Businesses, Expansions and Branch Offices
Expansion is one of the main goals of any business across the globe. A company’s growth is often linked, with its expansion plans. A successful company will always aim to flourish in length and breadth. As a company appoints more staff and employees to cater to a larger section of people; it will need to expand, the office space simultaneously. This is when it strategises to open new branch offices. However, keeping the cost and quality under the scanner is also very essential. Opening offices in various parts of the country or world, not only helps build trust factors in the minds of its customers and potential customers, but it also establishes the company’s brand image. Although, companies always look for places that are ideal for business activities and Dubai is one such business hub that provides a complete solution to its investors coming from everywhere.
In the last two decades, it has been observed that a growing number of businesses are moving to Dubai to either start a new business or open a branch office of their existing company. Some of the key factors are – its strategic location, ease of doing business and tax-free economy.
Roles of Branch Offices
Branch offices are a branch of a parent company that represents it at a different location. It operates under the same trade name and functions in the same area. It has the authority to sell and advertise the goods and services of the parent company and can run business operations from a different location in the local market. However, a business can also open a branch office in Dubai for other activities like sales & marketing, consulting, trading, etc. but, no branch office can carry out operations that are not authorised by its parent organisation. A branch office in Dubai is most suitable for lawfully regulated sectors, like, insurance, banking, finances, and services with firm control.
Why are Foreign Companies Opening Branch Offices in Dubai?
By opening a branch office in Dubai, foreign companies can secure a formal presence in the United Arab Emirates. Contrary to a local limited liability company, a branch office with a 100 % non-UAE national holding the same legal rights as its parent organisation, operating under its parent’s name seems to be a better solution for the investors.
What are the Different Types of the Branch Office in Dubai?
Companies can form two different categories of branch offices in Dubai – Dubai Mainland, and in the Free Zone.
The key differences between the two are:
● Free zone branch offices are liable to the conditions of registration and licensing imposed by the authority under which they function.
● Same goes with Mainland Dubai. They are liable to the conditions applied by the authority under which they are functioning. Both work under a different jurisdiction.
● Branch offices in free zones are liable to different capital requirements.
● While the formation of branch offices in Dubai mainland does not invite any share capital requirements.
● Free zone branches are limited to accomplish their business activities in the open region they are registered with.
● But, Mainland companies can operate from anywhere in the UAE.
According to Article (313) of the Companies, Law allows an international business to run its main operation in the UAE by opening a representative or branch office.
The global company that opens a branch in the UAE can conduct its approved trade activities. On the other hand, a representative office can hold only promotional activities for the parent organisation’s activities. A foreign company’s branch office must obtain a license from the Ministry of Economy before the Department of Economic Development acquires a permit to run a business in the UAE.
However, skilled and service companies from across the world are now allowed to form branches in Dubai without the Ministry of Economy registration.
Contrarily, an outside party can also form a representative office.
● Representative offices’ responsibility is limited to assisting the parent company in supporting business activities. Meaning, they can only hold operations like – collecting information, marketing campaigns, taking orders, business communication that is expected to be undertaken by the company’s head office.
● Every office is restricted by the number of staff (generally three/four) that they support. Representative offices also hire a UAE national as a service agent, who is responsible for services like obtaining licenses and permits to the parent company.
What are the Key Features to Start a Branch Office in Dubai?
Following factors must be considered when you plan to start a branch office in Dubai-
● The branch or regional office must conduct the same business activities as the international company (parent company)
● For business activities, the parent company has to apply to the concerned departments and authorities in Dubai for the necessary licenses.
● The branch office is not categorised as a separate legal body from an international company.
● The parent company is responsible for the liabilities and commitments of the branch office in Dubai.
● For taxations, the branch office has to pay on the revenues generated in the UAE.
What are the Advantages of Opening a Branch Office in Dubai?
There are a lot of advantages of trading in the UAE’s local market. Here are a few benefits of opening a branch office in the UAE-
● Corporate Tax is Zero
● Higher employee capacity
● A foreign company can acquire 100 % of its shares in a branch office
● A cost-efficient solution and a new market
● Beneficial for the entire business if operated efficiently.
● New customer base, extensive reach
● Easy business environment
● Well-equipped office spaces
What is the Process of Setting-Up a Branch Office in the UAE?
The process is fast and hassle-free. Here is how it goes:
● The centre of attention is the spotting of the local service agents. They must be a member of the UAE or a company owned by UAE nationals.
● Next step is to register a name for the business. It must be unique and should not be the same as any existing UAE organisation.
● Apply to the Ministry of Economics, requesting share capital, general manager’s name in the UAE, head office, etc. combined with the documentation.
● Next step is to get a license from the Economic Development Department. Later, you can use the documents, and you obtain the commercial license after the approval of the Ministry.
● Once the license is issued, additional company registration activities like office space, obtaining visas for employees, opening bank accounts, and labour cards can be considered.
● After all the above factors are accomplished, you are all set to start your branch office operations.
What are the Documents Needed to Open a Branch Office in UAE?
Documentation is essential while establishing a branch office in the UAE or anywhere else in the world. Here are some of the exquisites for the purpose:
● Trade name reservation and original authorisation forms
● Certificate of Incorporation
● Memorandum of Association (MOA),
● Article of Associations (AOA)
● A clear board resolution approving branch opening
● A High-Status Certification
● Power of Attorney to the designated manager
● Copies of all Managers’ passports
● Audited parent organisation’s reports for the last two years
● An outline that explains the purpose, mission, and vision of the organisation
● A notarized sponsorship arrangement at court
What is the Cost of Setting Up a Branch Office in Dubai?
Cost of opening a branch office depends on your business needs, location, and your choice of business structure that is Mainland or Free Zone. Check with a professional business setup consultant for better understanding.
How Can OBKBC Help You?
If you want to open a branch office in Dubai, you can rely on us without hesitation. We offer complete service to make your operations here in Dubai smooth. Be it, identifying the gaps, preparing the applications, arranging the necessary documents, chasing the authorities and government officials for approvals, opening a bank account or finding the right office location, we are everywhere. We have a team of specialists to assist you in the set-up of your office in Dubai or anywhere else in the UAE. Feel free to contact us for more information.
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