The most significant commerce and business hub in the Middle East is Dubai. The emirate is a desirable place for international traders to open a business since it provides significant tax benefits to business. Investors need to choose the right corporate structure when conducting business in Dubai.
The branch and the subsidiary are two legal entities that are most frequently used by international businesses. Understanding the distinctions between a firm branch and a subsidiary in Dubai might be essential for your business objectives, since each has unique characteristics of its own.
Branch in Dubai
A branch in Dubai needs to have a Department of Economic Development (DED) registration. Certain prohibited activities, such operating restaurants or commercial agencies, are prohibited for this corporate structure. The branch is only allowed to carry out tasks that are comparable to those done overseas by the parent firm. It is closely connected to the initial corporation and does not exist as a distinct legal entity. As a result, the parent business located overseas is responsible for the debts and liabilities of the branch and needs to designate a representative to oversee its operations in Dubai.
Registration Paper Work
Foreign investors need to submit a number of paperwork:
Subsidiary in Dubai
In Dubai, a subsidiary is a distinct legal entity from the parent business. In contrast to a branch, this implies that the foreign company will not be held accountable for the activities of the subsidiary. The subsidiary will be headquartered in Dubai, and management operations will be carried out there as well. This kind of legal organization needs to have the required permits for operation and employing staff, as well as abide by Dubai’s tax regulations.Foreign employees of a subsidiary company in Dubai can also obtain residency, facilitating immigration to Dubai.
The following table represents a comparison between the two entities which are available for business in Dubai for both domestic and foreign investors:
Metrics | Subsidiary | Branch |
|---|---|---|
Definition | Separate Legal Entity | It performs the same business activity of the parent company |
Reports to | Holding Company | Head office |
Activity | As per the holding company or any other | Same as Parent Company |
Separate Legal Entity | Yes | No |
Account Maintenance | Separately | Jointly or separately as per Parent company decision |
Ownership Interest% | Wholly owned by the parent company | 100% ownership in the branch |
Obligations | Limited to the subsidiaries and the regulations of UAE | Extends to the parent company |