The UAE in general and Dubai in particular offer excellent options for trading and commercial activities that is why Dubai has become the fastest growing Emirate. Surely, there are quite a lot of offshore jurisdictions and places around the world where it is very profitable to open a company, but you are unlikely to find another place with such a good combination of all the factors for doing business. There are no taxes and fees here (no taxes on profits, dividends, inheritance, no restrictions on the repatriation of capital), you can be a 100% owner of a company, you will find a well-developed infrastructure (offices, warehouses, transport, communications, etc.), there is access to qualified personnel and a number of rapidly developing markets. You can get in any place of the world in less than 8 hours from the airport of Dubai. There is no place in the world better for business development.
There are several dozens of free zones in Dubai, the UAE, which are intended to develop various sectors of the local economy: international commodity center – Dubai Multi Commodities Centre (DMCC), or the Dubai International Financial Center DIFC – a financial hub. There are many serviced offices in Dubai with offices of large global corporations, like Coca-Cola, Reuters or Siemens , as well as large number of medium and small companies and startups.
One of the main advantages of starting a business in the UAE is the specifics of the local taxation system. Most of the Emirates have their own corporate income tax decrees providing for a tax that will be levied on the income from economic activities that are carried out in their territories, these tax rates are typically 0% but in some cases they may be up to 55% (for those engaged in oil extraction, petroleum industry and branches of foreign banks). Therefore, in fact, the tax is not levied on most companies operating in the Emirates.
How to open an office in Dubai and in what form?
Depending on your business model, there are several options on how to open an office in Dubai. There are four main options: an onshore or offshore company in one of the free zones of the country, a local company outside the free zones, and a branch of a foreign company.
- Local company. If you want to deliver goods or services to local markets in Dubai, you need a local company. The Limited Liability Company (LLC) will always be a partnership with a local shareholder who has at least 51% of shares. In case you want to rent an office or warehouse outside the free zone or in one of the trading centers, you will also need a local form company LLC (LLC). Note: there is the new legislation in 2018 which allows to register LLC companies with 100 % foreign ownership for some business activities.
- Free Zone Company. In case you want to keep full ownership of your company, you can open a business in one of the free zones of Dubai. When you own a free zone company, you can conduct business only within your FTZ. With a free zone company, you can rent an office or a warehouse also in the free zone, besides you can get a resident visa for you, your family and employees.
- Offshore company. If you plan to open an offshore company in the UAE, you should take into account that you will not be able to conduct business in the local market of the UAE. However, the UAE can be used as a basis for doing business in the rest of the world.
- Branch of a foreign company. In this case, you register a branch of a company from another jurisdiction. This structure is not a standalone legal entity, and cannot conduct activities that the parent company does not conduct, but a branch can become a powerful marketing tool for promoting your business in the region, while the costs of its activities are relatively low.
Open an office in Dubai in the form of a branch or subsidiary.
Typically, most foreign investors consider the first three registration options, and they do not take into account the opportunity to open a representative office or branch in the UAE at all, but that is totally wrong!
So, let us consider the last type of company and the meanings of these terms. What are the advantages and disadvantages of a subsidiary company or a branch, what is the difference between them, what are the benefits of setting up a foreign office and what are the features of local taxation?
- A branch is a regional representative of the parent company, the main function of which is to promote business in the country and a regional presence. The branch is not a separate legal entity; it performs the same actions as the head office. A head of the branch, a regional manager responsible for the work of the branch is responsible for the work of a branch, reports and receives instructions from the head office.
- Representative office – a type of branch. Such a structure is typically used for organizational and marketing tasks in business promotion. The cost of organization and maintaining of such an office is much lower than a separate full-fledged legal entity, but the benefits of a regional presence can be really great.
- Subsidiary. Unlike a branch, a subsidiary is a separate legal entity, although it is owned/controlled by the parent company (holding company). The subsidiary has much more freedom in its activities. Such a structure can be engaged not only in those types of activities of a holding company, that is, its capabilities and services in the region will be much wider.
In some cases, a branch and subsidiary will be a much simpler and more rational solution than opening a separate company, such as a local company.
Tax optimization and reporting in branches in Dubai.
From the point of view of a tax optimization and reporting of a parent company, a branch and subsidiary are good solutions for regional development and promotion in a foreign country. Having an office (branch) in another country is a simple and lawful solution in terms of taxation and tax optimization. And, once you have your office set up in the UAE, you do not pay any corporate taxes in the country.
So, you want your foreign company to open a branch or set up a representative office or form a subsidiary company in the UAE. How to create it in Dubai? Starting a representative office in the UAE is similar to the process of registering a company in Dubai, but there are some nuances. First, you need to decide which type of company your representative office would have and where it would be registered. Then you need to get the respective list of requirements on the documents you need to prepare from your main company in order for it to set its branch or subsidiary in the UAE. Such documents must be legalized and translated into Arabic language.
In order to open a new branch office in Dubai, foreign investors must select the type of business activity for the legal entity and company name and contact the respective authority for approval. Your application for a subsidiary company forming has to contain information about your business activities. Also, you have to confirm that you have resolution from the parent company to establish a representative office (board resolution for branch registration). For the incorporation of a branch, it is also necessary to attach documents such as a certificate of incorporation, a memorandum and the articles of the parent company. Setup cost will depend on the chosen field of activity and place of registration within the UAE. On taxation - your branch office in the UAE will be exempt from the UAE corporate tax - similar to any other company type in the UAE.
Tasks of a branch (representative office) in Dubai
By setting up a local representative office, a foreign company can pursue several different goals, opening an overseas branch or a subsidiary company in Dubai. These objectives will define the structure and type of the registered company, which is starting its activities in the UAE.
- Representative. Dubai is one of the largest business centers in the GCC region, and if your business interests are directed towards the Middle East, the Persian Gulf, and North Africa, Dubai offers the perfect combination of conditions and opportunities to promote your business there.
- Administrative. The developed infrastructure, good office space rental opportunities and an abundance of qualified personnel make Dubai profitable for opening an office for business administration.
- Marketing. The UAE annually hosts hundreds of various international shows, conferences, business forums, etc. There are very good opportunities for advertising and promotion of goods and services in the region.
- Holding. A well-developed financial sector and ample opportunities for investment along with clear corporate legislation make Dubai a great place to open holding companies.
- Operating. As it was already noted, Dubai is a major business center in the region, they often organize business meetings, presentations, and other events here, so opening an office that deals with the issues of negotiations and business promotion in the region are a great option.
- Coordinating. The UAE has a very developed system of transport and traffic. This is primarily due to large ports and airports, which are located in all the Emirates. If you are involved in the logistics business or deliver goods to the Middle East or African countries, it’s very profitable to open your office here; it can coordinate deliveries or carry out some other similar operations.
- Functional. Not only offices and banks are located in Dubai, but production can also be developed here (and this is encouraged by local authorities), large industrial sites, warehouses, and logistics hubs are within some of the free zones.
- Financial. There are both local banks and representative offices of large international financial holdings in the country. Dubai provides excellent conditions for the development of the financial sector.
- Other. Perhaps you have your own vision of functions which such office can perform here. In any case, in Dubai, you will find everything you need – a tax-free environment, easy access to material and human resources, infrastructure and a simplified bureaucratic system.
Unlike local companies, which, for some activities, may be only partially owned by a foreign citizen, a branch or subsidiary office will be entirely under your ownership , and the opportunities that you receive from such a structure may be excellent for your business to be able to use the advantages of UAE corporate taxation and be represented in the region.
If you have questions regarding the opening of a branch or subsidiary in the UAE, please contact our consultants, we will help you to open your office in Dubai.