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How to Establish a Subsidiary Company in UAE?

By Ananya - 22 Nov 2021 Last Updated: 06 May 2022
How to Establish a Subsidiary Company in UAE?

Dubai is the UAE's most major commerce network, with a large number of businesses in a variety of industries. Dubai's legislation encourages free commerce, making it one of the UAE's most appealing cities for foreign investors. Onshore firms can be established within the Emirate or in one of its freezones.

Many overseas corporations open branch offices or subsidiaries in Dubai to establish a presence. The key distinction between a branch office and a Dubai subsidiary is the latter's independence. While the subsidiary will be linked to the parent firm, it will be able to run its own activities in Dubai.

Our experts can assist individuals who want to establish a subsidiary in the UAE due to their extensive understanding of company creation in Dubai.

Characteristics of Dubai Subsidiary Companies

Foreign corporations seeking a presence in Dubai will choose a subsidiary since it is a legally autonomous company that operates under the rules of the UAE and the Emirate in which it is based. In contrast to a branch office, which is not recognised a legal autonomous structure, the parent firm of a subsidiary might elect to complete other activities through a Dubai subsidiary, which can significantly improve revenues.

Even though the subsidiary is treated as a separate entity, the foreign corporation will operate as a shareholder and hence have decision-making authority over it.

Those looking to establish subsidiaries in the UAE should keep the following in mind:

  • The subsidiary will operate independently under one of the company structures covered by UAE and Dubai legislation.
  • The most common types of structures for subsidiaries in Dubai are private and public businesses.
  • A foreign firm can set up a subsidiary in a Dubai free zone by forming a free zone company.
  • The subsidiary will be subject to Dubai's tax laws, which will benefit both the local and parent companies.
  • The subsidiary may benefit from additional protection as a result of the UAE's double tax treaties.

The same rules apply to foreign firms as they do to foreign citizens when it comes to registering a subsidiary company in Dubai.

Share Capital requirements for a Subsidiary in Dubai, United Arab Emirates

One of the most significant advantages of establishing a Dubai subsidiary is the difference in share capital requirements between mainland firms and free zone entities. From this perspective, it's vital to note that free zone authorities will frequently impose differing share capital limits.

It's a good idea to do some study on the free zone where you'll be establishing a subsidiary in the UAE. It's also crucial to realise that each free zone focuses on one or more industries.

If you are considering establishing a subsidiary of your international firm in Dubai, our experts can provide all of the necessary assistance.

Steps to for a Subsidiary Company in Dubai

The Department of Economic Development requires all businesses operating in Dubai to register (DED). The first step in forming a subsidiary in Dubai is to hire a local agent to assist with the registration process.

Foreign entities are able to register subsidiaries in the form of limited liability corporations, which is one of the most common business vehicles in Dubai, under the Dubai Company Law.

To register a subsidiary in Dubai, you must do the following steps:

  • Reserving a business name
  • Gaining DED permission for the trade operations to be carried out
  • Drafting and notarizing the subsidiary's memorandum and articles of association
  • Sending information to the DED regarding the shareholders
  • When forming a subsidiary, you must also register for Vat.

The Dubai subsidiary will be required to apply for a trading licence with the Chamber of Commerce and Industry once the registration is complete.

Obtain a Dubai subsidiary's trade licence

The following documents must be submitted to the Dubai Chamber of Commerce and Industry in order to receive a Trading Licence:

Because it must have a registered office in the Emirate, the Dubai subsidiary will also need permission from the Municipality Building Department.

Creating a subsidiary Company in a free zone in Dubai

The registration of the chosen business form with the Dubai free zone authority in which the business will operate is required when forming a subsidiary company in a Dubai free zone. The fundamental benefit of establishing a subsidiary in a Dubai free zone is that there is no need for a local sponsor or partner because entire independence is permitted.

The company registration criteria for a subsidiary in a Dubai free zone are the same as for an onshore company, but the registered office of the company must be in that free zone. In this regard, all of Dubai's free zones have outstanding infrastructure for meeting the demands of small, medium, and big businesses.

Dubai's Subsidiaries Taxation

As previously stated, the subsidiary will be taxed in accordance with Dubai's legal framework. Apart from corporations in the oil and gas and banking industries, there is no corporate tax in place in Dubai at the moment.

The introduction of the value added tax and the excise tax is the only recent change in Dubai's corporate taxation.

What are the benefits of establishing a subsidiary in Dubai/UAE?

We remind you of the following reasons for establishing a business in Dubai through a subsidiary:

  • It is simple to set up and allows for complete independence, including the ability to provide services that are separate from those provided by the parent firm.
  • In terms of taxation, the repatriation of profits to foreign shareholders is tax-free in Dubai.
  • Companies from a variety of industries can establish a subsidiary because there are no restrictions in this regard.
  • Visas for agents who are no longer employed by the parent company are now easier to get.

Conclusion

The Dubai subsidiary is a legally distinct legal entity from the parent corporation. This means that, unlike the branch, the foreign corporation will no longer be accountable for the activities of the subsidiary. The subsidiary's headquarters will be in Dubai, and all managerial functions will be carried out there. If they have a UAE native business partner who owns 51 percent of the company, foreign business owners can form a subsidiary in one of the free zones or outside of them. This form of legal business will be required to follow Dubai's tax regulations and obtain the relevant licences in order to operate and hire staff. Connect with Dhanguard to know more.

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

Dhanguard provides the company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free offshore company formation services and company formation services in Mainland and Freezone in UAE.

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