Opening a branch of a foreign company in the United Arab Emirates
Many Israeli entrepreneurs and business owners now are attracted by the possibility of opening a branch of a foreign company in the United Arab Emirates. This undertaking involves an investment which is likely to pay off well, but it also requires thinking through many issues ahead of time. Decisions on how to register the business, its management, the ownership structure, and the geographical area in which it is registered – these and other issues are only part of what you must consider in opening and managing a foreign company in the UAE.
Our law offices in Jerusalem and Tel Aviv, specialize in commercial law, providing a range of legal services to Israeli and international clients. Among other services, attorneys in our office assist clients in registering and setting up companies in the United Arab Emirates and other destinations worldwide, provide ongoing legal consultation to businesses and companies, and represent clients before tax authorities in Israel and abroad. In this article, Rachel Amsalem, an immigration specialist from our office, surveys what is important to know before you set out to establish a branch of a foreign company in the United Arab Emirates.
Business in the United Arab Emirates
The United Arab Emirates, formerly off limits to most Israelis, has been transformed, almost overnight, into a leading destination for Israelis seeking to do business. The UAE’s cancellation of its economic boycott on Israel, following the 2020 peace accords, has changed the rules of the game; starting a business in Dubai or the other emirates has now become an accessible and attractive option for Israelis.
The United Arab Emirates is a potentially profitable destination for opening branches of foreign companies in a wide range of sectors. Energy (petroleum and gas), hi-tech, restaurants, and fashion are just a few of the fields that Israel and the United Arab Emirates have in common. These are fields in which Israeli businessmen are already operating successfully, and for which there is great demand in Dubai, Abu Dhabi and the other principalities in the country. Alongside the robust demand, a potential business owner should take note of the supportive government policies, as the UAE seeks to encourage the opening of businesses on its territory. Lenient taxation policy and an expeditious process of obtaining visas and business licenses have made the UAE a world leader in indices measuring ease of doing business.
Opening a branch of a foreign company vs. registering a new company in the UAE
Israelis interested in starting companies and doing business in the Emirates must make some critical decisions as early as the planning stages. These decisions relate to the type of business and the region in which the business will operate, both of which must be determined ahead of time in order to obtain the relevant license. Issuing an incorrect license is likely to cause significant problems for, as a rule, one type of business license cannot be converted into another type.
Another critical issue which demands forethought is the form of incorporation. The UAE enables various incorporation tracks for foreign businessmen and companies. A limited-liability company (LLC) can be set up in a relatively simple process. In addition to registering a new company, the United Arab Emirates offers the possibility of registering a local branch of a foreign company based in Israel or some other country.
Opening a branch requires submitting copies of the incorporation documents for the foreign company. As long as the company name is not already taken in the UAE, the companies can be linked and the registration carried out. It is important to note that a branch is permitted to operate only in the areas that the parent company does. Expansion into additional business arenas will require setting up a local company.
Another option is to set up a representative of the foreign company. Unlike a branch, a representative is not permitted to carry out business activities within the UAE, but only to market and promote the parent company.
How can you decide which registration track is best for you?
This is indeed a complex decision, depending on many parameters, including the business sector and the operations of the specific business you want to set up. The UAE significantly encourages foreign investment on its territory, but holds a policy that foreign businesses can only be started in certain fields. The full list of fields changes and undergoes periodic updates, and it is important to make sure that your field of activity appears in the current version of the list.
The division of the country into various commercial zones, which in turn affect the company’s ownership structure, is another factor that must be taken into account. We explain these zones in detail in another article published on our website. These issues require an in-depth examination and legal guidance in order to decide on the form of registration and management of the business that is right for you. You must also ensure that you are acting in accordance with the laws of the UAE, which are quite different from those in Israel.
Contact our specialists to set up a business in the UAE
For any detailed question on opening a branch of a foreign company and doing business in the UAE, you can consult with the attorneys from our law firm. The office specializes in immigration and commercial law, and assists businesspeople seeking to operate in the UAE. We work together with a leading firm in the field, located in Dubai, which is in direct contact with the local authorities. You can reach us at the telephone numbers or email address listed below.