirements and the nature of your company’s activity.
• Register and become a member of the Chamber of Commerce. Register the company with the UAE Chamber of Commerce once the branch office license has been received.• The location of your customer base
• Office Space and Bank Accounts – After obtaining a business license, your company can begin looking for office space, open bank accounts, and obtain visas and labor cards for staff. Banks will require comprehensive UBO information on the Parent business and any additional corporate and shareholder structures within the Parent company. All foreign paperwork must be authenticated, legalized, and translated before being used in the UAE.
The issuing body is the MoE. You will receive the branch office license after the required documents are submitted and the relevant fees are paid. Furthermore, it is essential to realize that having a local service agent is required for a branch office. MSZ Service Providers can examine all your company requirements to help you choose the ideal local service agent for your branch office.
Opening a Branch Office in Dubai: What Documents Do You Need?
Founding a branch office for your parent company is a straightforward process, but you’ll need to have plenty of information and documentation handy. Some of the information required will be:
• Trade Name Certificate.
• Certificate of Incorporation, Memorandum of Association, Articles of Association, and Certificate of Good Standing for the parent company.
• Resolution of the Board of Directors to open a branch office in Dubai.
• Passport Copy of the General Manager
• General Manager’s Power of Attorney
• Financial Statements of the Parent Company (2-year Audited)
• List of the business and commercial activities that will take place in Dubai
• Agreement with local service agent and copies of identification documents
Opening a branch office is a viable alternative for free zone or mainland enterprises looking to expand dynamically into the UAE local market and explore new business prospects.
Establishing a foreign firm branch includes further certification from the UAE Embassy in the parent company’s home country. An approval or a clearance from the UAE’s Ministry of Foreign Affairs is also required.
A Quick Guide to Opening a Branch Office of a Free Zone or a Mainland Company in Dubai
When you open a branch office in Dubai’s Mainland or in one of the many Free Zones, there is a process you’ll need to follow:
1. Obtain Board of Director’s approval
A resolution indicating the opening of a new branch office must be approved by the board of directors to open a branch office. The Board of Directors has the authority to choose one director to establish the branch company and monitor its activities.
2. Branch Office Registration
Once the board resolution is approved, the company can continue and proceed to its branch registration. The Company can get its business license and register the branch on Dubai’s mainland by following the outlined steps.
The cost of establishing a branch office in Dubai for a Free Zone Company with a Service License type will depend on your chosen location and business activities. The name of the branch office will be the same as the parent company with the suffix “Branch.” It has the authority to carry out all the parent company’s business operations.
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• Secure approvals and permissions from many governmental authorities.
• Prepare the necessary documents and MOA.
• Identify a trusted and qualified local service agent.
• Assist in the opening of bank accounts.
• Assist in finding suitable office premises.
• Handle other documentation formalities.
• Submit visa applications and offer corporate PRO Services.
• Handle business formation and administrational duties.
Get your company up and running in no time with MSZ Consultancy. We offer fast licensing and business formation for offshore companies and Free Zone companies, world-class facilities, connections, and cutting-edge infrastructure. You’ll also have the power of industry insiders to help you navigate the ins and outs of business in the UAE, allowing you to get back to what’s most important.
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Frequently Asked Questions
The process of starting a branch in Dubai can be a confusing process, and you’re sure to have a few questions pop up along the way. That’s why we’ve put to put together a few of our most frequently asked questions:
1. What is the difference between a branch and a subsidiary?
A branch is an expansion of your main office, as though you were adding another room to your current building. Establishing a subsidiary is the same as starting a new firm. A subsidiary is regarded as a different legal entity.
2. What are the advantages of establishing a branch in Dubai?
Below list are some of the advantages of establishing a branch in Dubai:
• Entry into new and widened target markets.
• Business growth may lead to further expansion.
• Stay ahead of the global completion.
• It enables you to get in touch with a wider international audience.
• New place, additional sales can lead to increased revenue.
3. How much will it cost for branch setup in Dubai?
The cost of establishing a branch office in Dubai will depend on your chosen location and business activities. The actual fee will be determined by the legal framework of the firm, as well as other factors.
4. Is it possible to incorporate a foreign branch office in Dubai?
Incorporating a Branch or Representative Office (RO), which allows 100 percent ownership by the parent company, is a frequent strategy for international enterprises to retain foreign ownership under the UAE’s Commercial Company Law. Single shareholder entities, also known as free zone establishments, and free zone businesses with two to five shareholders are examples of entities that can be incorporated.