Expanding your business internationally can be a significant milestone, and the United Arab Emirates (UAE) offers an enticing environment for global enterprises. Dubai, in particular, is a bustling business hub attracting companies from various sectors. If you are considering establishing a presence in Dubai, you have two options: opening a branch office or a representative office. In this blog, we will explore the definitions, differences, step-by-step process, benefits, required documents, and cost details associated with opening a branch or representative office in Dubai, UAE.
Understanding Branch Offices and Representative Offices in UAE:
A branch office is a fully functional extension of the parent company, conducting similar activities and bearing the same name. It is allowed to carry out commercial operations, sign contracts, and generate profits.
A representative office, on the other hand, serves as a liaison between the parent company and potential clients in the UAE. It is restricted from engaging in profit-generating activities but can perform market research, and promotional activities, and facilitate communication.
Differences between Branch and Representative Offices:
The key distinctions between these two types of offices are their functions and legal status. A branch office has a separate legal identity, whereas a representative office does not. Additionally, a branch office can conduct commercial activities and generate revenue, while a representative office is limited to non-profit-generating tasks.
How do Open a Branch or Representative Office in Dubai, UAE?
- Decide on the type of office: Determine whether a branch office or representative office aligns better with your business objectives.
- Obtain initial approvals: Seek initial approvals from relevant authorities, such as the Department of Economic Development (DED) in Dubai.
- Choose a local sponsor: In the case of a branch office, you must appoint a local sponsor, who will hold a 51% share in the business. For a representative office, no local sponsor is required.
- Lease office space: Secure an appropriate office space within Dubai, adhering to legal requirements.
- Prepare necessary documentation: Gather required documents such as registration forms, Memorandum of Association, and power of attorney.
- Submit the application: Submit the application along with the necessary documents to the DED.
- Obtain a trade license: Once the application is approved, obtain a trade license from the DED.
- Complete other legal requirements: Fulfill additional legal obligations, including registering with the Dubai Chamber of Commerce and Industry and obtaining necessary visas for employees.
- Commence operations: Upon receiving all approvals, you can start operating your branch or representative office in Dubai.
Benefits of Setting up a Representative Office in UAE/Dubai:
- Market research and analysis: A representative office allows you to gather valuable insights about the local market, customer preferences, and competitor landscape.
- Business development: You can establish relationships with potential clients, suppliers, and partners in the UAE.
- Brand establishment: A representative office helps to create brand awareness and build credibility within the UAE market.
- Cost-effective entry: Compared to setting up a branch office, a representative office is a more cost-effective option with reduced financial commitments.
- 100% Foreign Ownership: Establishing a representative office allows for 100% foreign ownership, providing complete control and decision-making authority to the parent company.
- Limited Activities: A representative office can engage in activities similar to those of its parent company, ensuring alignment with the core business objectives and expertise.
- Local Service Agent (LSA): The LSA, who is not a shareholder, bears no liability towards the business and is primarily responsible for providing specific services such as obtaining entry/residence permits and assisting in acquiring licenses. This arrangement helps navigate local administrative procedures.
- Manager Authorization: The manager appointed by the parent company’s Board of Directors has the authority to represent the company in all matters within Dubai, ensuring efficient decision-making and streamlined operations.
- Liability and Tax: As a representative office is not a separate legal entity, the parent company retains 100% liability for the actions of the office. Tax obligations are typically aligned with the parent company’s jurisdiction, providing potential tax advantages.
- Minimal Permissions: Representative offices generally require fewer permissions compared to branch offices, reducing administrative burdens. However, in certain cases, permission from the Ministry of Economy may be necessary for specific functions
The exact documentation may vary depending on the nature of your business and local regulations. However, the general requirements include:
- Application form
- Memorandum and Articles of Association
- Power of attorney
- Passport copies of company shareholders and directors
- Bank reference letters
- Lease agreement for office space
- No-objection certificate from the parent company
- Business activity plan and Legal structure of a foreign company
The costs associated with opening a branch or representative office in Dubai can vary based on several factors such as office space, license fees, visa fees, and professional service.
How Legal House helps you?
Legal House can provide valuable assistance in setting up a branch or representative business by offering the following services:
- Reviewing the Business Model and Regulatory Framework: Our legal experts can assess your business model and provide guidance on the applicable regulatory requirements, ensuring compliance with local laws and regulations.
- Preparation of Regulatory Business Plan and Financial Projections: We can assist in preparing a comprehensive regulatory business plan, including financial projections that meet the regulatory standards and requirements.
- Development of Policies, Processes, and Manuals: Legal house can help in developing and drafting the necessary policies, processes, and manuals required for the smooth operation of your branch or representative office.
- Finalization of Legal Structure: Legal experts can guide you in finalizing the legal structure, including setting up a holding company if required, and customizing Memorandums in line with the specific needs of your branch or representative office.
- Assistance with Leased Space, Bank Account, Residency Visas, and Financial Services Permissions: We can assist in finalizing leased space, opening a bank account, obtaining residency visas, and obtaining the necessary financial services permissions, ensuring a smooth setup process.
By leveraging the expertise of a legal house, you can navigate the complexities of setting up a branch or representative office, ensuring compliance, and streamlining the process to establish a solid foundation for your business in the UAE. Feel Free to contact Us at email@example.com .
Establishing a representative office in the Dubai International Financial Centre (DIFC) can be advantageous due to its proximity to a global financial hub, access to a robust professional network, favorable tax benefits, a trusted regulatory environment, and the opportunity to leverage Dubai’s status as a global business hub, all of which can enhance your company’s reputation and business opportunities.
The approximate cost of opening a branch or representative company in UAE varies depending on factors such as the type of office, location, business activities, and specific requirements. It can range from several thousand dollars to tens of thousands of dollars, considering license fees, office setup costs, and fees associated with local sponsors or service agents.
In addition to the mentioned costs, there may be a refundable deposit requirement. A refundable deposit of 50,000 AED is typically required when opening a branch or representative company in UAE. This deposit acts as a security measure and is usually returned upon the closure of the branch or representative office, subject to fulfilling all the necessary obligations and requirements.
The timeframe for opening a branch office in Dubai can vary. On average, the process can take anywhere from a few weeks to several months. The duration depends on factors such as the complexity of the business activities, the completeness of documentation, the efficiency of the application process, and any specific requirements or approvals needed. It is advisable to consult with local authorities or seek professional guidance to get a more accurate estimate based on your specific circumstances.