In today’s interconnected world, businesses are increasingly seeking to expand their reach beyond borders, tapping into new markets and opportunities for growth. One effective strategy for international expansion is establishing a subsidiary company setup in Dubai or in a strategic location that offers a favorable business environment.
Establishing a subsidiary company in a strategic location like Dubai, UAE, can be a powerful step towards international expansion. But what exactly is a subsidiary company, and why is setting one up in Dubai so advantageous? Let’s understand.
What is Subsidiary Company?
A subsidiary company is a distinct legal entity that is owned and controlled by another company, referred to as the parent company. While the parent company holds majority ownership, the subsidiary operates independently, managing its own assets, liabilities, and business activities.
A branch and a subsidiary are both business entities that are owned by another company. However, there are some key differences between branch and subsidiary in UAE. A subsidiary is a separate legal entity that is owned by another company, known as the parent company. Branches are not separate legal entities and are considered extensions of the parent company.
Establishing subsidiary companies plays a crucial role in international expansion, enabling businesses to:
1. Risk Mitigation
Subsidiaries limit the parent company’s liability to the subsidiary’s assets, protecting the parent company from potential financial risks in the new market.
2. Local Presence
Subsidiaries establish a local presence in the new market, enabling the company to better understand and cater to the needs of local customers and partners.
3. Tax Advantages
Depending on the location, subsidiaries may enjoy tax benefits, such as lower corporate tax rates or tax exemptions.
4. Compliance and Regulatory Ease
Subsidiaries simplify compliance with local laws and regulations, as they are treated as domestic companies.
5. Talent Acquisition and Retention
Subsidiaries facilitate the recruitment and retention of local talent, allowing the company to tap into the skills and expertise of the local workforce.
Why Choose Subsidiary Company Setup in Dubai
Dubai’s strategic location, coupled with its business-friendly policies and infrastructure, has transformed it into a global hub for international business. Several factors contribute to Dubai’s attractiveness as a destination for subsidiary companies:
- Dubai lies at the crossroads of Asia, Europe, and Africa, offering easy access to major markets and transportation routes.
- Dubai’s government actively promotes foreign investment.
- Dubai is among the most tax-friendly countries for the entrepreneurs, offering tax incentives, free zones, and streamlined regulatory processes.
- The city has world-class infrastructures including transportation networks, financial institutions.
- Dubai’s diverse population provides a pool of skilled and experienced professionals from around the globe.
- Dubai maintains a stable political and economic environment that ensures long-term growth prospects.
How to Setup a Subsidiary Company in Dubai?
Expanding your business to Dubai can be a strategic move towards global success. However, the process of setting up a subsidiary requires careful planning and adherence to local regulations.
Prerequisites
- Determine your business activity and legal structure, such as a limited liability company (LLC), which is the most common option for foreign investors.
- Choose a Suitable Location including Mainland and Freezones. Each location has its own regulations, tax implications, and business restrictions. Select the location that aligns with your business objectives and target market.
Here’s a simplified process of subsidiary company setup in Dubai:
1. Initial Approval and Name Reservation
Submit an initial application to the DED, providing details about your proposed subsidiary company. Once initial approval is granted, reserve a unique trade name for your subsidiary company, ensuring it complies with naming regulations.
2. Register Your Subsidiary with the Department of Economic Development (DED)
After obtaining initial approval, you can proceed to register your subsidiary with the DED. This involves submitting the required documents such as passport copies of shareholders and directors, MOA (if applicable), etc.
Upon successful registration, you will receive a trade license, which authorizes your subsidiary to operate in Dubai.
3. Open a Corporate Bank Account
To manage your subsidiary’s finances, you need to open a corporate bank account in Dubai. Several local and international banks offer corporate banking services in Dubai. Choose a bank that aligns with your business needs and provides competitive banking solutions.
4. Secure Visas
Apply for visas for shareholders, directors, and employees who will be working in Dubai.
5. Arrange Office Space
Find a suitable office space to accommodate your subsidiary’s operations. Dubai offers a variety of office options, from shared workspaces to serviced offices and leased commercial spaces.
6. Tax Implications
Be aware of the tax implications for your subsidiary company in Dubai, including corporate tax, withholding tax, and value-added tax (VAT).
Please note that depending on the activities that your subsidiary will be carrying out, you may need to obtain additional permits and licenses.
Subsidiary company setup in Dubai can involve complex legal and regulatory procedures. It is advisable to seek guidance from experienced business consultants in Dubai like Shuraa who can assist you with the process, ensuring compliance with all requirements and maximizing your chances of success.
What is the Cost of Setting up a Subsidiary Company in Dubai?
The average license cost of setting up a subsidiary company in Dubai generally starts from AED 25,500. However, the cost varies depending on several factors, including:
- Type of business structure
- Nature of your business
- The number of visas required
- Location of your office
- Additional licenses and permits
Besides the license costs, there are other costs involved such as:
- Visa cost
- Legal documents cost
- Office space rent
- Bank account opening fees
- Furniture and equipment cost
- Accounting and tax registration fees (If applicable)
To get the actual cost of establishing subsidiary company in Dubai, get in touch with the business setup advisor at Shuraa Business Setup.
Get in touch with the business setup advisor like Shuraa Business Setup to get the actual cost to establish a subsidiary in Dubai.
Taxation of Subsidiaries in Dubai
As of July 1, 2023, a new corporate tax regime has been implemented in the United Arab Emirates (UAE), including Dubai. This new regime applies to all businesses operating in the UAE, including subsidiaries of foreign companies.
Under the new regime, the corporate tax rate is set at a flat rate of 9% for taxable profits exceeding AED 375,000. However, there are certain exemptions and deductions available, which can reduce the effective tax rate for some businesses.
Final Steps for Your Dubai Venture with Shuraa Business Setup
Establishing a subsidiary company in Dubai presents a compelling option for businesses seeking to expand their global footprint. Without a doubt, Dubai offers a pool of opportunities for growth and expansion.
The process of setting up a subsidiary company in Dubai may seem complex, but with careful planning and expert guidance, it can be navigated smoothly and efficiently. Shuraa Business Setup, a leading service provider of company formation in Dubai, offers expert assistance to businesses throughout the entire process, ensuring compliance with all regulations and maximizing the chances of success.
From initial company registration to comprehensive PRO services, Shuraa Business Setup provides a one-stop solution for all your business establishment needs.
Connect with us today – Phone: +971 44081900, WhatsApp: +971 507775554, Email: [email protected].
Seize the opportunities that Dubai has to offer and let Shuraa be your guide to a successful business venture in the heart of the UAE.
