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Setting up of Holding Company in UAE

By Ananya - 18 Nov 2021 Last Updated: 06 May 2022
Setting up of Holding Company in UAE

Holding companies are legal entities that own and operate subsidiaries. While holding corporations are not permitted to engage in stand-alone economic activities like as manufacturing or delivering services, they are perfect for stock ownership, trademark and patent ownership, and the purchase of real estate and other assets.

Holding corporations in the UAE have just a supervisory structure and no active management within subsidiaries, which means they can own shares, establish systems for running activities, and profit from asset sales, service delivery, and dividends. Holding company can select a director or a board of directors to oversee subsidiary operations, set regulations, and govern the movement of money to and from subsidiaries, depending on their structure.

In the United Arab Emirates, how are business owners utilising a holding company?

Business owners are constantly looking for new ways to safeguard their assets. They've devised a number of security techniques over the course of the company's first year.

The formation of a holding company is one of the most successful means of integrating firms that operate in a variety of areas and activities.

The Holding Company may possess 100 percent of the subsidiary or only enough stocks or membership interests to exert control over it.

Holding companies are corporations or limited liability companies that do not engage in commercial trading. The holding company's subsidiaries will engage in a variety of business activities. They'd be involved in manufacturing, selling, and delivering services, as well as selling real estate and owning intellectual property.

How holding company is financed?

The Holding Company is in charge of selecting where the money should be invested. It can also raise funds by selling public equity interests in its subsidiaries.

In addition, the holding company receives money from the subsidiaries in the form of dividends, distributions, interest payments, rentals, payments for back-office operations, and Capital Investment.

What is the Purpose of a Holding Company?

Businesses of all sizes and industries employ the holding company structure. Holding firms make up the majority of publicly listed multinational corporations.

It applies not just to major corporations with several subsidiaries and enterprises operating in various industries, but also to individuals and small businesses.

An entrepreneur who wishes to invest in real estate, for example, can form a corporation and purchase the property in its name.

A holding company can own the company, and the business owner can create additional subsidiaries while keeping all of the businesses separate yet consolidated under the holding company.

Benefits of a Holding Company

Here are some of the benefits of forming a Holding Company in the UAE.

Protection from Liability

It helps to insulate the owner and the holding company from the subsidiary companies' obligations. Each subsidiary will have its own legal identity, with owners and management in charge of the company's expansion.

As a result, the holding company and other subsidiaries will be protected if one of the companies experiences a slump.

Control Assets for a Lower Cost

Without owning 100% of the shares or membership interest in the subsidiary, the holding company can exert control over it. As a result, the holding company's cost of subsidiary ownership is lower than acquiring the entire subsidiary's ownership interest.

Costs of Debt Financing are Lower

The holding company has more financial strength than the operational companies and can receive loans at a cheaper interest rate. When the subsidiary wants funding, particularly when it is a start-up, the holding company might help by distributing funds to the subsidiary.

Encourage new Ideas

The entrepreneur will benefit much from the restructuring of the company into subsidiaries and a holding company. It could aid in the routing of cash and the channelling of corporate growth without collapsing if one of the ventures fails.

It will also aid in the development of breakthroughs from research and innovation on the one hand, while revenue-generating firms thrive on the other.

Better control and a bird's-eye perspective

Because it is not focused on producing money or running a business, the holding company will be able to manage the subsidiary companies better.

Every month, the subsidiary's management will submit profits and business information to the holding company. As a result, the holding company will have a bird's-eye perspective of what's going on in the subsidiary and will be able to take swift remedial action if necessary.

Read More: Benefits of Private Shareholding Company Formation in Dubai

Why is the United Arab Emirates such a popular site for holding companies?

Holding companies in the UAE have attractive options for real estate ownership and keeping stakes in other corporations thanks to UAE corporate legislation. Starting a holding company in the UAE has a number of benefits, including banking benefits, asset security, and administrative savings.

The following are some of the key advantages of implementing a holding structure in the UAE:

Obtaining a residency permit

Obtaining a Resident Visa in the UAE is as simple as owning a property through a holding company. Investors can get a visa with a 10-year validity period, as well as the new UAE Golden Visa.

Tax advantages

Starting a holding company provides a benefit over individual business ownership because corporate income, capital gains, and dividends are all tax-free. For holding businesses that leave the UAE, there is no tax on income received abroad. Because holding corporations in the UAE are exempt from income tax, using this structure to keep assets elsewhere and earn dividends / income in the UAE might save money on taxes.

Various ownership options

Distributing your ownership among multiple companies as branches or franchises in diverse industries gives for improved investment options, decision flexibility, and risk mitigation. It also provides anonymity and reduces personal risk, especially when an individual has a large number of investment assets, because the assets are kept by the corporation rather than the individual. Depending on the Emirate the holding company is established in, different ownership choices are available, such as ADGM, DIFC, RAK, IFZA, and JAFZA.

Banking Made Simple

Most holding companies can issue resident visas to their shareholders; however, the UAE resident visa for directors and managers can be obtained in other ways, such as by establishing an operational firm in the UAE. The process of opening a corporate bank account is made significantly easier when a manager/director or shareholder has a UAE residency visa. All corporate banks in the UAE offer user-friendly internet banking platforms that enable funds to be accessible from anywhere in the world.

Management of Human Resources and Legal Structure

Legal changes can be easier to coordinate across subsidiaries with holding companies. Employees can be positioned more efficiently to better utilise their skills, making the human resources role easier.

From opening bank accounts to completing the essential paperwork to deciding on the best ownership structure, location, and jurisdiction, we've got you covered.

Forming a holding company in UAE

Holding corporations must have a management board that defines and organises the rules and regulations for the subsidiaries, oversees all of their activities, and sets restrictions to prevent market risk, such as foreign exchange exposure, under Dubai law. In order to function effectively, each subsidiary must have its own director and the appropriate resources. The holding body is in charge of negotiations and terms of agreements.

There are two ways to structure a holding company:

  • ADGM, DIFC, DMCC, RAK, and JAFZA are some of the UAE Freezones.
  • Dubai, Abu Dhabi, and the other Emirates are located on the mainland of the United Arab Emirates.

In free zones and onshore, foreign owners can have 100 percent ownership or share 51 percent of the business with local owners, depending on where the holding company is set up - Mainland vs. Free zone, Dubai vs. Abu Dhabi, for example.

Procedure for Registering

In order to register a holding company in the UAE, you must do the following:

Location

It is critical to choose the right place and jurisdiction, and it is strongly advised to do some preliminary research.

One of the most appealing places to form a holding company is Dubai's international financial centre (DFIC). DIFC allows holding corporations to hold assets both locally and globally as a prominent commercial hub. The following are some of the advantages of forming a holding company in DIFC:

  • 100% ownership is guaranteed.
  • Banks and other international financial institutions have long used this location.
  • For the next 50 years, there will be no income, capital, asset, or profit taxes (except for 5 percent VAT tax).
  • In the region, the funding environment is considered as the best.
  • Professional services of the highest calibre.
  • There will be no capital repatriation.
  • The location is ideal for emerging markets.
  • Within the zone, there is common law jurisdiction and courts.

The Abu Dhabi Global Market (ADGM) is the city's main financial freezone. In addition to owning real estate properties, holding corporations in ADGM can include assets from the UAE, the GCC, and the rest of the world.

Holding companies in ADGM can take advantage of a number of benefits, including:

  • A regulatory and legal structure that is both engaging and enticing to businesses.
  • Taxation system that is favourable.
  • The zone's common law jurisdiction and courts are based on British common law.
  • Independent and unique jurisdiction written in English with English Law as the default in the event of ambiguity.
  • A diversified environment for legal and financial services with cutting-edge service quality.
  • The world economy's epicentre, connecting corporate networks in the Middle East, Africa, and South Asia.

Registration Requirements

Using a competent company formation organisation with excellent links inside government authorities, such as Dhanguard Group, can speed up the registration procedure for the holding company.

It's worth mentioning that omissions or errors in your application can cause the application process to be delayed. As a result, partnering with a company formation expert throughout the registration phase is recommended.

Conclusion

In a nutshell, forming a holding company benefits the corporation in a variety of ways. A holding business enjoys the same advantages as a Free Zone/Mainland Company. The Free Zone enterprise will be owned entirely by the entrepreneur. Capital repatriation and the employment of foreign nationals are both unrestricted. There are no corporate or personal income taxes, safe company ownership, and a slew of other commercial advantages for shareholders to protect their subsidiaries and share capital. Talk to one of our expert business advisers at Dhanguard right immediately if you want to learn more about forming a holding company in the UAE.

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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