A Foreign Branch Office in the UAE is a registered company that is an extension of the foreign parent company. It is not a separate legal entity from the foreign parent company, and therefore, its commercial activities must remain the same as those of the parent company. It must obtain a trade licence with the same name and for the same activities its parent company carries out. The purpose of the foreign branch office is to sell the parent company’s products and offer services to its customers.
A branch office of a foreign company set up in the UAE can be 100% foreign-owned, provided a local service agent is appointed. Here is the step-by-step process for setting up a Foreign Branch Office in the UAE.
The foreign company must appoint a local service agent that is either a UAE national or a company owned 100% by UAE nationals.
The local service agent will then complete the trade name registration with the Department of Economic Development (DED).
The application for obtaining approval from the Ministry of Economy (MOE) includes the details of the company i.e., head office, nature of the business, share capital, the name of the general manager in UAE, etc. along with the mandatory documents, such as:
Memorandum of Association (MOA)
Article of Association (AOA)
Certificate of Incorporation
Parent Company’s Good Legal Standing Certificate
Board Resolution stating the formation of a Branch Office
Power of Attorney in favor of the General Manager, giving him the rights to operate and manage bank accounts on behalf of the parent company.
The MOE will issue the initial approval letter to either Abu Dhabi Department of Economic Development (ADED) or Dubai Department of Economic Development (DDED). The required documents include
MOE initial approval
Copies of documents submitted to MOE
Copy of proposed lease in UAE (known as “Tawtheeq” in Abu Dhabi and “Ejari” in Dubai)
Engagement letter from a locally registered UAE auditor confirming company existence and two-year financial statements of the parent company
The commercial licence issued by the DED is valid for one year and can be renewed annually
Once the commercial license is obtained from the DED, the company can invest in office space and acquire visa and labour cards for employees
You also need to open bank accounts. The banks will require complete UBO information on the Parent company and additional corporate and shareholder structures within the Parent company
All foreign documents will need to be attested, legalised, and translated for use in the UAE.
The MOE registration is an online process. It requires the company to register and obtain a user name and password and upload the requested documents via the portal. The following are some of the key requirements for the MOE registration process:
There are different types of licenses available for mainland businesses in Dubai, including commercial licenses, professional licenses, and industrial licenses. The type of license required depends on the nature of the business activity.
Bank Guarantee: Each Foreign Branch is required to pay a refundable Bank Guarantee deposit of AED 50,000 to the Ministry of Economy through a local UAE bank. This deposit cannot be withdrawn or used as working capital and is held for the duration of the license
Appointing a local-based Auditor: You must appoint a UAE-based certified accountant to prepare a balance sheet and present annual final accounts of branches while renewing entry at the Ministry of Economy. If the foreign company has several branches, then the auditor shall present a combined balance sheet.
Legal structure
Foreign branch companies in Dubai are considered as extensions of the parent company and do not have a separate legal identity. The parent company is responsible for the activities and liabilities of the branch, and the branch is subject to the laws and regulations of Dubai.
Licensing requirements
Foreign branch companies in Dubai must obtain a commercial license from the Department of Economic Development (DED). The license will specify the activities that the branch is authorized to conduct in Dubai. The branch must also obtain approval from other regulatory bodies, such as the Dubai Municipality and the Dubai Civil Defense, if applicable.
Local sponsor
Foreign branch companies in Dubai must have a local sponsor or service agent who is a UAE national. The sponsor's role is to provide administrative support and assistance with government procedures, but they do not have any ownership or control over the branch company.
Capital requirements
Foreign branch companies in Dubai do not have any minimum capital requirements, but the parent company must provide financial guarantees to cover the activities of the branch. The amount of the guarantee will depend on the activities and risks associated with the branch's operations.
Tax and accounting requirements
Foreign branch companies in Dubai are subject to corporate tax on their profits, which are taxed at a rate of 20%. They must also comply with the accounting and financial reporting requirements of the UAE, including submitting annual audited financial statements to the authorities.
Business activities
Foreign branch companies in Dubai are allowed to conduct the same activities as their parent company, subject to any restrictions or regulations imposed by the authorities. The branch must also comply with the labor laws and regulations of Dubai, including obtaining work permits and visas for its employees.
