UAE provides one of the world’s best business opportunities for businesses around the globe. It is the reason that international companies prefer UAE for having their presence than any other place in the Middle East region. There are several business fields in UAE for small foreign entrepreneurs and large investors alike. But setting up a company in UAE mainland has few disadvantages also especially in the case that they have to take assistance from local sponsor who has 51% shares in the company. A simple way to avoid this condition is by setting up a branch or representative office of a foreign company. Both these offices are treated just as an extension of a foreign corporation.
What is branch/representative office
Availability of new foreign-investment friendly laws in UAE from time to time makes it easier for foreign investors to take advantage of these rules. Though the process of setting up either a branch office or representative office is quite similar but both these offices are different in their working. Branch office can engage in commercial activities and can earn profit while representative offices are only allowed to market products and services of their parent organization.
The similarities between both these offices include commercial registration, license in the name of foreign company, requirement of local service agent and similar registration process.
Following is the step by step complete procedure for establishment of both branch office and representative office of a foreign company in UAE.
Step 1 – Local Service Agent (LSA):
In contrast to the registration of a company in UAE where local sponsors are required, the branch or representative office would need services of a local service agent (LSA). The LSA is either a UAE national or a company wholly owned by nationals of UAE.
The LSA has nothing to do with ownership, management and operations of branch/representative office. Instead it takes fee for its role in administrative functions that include license, visa, permits etc.
Both parties (branch/rep. office and LSA) will sign a written agreement for appointment of LSA. As there is no prescribed form of agreement, they can do so after negotiating.
Step 2 – Initial Application in DED:
After the appointment of the LSA, the second step is to submit application for trade name reservation and initial approval of branch/representative office of your company. This application will be submitted in the Department of Economic Development (DED) of the relevant Emirate where you are willing to setup branch/representative office.
Step 3 – Approval from MOE:
After initial approval from DED, you will now seek approval from the Ministry of Economy (MOE). For this purpose, an application will be made to the ministry. This application will comprise following details.
- Trade name reservation certificate and initial approval from DED
- Certificate of incorporation, certificate of good standing, memorandum & articles of association and other corporate documents
- Audited accounts of the parent organization of the past two years
- Notarized agreement with the LSA (local service agent) and the LSA’s identification (or corporate) documents
- Board resolution authorizing the opening of branch/representative office, accepting responsibilities for liabilities of the established office in UAE, appointing general manager and granting power of attorney to the GM
- Copy of the general manager’s passport and the power of attorney in favor of GM according to the board’s resolution
- Statement regarding company’s main operations and its intended activities in the UAE
After initial approval by MOE, few documents on hard copy will be submitted that will include:
- Application form
- Parent company’s incorporation certificate
- Local bank deposit certificate
- Initial approval by MOE
After submission of these documents, the MOE will approve the establishment of branch/representative office. This will complete the 3rd step.
Step 4 – Issuance of Commercial License by DED:
The formal approval by the MOE will be issued to the DED of the respected emirate. In the next step, the applicant will be required to submit application to the Abu Dhabi DED or Dubai DED according to the situation. Along with all the previously submitted documents to the MOE, the new application will also include the proposed office address in the UAE.
Following are few important additional documents that must accompanied the application to DED.
- Undertaking from the foreign parent company
- A copy of the planned lease in the UAE
- The MOE approval obtained after the step 3 along with approvals from all the other respective authorities
- A letter from a UAE auditor confirming the financial statements of the company for the past two years before the submission of application
In the end, the respective DED will issue a commercial license to branch/representative office which is valid for 1 year and can be renewed annually.
Step 5 – Administrative Tasks:
After the issuance of commercial license, the foreign company will complete different administrative tasks including obtaining visa & labor cards for its employees, lease for office space and opening bank accounts.
Step 6 – Registration with Chamber of Commerce & Industry:
The last step for process of opening branch/representative office of a foreign company is the registration of the office with Chamber of Commerce & Industry (Abu Dhabi, Dubai or any other relevant emirate). You will be required to complete an application and provide copies of commercial license, office lease agreement and passport copies of the authorized signatories of the branch/representative office. The procedure is almost same in all the emirates.
The MOE fee is same in all the circumstances but there is difference in fee of other processes in various Emirates. The fee rate is different in different emirates. According to the activities to be carried out in UAE, the fee for commercial license may also vary.
Notarization and translation of documents:
All the documents listed above will have to be presented in the foreign ministry of the country where the company is incorporated. There, the authenticity of the documents will be checked.
Another thing that is necessary is to translate these documents in Arabic language before presenting them to the authorities in UAE. This translation will be done by an official translator.
The notarization process takes lot of time and it should be started as early as possible. The process can be delayed if the UAE embassy is not located in the country of incorporation of the company.
- Each emirate has different formalities and procedures. This article mainly deals with representative/branch office in Dubai and Abu Dhabi as they are the most well-known locations for business activities. But there are few procedures that are also separate in both these emirates also. Consequently, the time needed for incorporation of branch/representative office in different emirates may be different
- Application process in few emirates has gone online. Now the applications can be submitted on the websites of MOE and other relevant departments
- Dubai has relaxed its rules a bit. There is a possibility that one can also obtain a four year license on special request if it is accepted
If you are willing to setup representative / branch office of a foreign company in Dubia and any other emirate of UAE, then we at Riz & Mona Consultancy are here to assist you as we are specialists in conducting such business activities.