Business is good. In fact, business is doing so well that you’re finding it necessary to open up another office. A branch office would allow you to take on more clients, expand to new markets, and secure your company’s future in the industry. But instead of a branch office in the same country, Dubai may be a better location.
Why Set Up Your Business in Dubai?
Setting up a branch office in Dubai will cost money, but the benefits may outweigh what your company will spend on company formation services, office lease, business licenses and permits, and government fees.
For one, you can establish the office in one of many free zones in the city. Free zones are economic zones with rules and regulations that are business- and investor-friendly. When you set up in the free zone, you retain 100% ownership of the company even as a foreigner.
For another, Dubai has favorable tax policies. From a tax perspective, a branch setup provides the same benefits as local companies, including the ability to repatriate profits without any extra charges when established in Dubai free zones.
Although you will be taxed only on the income you earned in the emirates, a corporate tax of 9% will now apply if your profits go over AED 375,000. Income below this amount will not be taxed. The law took effect on June 1,2023.
The Dos and Don’ts of Setting Up Your Branch Office
A business set up in a Dubai free zone comes with substantial benefits for your company, but it must be done right to deliver on them.
What are some of the things you need to avoid to successfully set up a branch office in Dubai?
1. Don’t set up a branch office on your own.
Although you don’t need to be in the UAE to set up a branch office, you do need to appoint a National Service Agent (NSA) or Local Service Agent (LSA) to complete the trade license and acquire the branch office license. This appointment is a legal requirement.
The NSA or LSA will act as an intermediary between your branch office and the government. The NSA has no financial obligation to your branch office. Its function is purely administrative as it’s responsible for applying and receiving you branch’s license, permits, visas, immigration, and other approvals to complete
2. Don’t overlook legal and regulatory compliance.
UAE laws and regulations are complex. Failure to comply can mean legal sanctions, hefty fines, and suspension of your business activities.
Before initiating your branch office setup, learn the legal and regulatory requirements. For example, Article 314 of the Commercial Companies Law states that a branch office must operate and have the same activities as the parent company. If your business provides services, the branch office must provide the same services.
Because the branch office is part of the foreign company and not a separate legal entity, your business will be liable for the obligations or debts of the branch office.
3. Don’t neglect strategy.
It is important to set out your goals and how you will get there before you begin to consider setting up a branch office. At this stage, you need to invest time and resources into the process. And that includes knowing the market, competitors, and the location of your branch.
You’ll want to establish a robust presence in Dubai, which means customizing your marketing strategies for the new market. How do you foster brand awareness and develop brand loyalty in the UAE? What do you need to drive sustainable growth?
Your new office will be thousands of miles away, so it needs to follow a strong plan to meet business objectives and support the parent company’s revenue goals.
4. Do think about a long-term commitment.
Your branch setup may only be part of a short-term plan to secure a contract with the government or explore new bids to tender. But Dubai presents numerous opportunities for businesses, so there is potential for a long-term commitment if you have the resources to support it.
5. Do set clear goals.
Your branch office in Dubai aims to expand the business to new markets and new partners. But before working with an NSA or LSA, be specific about what that expansion means.
Consider the following concerns:
● Your strategy for setting up in one of the free zones and working with a local team
● The desired long-term outcomes
● How you will measure the success of the project
● Timeframes
6. Do set a realistic budget for your branch office setup.
A new office setup is rarely cheap, more so for an overseas branch. Instead of worrying about the cost, know how much investment is necessary.
A typical budget for setting up a business office in the UAE runs from AED 20,000 to AED 30,000. The figure goes up or down, depending on your requirements.
7. Do be selective about your company formation consultant.
A business setup is always going to be complex, no matter the location. Dubai, and the rest of the UAE, does make it a bit easier with investor-friendly policies. The process, however, can still be daunting.
It’s wise to work with a company formation consultant who can take you through the process, ensuring you don’t overspend while meeting your objectives.
When your business is doing well, an expansion makes sense to stimulate further growth. Make sure your expansion plan in Dubai has a clear strategy so that it delivers on expectations. Learn the rules and regulations that govern your industry. And work with the right consultant that will simplify the entire process.
