The holding company can overlook the business operations of the subsidiary either within the UAE or overseas. With limited liabilities and 100% ownership of the subsidiary firm, this type of company is popular among foreign business owners looking to make a presence in the UAE. If you are interested in starting such a company in the UAE, here is all you need to know.

There are certain steps that you should follow to form a subsidiary company in the UAE, as per the regulations set forth by the Department of Economic Development (DED). These include appointing a well-versed local agent who completes the entire process on your behalf, reserving a company name that is both distinct and lawfully filed, obtaining approval and registering with the DED for all business activities to be pursued, notarizing all legal documents and drafting articles and a Memorandum of Association, submitting shareholder and relevant management information to the DED, and applying for a trade license for the subsidiary company at Dubai’s Chamber of Commerce and Industry.

Beyond the surface, setting up a subsidiary company involves making many crucial considerations, such as understanding the share capital requirements for the initiative, preparing all the legal requirements needed beforehand, and researching the taxation of subsidiaries in Dubai and how that ultimately affects operations, functions, and more. Learning about the benefits will also help investors affirm their decision to form a subsidiary company, which is better done with the assistance of business setup consultants who are knowledgeable and adept at achieving the above with efficiency and efficacy.

It is important to mention that when the parent company creates a subsidiary in the UAE, it only retains the authority to make decisions as a shareholder for the establishment, given that a subsidiary is an independent entity. This would not be the case when opening a branch of the main corporation, which in the UAE, is not legally independent and requires a local partner under the laws of the Emirate it is established within. The subsidiary will operate under a Dubai legislation approved structure, which can be in the form of a free zone company for foreign investors looking to subsidize in the country.

Also worth noting is that, in Dubai, subsidiaries fall under a private or public company structure for the most part and are subject to tax laws that work to provide equal benefits to the parent company as well as the subsidiary. Overall, a subsidiary allows for greater profit gains, especially under the double tax agreements that further furnish the firm with enhanced protection. This can be an added advantage for holding companies considering this nation for expanding trade operations.

Moving on to the capital requirements, for mainland companies and free zone establishments, the laws dictate different requirements and hence regulate these shares in different manners. When setting up a free zone company in the UAE, the laws applicable to an investor’s specific company formation should be researched beforehand, given that business activities can expand over several industries. Depending on the set activities the firm will pursue that inadvertently affect the free zone it gains access to and licenses to, subsidiary companies can receive different and promising benefits.

As for the legal documents required to process the license to establish a subsidiary, they are subjected to further approvals and notarizations prior to beginning the process with local authorities. It begins with passport copies of all the shareholders and managers of the company that must be notarized and extends to clearance certificates that must be obtained from relevant government authorities. Investors must also acquire an approval letter for the business name from DED. Articles and a Memorandum of Association must also be drafted and ready, along with a completed application form for the trade license. Translation services might be needed and can be overlooked by business setup consultants who specialize in managing the entire process from start to finish.

Interestingly, one of the most attractive reasons for setting up a subsidiary in Dubai, or the UAE in general, is the lack of corporate taxes implemented on businesses that operate in industries other than banking and oil and gas. Although taxes are regulated and legislated in accordance with the legalities of the city, additional corporate taxes are not enforced at the moment. Subsidiaries are currently subject to value-added tax (VAT) and excise tax that concern the manufacturing and sale of products and services offered by the company. The parent company is only required to complete and file annual audited accounts as a part of the accounting and reporting requirements of the city.

There are other exceptional benefits that foreign investors receive when setting up a subsidiary company in Dubai. Any return of profit and funds is allowed free of charge, giving the parent company owners greater returns both in the short-term and long-term. Also, no restrictions are placed on the companies to limit their activities to one industry; rather, subsidiaries can span their business over several sectors and industries as needed. Furthermore, representatives of the subsidiary organization can obtain their visas separately from the management of the holding company.

From an administrative perspective, the subsidiary company also has reduced administrative overheads as bookkeeping, auditing, and other tasks are completed in-house by the management. With lower costs and smaller annual turnover, the cost efficiency of this initiative is also high.

To ensure that each step is executed with accuracy and proficiency, you can get professional assistance from the best business setup consultants in Dubai. Best Solution Management Services is a leading company formation firm with expansive industry knowledge and domain expertise. Our business management agency is adept at helping investors and capitalists gain unrivaled assistance in mainland company formation, free zone company setup, and other business solutions that transform the face of your business operations. Contact us today!