'Why and How' of Branch Office Formation in Dubai

[vc_row][vc_column][vc_column_text css=".vc_custom_1615385230411{border-radius: 1px !important;}"]Internet entrepreneur and co-founder of Google, Larry Page once said, “Always deliver more than expected.” To ensure the growth of an existing company, it is always good to look for options to expand it. Branch offices are a good way to guarantee the same. Many who get confused between a branch office and a representative office should note that a representative office works to market the services and products of the parent company while a branch office can also take care of business operations within the local market. It is the most secure process for a foreign company to enter a new market as the branch office comes under 100% ownership of the parent company, be it local or foreign.

In FEZ or Dubai Mainland?

Branch offices can be in the Free Economic Zone (FEZ) or in the Dubai Mainland but it is more beneficial to open a branch office in Dubai. The differences in the two are as follows:

	Branch in FEZ	Branch in Dubai
1	Subject to licensing and registration conditions of the respective FEZ authority	Subject to requirements as per rules & regulations of Dubai
2	Subject to different capital requirements	Does not involve minimum share capital requirements.

Moreover, FEZ branch offices are limited to activities that they are registered for only in the open area. A registered branch office is allowed to do the following:

• Issuing invoices to international as well as UAE companies
• Leasing office premises
• Hiring local staff as and when required
• Signing a local legal document

However, it is not allowed to manufacture and import, or export in & out of the UAE. Required documents:

• Trade name reservation and original authorization application forms
• M&AA- Memorandum of Association (MOA), Article of Associations (AOA)
• Certificate of Incorporation
• Board resolution approving branch opening
• Overview of purpose, mission, and vision of the company
• High-Status Certification
• Power of Attorney
• Photocopies of passports of all Managers
• Two years of Audit reports of Parent Company
• Sponsorship arrangement notarized at court

Steps to open a branch office in Dubai:

1) Submission of Application in Department of Economic Development (DED)	•    Reservation- of the Proposed company name •    Initial approval- of business activities, the identity of partners (if any), trade name •    Registration- of the Parent company for membership with DCCI (Dubai Chamber of Commerce and Industry
2) Local agent Agreement in Dubai Courts	•    Finding local agent- UAE national or company-owned solely by UAE nationals (*UAE accredited auditor not required unlike LLC) •    Signing agreement with a local agent
3) Getting Branch Office Space	•    Finalizing premises as per requirement •    Drafting lease agreement with the landlord(/s) •    Submission of the agreement for Ejari attestation
4) Initial approval from Ministry of Economy	•    Submission of fees •    Receipt of initial approval certificate of Branch of foreign facilities
5)Trade License Application	•    As per Dubai law, the client applies for one of the following: a) Commercial license (for trading business) b) Industrial license (for manufacturing business) c) Professional license (for services like consultancy)
6) Company Registration Finalization	•    Opening of Corporate Bank Account •    Deposition of the required statutory amount to a local bank account •    Bank issues Bank Guarantee Letter which are required to get Branch Registration Approval from Ministry of Economy
7) Establishment Card	•    Application for the card from the Ministry of Economy •    &/or Registration of the company with GNRD (General Directorate of Residency & Foreign Affairs) •    Registration of company for VAT (Value Added Tax) and Federal Tax Authority (if applicable) •    Must use "Wage Protection System" through Ministry of Labour

External approvals: Ministry of Economy approvals along with the deposit needed. The company needs to appoint an auditor for the purpose of MOE. This article is written by Ms. Ananya Mukherjee, the Senior Business Advisor at Flyingcolour Business Setup Services. If you have any query related to the branch office formation in Dubai or anywhere across the UAE then please feel free to contact us at +971 4 4542366 or mail your query at info(at)flyingcolour(dot)com. *Please note that this article has been published on 03/10/2021 in accordance with the federal policies and updates at the time of writing. For the latest info please talk to our consultant.[/vc_column_text][/vc_column][/vc_row]