Once a business has reached a certain degree of maturity, it is common for the owners to expand it on foreign markets. However, in order to make that transition easier, it best to operate under a liaison office.
Foreign companies wanting to have an established presence in Dubai without undertaking separate commercial activities can opt for branch offices or liaison offices, also known as representative offices. While the branch office is allowed to carry out the same activities as the parent company, the representative office will only act as a communication channel between the parent company and its partners or customers in Dubai.
Foreign companies are required to appoint a local agent when opening a liaison office in Dubai.
Below, our company formation consultants in Dubai explain the procedure related to opening a representative office. We can help you set up such a structure which can later be transformed into a subsidiary or branch office in Dubai.
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The representative office under the Company Law in Dubai
The liaison office is recognized by the Dubai Company Act as a business form whose core activities are completed for non-commercial purposes.
The main activities of a Dubai liaison office are:
- to promote the parent company’s services or products on the Dubai market and to attract clients;
- to conduct marketing activities or surveys and to report to the parent company on the opportunities in Dubai,
- to carry out non-transactional activities, such as gathering information on the Dubai market;
- to represent the foreign company in relation to potential clients and business partners in Dubai;
- to act as a contact point between the foreign company’s clients and partners, if any.
The essential aspect to consider when opening a representative office in Dubai is that it cannot engage in any commercial activity which is why it is recommended for the foreign company to transform it into another type of structure if it decides to operate in the Emirate.
We can also help foreign investors who want to open a company in Dubai and thus start operating directly as a commercial entity.
Requirements for opening a liaison office in Dubai
The requirements related to establishing a Dubai liaison office are nearly the same as when opening a branch office. The first thing to consider when deciding to open a liaison office is to appoint a local agent who completes the registration procedure with the Dubai Trade Register. This is actually a mandatory requirement for company registration in Dubai, no matter the type of structure chosen.
Among the requirements which need to be fulfilled when opening a representative office in Dubai is depositing a guarantee of 10,000 AED with a local bank. The guarantee will be returned once the office ends its activities in Dubai.
It is necessary to have an address registered with the Department of Economic Development when opening a representative office.
There are no licensing requirements when it comes to opening a liaison office in Dubai.
Our Dubai company formation specialists can help you if you want to change the business form of your company in the Emirate.
If you are interested in opening a representative office in Dubai, this video presents the steps and requirements to do so:
How to open a liaison office in Dubai?
Once appointed the local agent, the representative office registration procedure can begin. The first step is to submit an application with the Dubai Department of Economic Development (DED), which is the equivalent of European commercial registers and obtain a business name for the liaison office. The second step is to file an application with the Ministry of Economy for the settlement of the liaison office. Once the Ministry of Economy allows the registration of the representative office, the local agent must return to the DED and submit several documents.
Documents related to opening a representative office in Dubai
The documents the local agent must file with the DED and the Ministry of Economy are related to the parent company. These are:
- the Certificate of Incorporation of the parent company,
- the parent company’s audited balance sheets from the last two years,
- a statement issued by the parent company’s management authorizing the establishment of the Dubai liaison office and appointing a manager,
- a copy after the manager’s identification papers,
- a statement with the company’s objects of activity.
The notarized agreement between the foreign company and the local agent together with the agent’s identification documents must also be submitted. It must also be taken into consideration that a liaison office may have up to four employees.
The main benefits of opening a Dubai representative office
Even if it does not allow a foreign company to undertake any commercial activity in Dubai, the liaison office has various benefits. Among these, we can mention the following:
- the opening of such an establishment does not imply any financial risks for the parent company;
- the liaison office is not subject to any corporate or income taxes, under Dubai’s legislation;
- the representative office can have a bank account in Dubai without any special requirements;
- it offers full foreign ownership even if it is established in Dubai mainland (compared to companies registered here);
- it is one of the most flexible types of structures when it comes to management and privacy.
The representative office can be set up in approximately 10 working days after all the documents are submitted with the authorities.
If you need more information on the benefits of representative offices, our local advisors are at your disposal with full information.
When to change the liaison office into another business form?
At a certain point, the representatives or managers of foreign companies opening liaison offices in Dubai will need to consider whether they will keep the office running, change it into another business form or simply close it. The non-commercial activities of a foreign company operating through a representative office can be turned into commercial ones by setting a branch office once the parent company has decided that the Dubai market suits its objectives.
When having to choose between opening a representative office and a branch office, our agents recommend you select the branch office thanks to the performant economy of Dubai which:
- grew by 1.94% in 2018 and expected to end 2019 on a positive note with an increase of 2.1%;
- 2020 is also expected to bring a Gross Domestic Product growth of up to 3.8%;
- real estate is expected to remain the most important industry in Dubai, with an annual increase of 3.65%;
- logistics and transportation, tourism and financial services are also expected to grow by 3.1%, 2.8%, respectively 2.4%.
If you need assistance in drafting the documents required to open a representative office, do not hesitate to contact our company registration agents in Dubai.