Foreign Branch Office: An Overview
A Foreign Branch Office in the UAE is a registered company that is an extension of the foreign parent company. It is not a separate legal entity from the foreign parent company, and therefore, its commercial activities must remain the same as those of the parent company. It must obtain a trade licence with the same name and for the same activities its parent company carries out. The purpose of the foreign branch office is to sell the parent company’s products and offer services to its customers.
Setting Up a Foreign Branch Office in the UAE
A branch office of a foreign company set up in the UAE can be 100% foreign-owned, provided a local service agent is appointed. Here is the step-by-step process for setting up a Foreign Branch Office in the UAE.
Step 1: Appoint a Local Service Agent
- The foreign company must appoint a local service agent that is either a UAE national or a company owned 100% by UAE nationals.
- The local service agent will then complete the trade name registration with the Department of Economic Development (DED).
Step 2: Obtain Approval from the MOE
- The application for obtaining approval from the Ministry of Economy (MOE) includes the details of the company i.e., head office, nature of the business, share capital, the name of the general manager in UAE, etc. along with the mandatory documents, such as:
- Memorandum of Association (MOA)
- Article of Association (AOA)
- Certificate of Incorporation
- Parent Company’s Good Legal Standing Certificate
- Board Resolution stating the formation of a Branch Office
- Power of Attorney in favour of the General Manager, giving him the rights to operate and manage bank accounts on behalf of the parent company.
Step 3: Obtain a commercial licence from the DED
- The MOE will issue the initial approval letter to either Abu Dhabi Department of Economic Development (ADED) or Dubai Department of Economic Development (DDED). The required documents include:
- MOE initial approval
- Copies of documents submitted to MOE
- Copy of proposed lease in UAE (known as “Tawtheeq” in Abu Dhabi and “Ejari” in Dubai)
- Engagement letter from a locally registered UAE auditor confirming company existence and two-year financial statements of the parent company.
- The commercial licence issued by the DED is valid for one year and can be renewed annually.
Step 4: Acquire Office Space, Visas, Bank Accounts
- Once the commercial license is obtained from the DED, the company can invest in office space and acquire visa and labour cards for employees.
- You also need to open bank accounts. The banks will require complete UBO information on the Parent company and additional corporate and shareholder structures within the Parent company.
- All foreign documents will need to be attested, legalised, and translated for use in the UAE.
Step 5: Ministry of Economy (MOE) Registration:
- The MOE registration is key to setting up a foreign branch office in the UAE. After obtaining the Foreign Branch Trade Licence from the DED, you need to complete the full registration process with associated registration fees payment and obtain the MOE Licence within one month. If the MOE registration process is not completed within one month, you will be liable to pay a fine of AED 1,000 monthly with a maximum limit of AED 10,000 annually.
- The MOE registration is an online process. It requires the company to register and obtain a user name and password and upload the requested documents via the portal. The following are some of the key requirements for the MOE registration process:
- Bank Guarantee: Each Foreign Branch is required to pay a refundable Bank Guarantee deposit of AED 50,000 to the Ministry of Economy through a local UAE bank. This deposit cannot be withdrawn or used as working capital and is held for the duration of the licence.
- Appointing a local-based Auditor: You must appoint a UAE-based certified accountant to prepare a balance sheet and present annual final accounts of branches while renewing entry at the Ministry of Economy. If the foreign company has several branches, then the auditor shall present a combined balance sheet.
Conclusion:
Setting up a Foreign Branch Office in the UAE is an attractive proposition for businesses but can be complex, cumbersome, and time-consuming. Moreover, leaving the process incomplete can be a costly oversight. That is why it is best to seek professional help from reliable business setup consultants like Creative Zone.
We offer a hassle-free solution, taking care of the processes and the documentation required for setting up your foreign branch office in the UAE. We can also act as the Local Service Agent for the foreign branch office. If you would like any assistance, please call us at 800 LICENSE (5423673) to arrange a consultation with one of our business setup advisors today.
