Expanding your business to Abu Dhabi can be a game-changer, given its strategic location, booming economy, and investor-friendly regulations. One of the most effective ways for foreign and local businesses to establish a presence in the emirate is by obtaining a branch license. A branch office allows companies to operate in Abu Dhabi without forming a separate legal entity, making it an attractive option for many entrepreneurs and corporations. In this blog, we’ll explore what a branch license in Abu Dhabi entails, its benefits, requirements, and the step-by-step process to obtain one.
What is a Branch License?
A branch license allows an existing company—whether local or foreign—to establish an extension of its business in Abu Dhabi. Unlike subsidiaries, branch offices are not considered separate legal entities; instead, they operate under the legal umbrella of the parent company. This setup enables businesses to leverage their existing reputation, expertise, and resources while expanding into the UAE market.
There are different types of branch licenses in Abu Dhabi, including:
- Foreign Branch Office: An extension of a company incorporated outside the UAE, permitted to conduct business in Abu Dhabi.
- Local Company Branch: A branch of a UAE-registered company looking to expand operations into Abu Dhabi.
- Free Zone Branch: A branch of a company already operating in a UAE free zone but intending to conduct business in Abu Dhabi.
- GCC Company Branch: A branch of a business registered in a Gulf Cooperation Council (GCC) country.
Each type has specific regulations and benefits, making it essential to choose the right one for your business needs.
Benefits of Establishing a Branch Office in Abu Dhabi
Setting up a branch office in Abu Dhabi offers numerous advantages, including:
- 100% Foreign Ownership: One of the biggest perks of opening a branch office in Abu Dhabi is that foreign companies can retain 100% ownership without needing a local partner. This makes it easier for international businesses to enter the UAE market while maintaining full control.
- Access to a Thriving Economy: Abu Dhabi is the capital of the UAE and one of the wealthiest cities globally, with a robust economy driven by oil, gas, real estate, tourism, and finance. Having a presence in this strategic location opens up vast opportunities for businesses across various industries.
- Reduced Setup Costs: Compared to setting up a subsidiary or a new company, a branch office requires lower capital investment since it operates under the financial and legal framework of the parent company.
- No Corporate Tax: Currently, the UAE does not impose corporate taxes on most businesses (except for certain sectors such as oil and banking). This tax-friendly environment makes Abu Dhabi an attractive destination for international companies.
- Ability to Trade in the UAE Market: Unlike free zone companies, branch offices can conduct business directly in the UAE mainland, making them ideal for companies looking to serve local customers and secure government contracts.
- Simplified Banking and Compliance: Since a branch office is an extension of the parent company, banking processes and financial compliance become more streamlined compared to establishing a new entity.
How to Obtain a Branch License in Abu Dhabi
The process of obtaining a branch license involves several steps. Below is a step-by-step guide:
Step 1: Obtain Initial Approval: The first step is to secure initial approval from the Department of Economic Development (DED) in Abu Dhabi. This approval confirms that your business activities align with local regulations.
Required Documents:
- Application form
- Parent company’s Certificate of Incorporation
- Memorandum and Articles of Association (MOA)
- Board resolution approving the branch setup
- Passport copies of the company’s directors
- Business plan outlining proposed activities in Abu Dhabi
Step 2: Appoint a Local Service Agent (LSA): Foreign companies setting up a branch office must appoint a Local Service Agent (LSA), who will act as a liaison with government authorities. The LSA does not hold any ownership but is required for licensing purposes.
Step 3: Register with the Ministry of Economy: The branch office must be registered with the UAE Ministry of Economy (MoE) before obtaining a full business license.
Additional Requirements:
- A bank guarantee of AED 50,000 in favor of the Ministry of Economy
- A service agreement with the Local Service Agent
Step 4: Secure a Business License: After MoE registration, the business must obtain a branch license from the DED. The type of license depends on the business activities permitted under the parent company.
Step 5: Obtain Additional Approvals
Certain industries, such as finance, healthcare, and legal services, require special approvals from relevant regulatory bodies such as the Central Bank of the UAE, the Department of Health, or the Legal Affairs Department.
Step 6: Office Space & Trade Name Registration
To finalize the licensing process, the branch office must:
- Rent a physical office space in Abu Dhabi
- Register a trade name with the DED
Step 7: Final License Issuance: Once all approvals are obtained, the final branch license is issued, allowing the company to commence operations legally.
Conclusion
A branch office is a cost-effective and efficient way for local and foreign businesses to expand into Abu Dhabi. With 100% foreign ownership, no corporate tax, and access to a lucrative market, setting up a branch in Abu Dhabi presents significant advantages. However, the process involves multiple legal and administrative steps, requiring thorough planning and adherence to regulatory requirements.