Foreign Branch Office
Setting up a Branch Office of a foreign company in Dubai is easy, and an attractive prospect as it can be 100% foreign owned, provided a local service agent (like Quickstep Business Consulting) is appointed. A Branch Office is an extension of a foreign parent company registered outside of the UAE. It is a fully-fledged business, permitted to perform contracts or conduct other activities as specified in its licence. A foreign Branch Office may only engage in activities similar to those of its parent company.
Under Commercial Companies Act No 8 of 1984 and Ministerial Decision Number 69 of 1989, a Branch Office of a foreign company is not considered a separate entity. It simply represents the parent company and carries out business under its name. The purpose of the Branch Office is to promote and market the products of the parent company, offer services to its customers and enter into transactions and conclude agreements in the name of the parent company. The branch company is not allowed to partake in any activities disallowed to its parent companies.
More Information about Foreign Branches:
- Activities– as a Branch Office, you are entitled to undertake the commercial activities of your parent company, although some activities are restricted (for example trading. In which case you would be required to set up as an LLC).
- Liability and tax– the Branch Office is not a separate legal entity, and therefore the foreign parent company is 100% liable for the actions of the branch and the revenue of the branch will be taxable (in the country where the relevant foreign parent is resident) as the income of the foreign parent.
- Sponsor/National Service Agent– each foreign Branch Office requires a local sponsor. The local sponsor has no equity participation or liability for the business, nor can the person represent the Branch Office or participate in its management.
- Bank Guarantee– As a foreign Branch Office, you will be required to deposit a refundable bank guarantee of AED50,000 for the duration of your licence and this cannot be withdrawn or used as working capital.