Expanding your business to new horizons can be daunting, especially when considering an international move. UAE’s strategic location, including Dubai, and favorable business climate, make it a top destination for companies aiming to broaden their reach.
This article will guide you through the advantages and steps required to set up a subsidiary in Dubai, ensuring that you’re informed about everything from legal requirements to potential tax benefits. Dive in and discover how simple the answer to the question “how to setup a subsidiary company in Dubai” can be!
How to Setup a Subsidiary Company in Dubai: Understanding Subsidiary Companies
A subsidiary company is like a child of a bigger parent company, i.e., it is tied to the parent company. This “subsidiary in the UAE” company operates under the control of its parent but can act on its own too. The company follows It has to follow the rules where it’s set up, which means it obeys Dubai company laws for local businesses even if its parent company is from another place.
The power of attorney regarding almost everything, including subsidiaries and its functioning, stays with the big parent though, because they hold most of the power. The child company operates on behalf of the parent company.
The good thing about a subsidiary is that it gets to do some things by itself while still getting help and strength from its big-company parent. If bad times hit, this setup can keep problems away from the parent, sort of like putting eggs in different baskets.
In Dubai, subsidiaries work well because they let foreign bosses totally own their business there – that’s not common in many places!
Advantages of Setting Up a Subsidiary in Dubai, UAE
The act as well as the process of setting up a subsidiary company in Dubai offers multinational firms a strategic foothold in one of the world’s most dynamic business hubs. Establishing a subsidiary company not only aligns with growth ambitions but also delivers tangible benefits across various business operation dimensions from risk management to tapping into local expertise.
Risk Mitigation
Setting up subsidiaries in the United Arab Emirates can be safer for your business activities. The UAE is openly available for setting up subsidiaries. It lets foreign investors own all of a company in some areas. This means you won’t have to share control with local partners or shareholders, which lowers your risks.
Hiring companies makes this process even better by offering help with the tricky parts of following local laws and hiring people. They take care of these things so you don’t break any rules.
After reducing risks, it’s also important to think about having a branch office or store in Dubai to connect with customers there. The difference between a branch office and a liaison office is that a branch office is tied to the parent company whereas a liaison office only acts as a representative.
Local Presence
Having your subsidiary in Dubai means you’ll be right where the action is. You can meet face-to-face with local clients and partners, which builds trust. A local registered office shows that you are serious about doing business in the UAE.
It helps to understand cultural ways and speak directly with people who might buy what you’re selling.
Being close by also makes it easier to handle paperwork or fix problems quickly. Plus, being there lets you join big events and get the word out about your company. Now let’s look at how this setup and setup process gives you tax advantages.
Tax Advantages
Dubai makes setting up a subsidiary appealing with its tax perks. Most companies in Dubai enjoy no corporate or personal income tax, leaving more money to grow the business. This light tax load means less paperwork and stress for business owners.
Starting June 1, 2023, a new Federal Corporate Tax regime kicked in across the UAE’s different regions. But it’s still a good deal – only profits over AED 375,000* get taxed at a flat rate of 9%. That’s low compared to many places worldwide.
Plus, there are often extra tax incentives for UAE free zone companies. These areas offer benefits like no import or export taxes and zero value-added tax (VAT). Such perks attract investors looking for smart ways to save on taxes while doing business in Dubai.
Compliance and Regulatory Ease
Setting up a subsidiary in Dubai means you’ll deal with clear rules which ensure compliance. The company or subsidiary laws here are made to help businesses do well without too much trouble. You don’t need a local person or company to own part of your business in many areas, as the UAE allows full foreign ownership. Hence, foreigners are allowed to register subsidiaries in their name, which in turn means that appointing a local individual is not a necessity. This is a good thing for those who want sole ownership. This makes things simpler for foreign investors.
In places like free zones, the government has made it even easier for business entities to follow rules. Here, companies enjoy less strict requirements, including capital requirements, and can opt to set up fast. Companies on the Mainland have their own rules but still offer good options for subsidiaries. Hence, many people choose mainland companies over other options.
Firms only need some paperwork and can then focus on growing their business instead of worrying about complex laws.
Talent Acquisition and Retention
Dubai is a hotspot for skilled professionals from all over the world. Companies here have a great chance to build strong teams with smart, hardworking people. Hence, they need to obtain the right professionals. A subsidiary in Dubai can find and keep these top workers with help from experts.
They know how to attract the best talent and make sure they stay happy at work, resulting in smooth operations in Dubai companies. Good workers are key for success, so it’s important for subsidiaries in Dubai to focus on this part of their business.
Steps to Establish a Subsidiary in Dubai
Embarking on the journey to establish a subsidiary in Dubai begins with navigating through a structured process, designed to integrate your business into this dynamic market. To establish a presence, careful planning and compliance with local regulatory frameworks are essential as you lay the groundwork for your presence in the heart of the Middle East’s thriving commercial hub.
Initial Approval and Name Reservation
Before you can set up a subsidiary in Dubai, you need to get in touch with the DED to acquire initial approval and reserve a company name. Pick a unique name that fits your business and follow the rules for naming.
After choosing a name, the name must be submitted for approval. The Department of Economic Development (DED) has to say yes before you move on. If they give the green light, your business name is yours and no one else in Dubai can use it.
This reservation makes sure people know what company is yours.
Company Registration with the Department of Economic Development (DED)
People wishing to start any company in Dubai are required to register it first. Similarly, to start a subsidiary in Dubai, you must register with the DED. Make sure that the process of registration of a subsidiary goes smoothly, since this step makes your business legal and ready to go. You’ll need documents required for setting up the foundation stone, like your main company’s trade license available for setting up the company (an official document featuring the trade name for your subsidiary company and other details) and passport copies of the owners.
Xpert Advisory can help make this process easier. They know how everything works with the DED. The cost for getting a license is around AED 25,500*.
After registering with the DED, opening a corporate bank account is next. This dictates how your subsidiary operates financially, i.e., handle money, besides its presence in Dubai.
Opening a Corporate Bank Account
Setting up a subsidiary in Dubai means you need to set up a corporate bank account. This is an important step after you create your company. You will give the bank some documents from your parent company, like a trading license that has been checked and approved. The banks want to set the fact straight that everything is okay.
Before opening a bank account, your new company must be on the list with the Department of Economic Development in Dubai (DED). They check if foreign companies can do business in the form of limited liability companies. Handle the registration properly, as banks will look for it. It shows that you follow Dubai’s rules and are ready to do business in their city.
Taxation of Subsidiaries in Dubai
The sector of commerce and industry in Dubai is booming, which is why subsidiaries get good tax deals. The city sets a corporate tax rate of 9% on profits that are more than AED 375,000*. This low tax helps businesses save money and grow.
Dubai doesn’t have income taxes for people either. Subsidiaries from other countries like this a lot. They can keep more of their money instead of paying high taxes. And they still get to use all the services and roads in Dubai.
Businesses also like not having Value Added Tax (VAT) in free zones. If a subsidiary is inside one of these special areas, it does not pay VAT. That’s another way companies can spend less on taxes when they work in Dubai.
Conclusion
Setting up a subsidiary in Dubai is a smart move for growing businesses. With the city’s welcoming business laws and no corporate taxes, it makes sense to expand here by opening any type of subsidiary given that an individual has knowledge regarding the type. Follow the steps, meet the requirements, and soon your company can enjoy all that Dubai offers.
Don’t forget, help for company formation in Dubai is available if you need it to navigate this exciting journey!
FAQs
1. What is a subsidiary company in Dubai?
A subsidiary company in Dubai is a business owned by another company, often called the parent company. It works as its own legal entity within the United Arab Emirates.
2. Why should I set up a subsidiary in Dubai?
Dubai is among the top cities in the world. Dubai maintains a stable political and economic environment, good infrastructures like Dubai World Central, and has policies that encourage foreign investment which can be great for your finances. Hence, this is why opening a subsidiary in UAE, is a smart choice.
3. Do I pay lots of taxes if I start a subsidiary in Dubai?
No! The corporate tax rates are low, which means you don’t have to worry about big tax bills on your profits which you make from your company in the United Arab Emirates.
4. What do I need to make my subsidiary legal in Dubai?
You need to get a business license from local authorities, follow labor laws for work permits and visas, and obey all corporate laws including making financial reports.
5. Can my subsidiary hire people from other countries?
Yes! You can apply for a business visa or work visa so you can recruit employees from outside the United Arab Emirates.
6. Is it easy to trade with other companies from my Dubai subsidiary?
Sure! Being part of JAFZA (Jebel Ali Free Zone Authority) helps you connect with an international trading network while benefiting from exemptions on certain fees and government contracts.
Disclaimer:
This blog is intended for informational purposes only. The content is provided “as is” and we make no representations or warranties of any kind regarding its accuracy, completeness, or suitability. Any reliance on the information is at your own risk. We are not liable for any losses or damages arising from the use of this blog.
* – Fees and Costs Mentioned are for Reference Only.
