Dubai is among the most business-friendly metropolises with a developing economy and the proper geographical location. Also, if you want to setup a subsidiary company in Dubai, you can enjoy many benefits, such as no taxation, huge market access, business growth opportunities, and more. But you might be confused about where you should start a subsidiary company.
In this post, we’ll guide you on how to establish a subsidiary company in Dubai, its advantages, types, and the required documentation. Let us dive right into it:
Benefits of Subsidiary Company Formation In Dubai, UAE
The following are the advantages to setup a subsidiary company in Dubai:
- Strategic Market Access: Dubai is geographically located at the intersection of the European, Asian, and African continents. According to Dubai Economic Agenda 2033, the size of the Emirate’s economy will double in the next decade.
- Complete Foreign Ownership: Laws of the UAE permits a full one hundred percent FDI in some sectors. This way, you can fully control your subsidiary. This freedom extends to several business operations and offers flexibility and management options for setting a successful business.
- Limited Liability Protection: A subsidiary in UAE operates independently from its holding company and protects your parent company. Moreover, the parent company of a subsidiary has different debts as compared to subsidiary. This helps to avoid financial risks to the main operations.
- Tax Advantages: The UAE has the lowest tax rate for some businesses compared to the rest of the world. Currently, there are no income or corporate taxes to meet, making your subsidiary’s tax situation much clearer.
- Access to Local Talent: Expanding your business to Dubai as a subsidiary lets you employ UAE people directly. This will exclude all middlemen and make recruiting easy and fast. Thirdly, there is nothing as convenient as a legally independent company or subsidiary to manage your employee remuneration.
Subsidiary Categories Within the Dubai
If you have decided to open a subsidiary company in Dubai, you need to define your company type. Here are the options available:
- Limited Liability Company (LLC): Most suitable for any commercial activity. It is also possible for the foreign investor to own 100% of the company.
- Public Joint Stock Company (PJSC): Slightly more suitable for large companies planning to list the securities on the stock exchange, a PJSC calls for a greater minimum paid-up capital and involves compliance with other regulations.
- Private Joint Stock Company (PRJSC): Unlike the PJSC, which mandates that the company go public, a PRJSC is ideal for medium to large businesses.
- Civil Corporation: Originally developed for legal, consulting, and medical applications.
The one you choose for your business establishment will depend on the amount of capital you’re putting into the company incorporation, whether you want an onshore or a free zone company.
Documents Required to Open a Subsidiary Company Setup In Dubai
To setup your subsidiary company in Dubai, the following documents are required to avoid any complications:
- Memorandum of Association: It contains the company’s goals and objectives, the nature of your business, and the share capital of the subsidiary.
- Articles of Association: It outlines the internal management of the subsidiary company, dealing with congress meetings, majorities and minorities, profit sharing, etc.
- Certificate of Good Standing: This document from your home country authorities confirms the parent company’s legal presence in Dubai and sound performance.
- Audited Financial Statements: Make sure you write that you are to attach copies of your parent company’s audited financial statements for two years. From this, one can show the parent company’s financial strength.
- Power of Attorney: Appoint the General Manager of your subsidiary with Power of Attorney to perform important duties, including registering a corporate bank account.
- Passports: Obtain Acrobat copies of the passports of the Directors and the General Manager of the subsidiary company in UAE.
- Trade Name Reservation Application: Choose a good and private trade name for your subsidiary in the UAE.
- Business Activity Outline: A document needs to be produced listing and describing in detail the types of business operations that your subsidiary will engage in in the UAE.
- LSA Agreement: Where you hire the service of a Local Service Agent (LSA), ensure that you submit a copy of the signed document containing details on the services and role of the LSA.
- Government Approvals: If you intend to engage in certain business operations, you may also need permits or licenses from the responsible ministries. It is advisable to request any approvals you receive during the process of opening a subsidiary in Dubai.
- If you want to set up a business in Dubai, Xpert Advisory’s team of seasoned professionals can help you get government authority approval without hassle.
How to Setup A Subsidiary Company In Dubai?
The UAE offers a favorable business environment, and organising a subsidiary makes sense. Here’s a simplified process of setting a subsidiary in Dubai, covering both the mainland and the free zones:
1. Choose the Subsidiary Location
- Free Zone Subsidiary: Active in Free Zones established within the Country; these provide up to 100% foreign ownership, import/export exemption, and up to 50 years of income tax holidays.
- Mainland Subsidiary: This is for firms that require immediate commanding ground in the local market. A local sponsor was once required to own a minimum of 51%, but the new reforms mean they can own 100% in some sectors, such as manufacturing, health, and trading.
- Offshore Subsidiary: Perfect for asset management or international business which do not need premises under a country’s jurisdiction.
2. Select the Business Type
- Limited Liability Company (LLC): Probably the most well-known for flexibility. It may be formed on the mainland of Dubai and owned by foreign investors in certain sectors. The company must have at least two shareholders.
- Branch of a Foreign Company: Enables a foreign company to conduct its business in Dubai without formulating a new legal entity in Dubai. This branch can only engage in the same business as the parent company.
- Representative Office: Limited to advertising the parent company’s goods or services to the Dubai market. Unable to participate in business transactions.
3. Select a Business Activity
- DED Activity List: Check the list of activities to guarantee conformity with the approved list of activities. As mentioned, the Directory is organised according to activity throughout the GAC, including trading, consultancy, education, manufacturing, and technology.
- Free Zone-Specific Activities: Certain Free Zones are focused on specific markets, such as Dubai Healthcare City-Healthcare City and Dubai Silicon Oasis-Technology City.
4. Reserve a Company Name
Following are the conventions that you must follow when selecting the name for your subsidiary company:
- Don’t use shorthand or slang or insult anyone.
- It is also important to avoid any connection with such a site, whether political or religious.
- The name should also express the business kind or the name of the larger business that owns the sub-business.
- Register through the Free Zone Authority or the DED to reserve a name.
5. Apply for Initial Approval
Subsidiary to operate in Dubai are required to complete an application with the DED or Free Zone authority. The approval tells you that your business processes are allowed by UAE laws. Documents required at this stage may include:
- Documents of registration of a parent company.
- Shareholders’ passports.
- Proposed business operations.
6. Documents that Must Be Provided
- Parent Company Documents: Opening a subsidiary in UAE requires MOA/AOA, incorporation certificates, and board of directors’ resolutions. To register your subsidiary, these documents may require attestation from the home country and the UAE embassy.
- Local Documents: For local agents or sponsors, a photocopy of the passport, visa, and Emirates identification number is required.
To set up a subsidiary company, several free zones or mainland settings may require additional industrial licenses or NOCs.
7. Obtain Trade License
To establish a subsidiary in Dubai, you need to get the license which depends on your business activity:
- Trade License: Used when importing, exporting, or distributing goods.
- Professional License: Only when the service is, for instance, consultancy, IT, or marketing services.
- Industrial License: In the manufacture or the process of manufacturing.
8. Register a Subsidiary Company
It is required to submit a notary of the documents and pay the agreed fee to register a subsidiary company. Registration of Free Zones involves easier registration than the mainland setup, which requires registration with the Ministry of Economy. Moreover, company registration may involve getting a Dubai Chamber of Commerce membership.
9. Open a Bank Account
To set up subsidiary business, you need to open an account in local banks like Emirates NBD or in international ones like HSBC. Provide documents such as:
- Trade license.
- To avoid revealing shareholders’ personal and company details.
- Office lease agreements.
If you want to open a bank account in Dubai, Xpert Advisory can guide you to ensure that you have a hassle-free bank account opening process.
Step 10: Administrative Requirements
We recommend hiring a Director and General Manager if you have a large team.
Fill out work permits and recruit employees.
Draft employment contracts.
Step 11. Start Your Business in Dubai
After obtaining the licences, official bank account, and staff, you can start operating your subsidiary company in Dubai.
Summary
In short, a subsidiary company in Dubai offers massive incentives for business owners, including appropriate market positioning, legal business climate, tax exemptions, and exclusive ownership of the company by foreign entities.
If you are ready to setup a subsidiary company in Dubai, contact a business setup advisor like Xpert Advisory to make the process convenient and stress-free.
FAQs
Can a Foreigner Open A Subsidiary Company In Dubai?
Yes, anyone can open a subsidiary with 100% ownership in Dubai and complete foreign ownership.
What’s The Difference Between Branch And Subsidiary In Dubai?
The branch office acts as the head office. While the subsidiary could or couldn’t be involved in the same business as the parent company.
Can An Overseas Citizen Start A Company In Dubai?
Yes, but an overseas citizen or his/her employees must require the right visa to start a company in Dubai. Long-term visas for self-employed persons can be issued so they and their families can stay in the country.
