A branch office in Dubai offers foreign companies and UAE-based corporations a pathway to establish a physical presence in the market without forming a separate legal entity. It acts as an extension of the parent company, allowing for operations under the same name and business structure. While branch offices share many of the benefits of Free Zone Establishments (FZE) and Free Zone Companies (FZC), they have their own distinct features and regulations. In this article, we delve into the complexities and benefits of setting up a branch office of a foreign or UAE company in Dubai.
What is a Branch Office?
A branch office is not a separate legal entity but rather an extension of the parent company. It is fully owned by the parent company and operates under the same name. The branch office can undertake any or all of the activities of the parent company but is required to have the same business objectives and activities as outlined by the parent company.
Where Can a Branch Office Be Established?
Branch offices can be set up in either the Dubai mainland or in one of the many Free Zones, depending on the type of business and target clients. Mainland branch offices are registered with the Department of Economic Development (DED), whereas Free Zone branch offices are registered with the respective Free Zone Authority.
Key Features
Same Legal Identity as Parent Company
A branch office in Dubai will have the same legal identity as its parent company and must carry out the same type of business activities.
Local Sponsorship/Service Agent Requirement
For mainland branch offices, a local service agent or sponsor is usually required. However, this is not the case for branch offices set up in Free Zones.
Broad Operational Scope
A branch office can engage in commercial, professional, or industrial activities depending on the license and activities of its parent company.
Direct Business Operations
Being an extension of the parent company allows the branch office to engage directly in contracts, billing, and receiving income.
No Capital Requirement
Generally, there are no minimum capital requirements for opening a branch office in Dubai.
Documentation and Eligibility
The documentation required varies depending on whether you’re opening a branch in the mainland or a Free Zone. However, standard required documents usually include:
- Board resolution from the parent company approving the opening of the branch
- Certificate of incorporation of the parent company
- Parent company’s Memorandum and Articles of Association
- Passport copies of the parent company’s directors and the appointed manager for the branch office
- Power of Attorney to the branch manager, if applicable
Registration Process
- Initial Approval: Obtain initial approval from either the Department of Economic Development (DED) for mainland or from the respective Free Zone authority for Free Zones.
- Submit Documents: Submit all required legal documents and complete the necessary forms.
- Appoint a Local Service Agent (LSA): For mainland branch offices, an LSA, who is a UAE national, must be appointed through a standard agreement. This step is not required for Free Zone branch offices.
- Pay Fees: Pay the relevant licensing and registration fees.
- Final Approval: Upon verification of all documents and payment, the business license will be issued, and the branch office can commence its operations.
Regulatory Compliance
Branch offices are subject to compliance checks, and may be required to submit annual financial statements or undergo audits. Regulatory requirements can vary depending on the jurisdiction (mainland or Free Zone).