The difference between a branch and a representative office
Many people think these terms are synonymous, but there is a significant difference between them:
- A representative office is opened exclusively for market research, establishing business connections, and representing the brand’s products or services of a company physically located in another part of the UAE or abroad. A representative office is not allowed to participate in commercial operations to gain profit. A bank account is needed when opening it, but only for operational expenses. Therefore, by the end of the reporting period, the representative office may have only a negative balance.
- A branch of a foreign company in the UAE is opened to do full-fledged business, that is, for profit. It has a wide range of activities: it can perform both representative tasks of the company and commercial ones. When opening a bank account for a branch, you need to deposit funds into a refundable deposit. This is insurance in case potential fines for non-compliance with local laws need to be covered. This requirement does not apply to branches in free zones.
It would be incorrect to claim that a representative office is better than a branch in Dubai or vice versa. Each option has its advantages. Therefore, let’s consider their benefits in a comparative table.
Representative office
- Minimal capital investment upon registration and less strict regulatory restrictions. This makes the process simpler compared to opening a branch.
- Good to study the demand for products or services without financial risks.
- Enhances the brand’s prestige, potentially expanding it beyond its home country.
- No need for advance capital.
- Employees can obtain multiple work visas.
- When opening a representative office in a Free Economic Zone (FEZ), you can promote a company based on the mainland.
Branch
- Direct extension of the parent company with the ability to conduct full commercial activities.
- Positive balance at the end of the fiscal year.
- Opening a branch is much less expensive than registering a new company.
- 100% ownership — only one local service agent is needed for a branch.
- Periodic promotional discounts on the registration of foreign companies from the UAE Ministry of Economy.
- When opening a branch in Dubai (in a Free Economic Zone), you can enjoy the same tax benefits as local businesses.
How to open a representative office or branch in the UAE
To go through the registration procedure, you need to prepare all the necessary documents and submit them for review to the Ministry of Economy.
Required documents
- Certificate of parent company registration, the founding agreement, and activity license. These documents must be certified at the Ministry of Foreign Affairs of the country of origin and the UAE embassy.
- Board of Directors’ decision to open a representative office or branch.
- Notarized agreement with a local agent stating that they will represent your interests.
- Lease agreement (an office in Dubai or another emirate must be rented for a year before submitting the document package).
- Passport of the branch director.
- Power of attorney granting the right to manage the company from the founders.
Step-by-step registration procedure
- Finding a service agent
- Select and register a trademark (TM)
- Submit an application for preliminary approval to the Ministry of Economy
- Obtain a trade license
This can be a UAE citizen or a local company owned by Emiratis. This step is mandatory, as the service agent, for a fee, is a company representative before government authorities and performs exclusively administrative tasks. Once the branch director obtains a visa, you can dismiss the service agent.
Using the parent company’s name is ideal for brand promotion. However, local laws prohibit certain names, especially those containing religious characters, city names, or country names. Sometimes, a trademark might already be registered in the UAE, as the country is not a signatory to the Madrid Agreement, such cases are not uncommon. In this case, you must choose another name that reflects the brand’s identity. We can consult you on selecting a TM name that complies with UAE regulations.
The service agent is responsible for this. They submit the company’s activity information along with the necessary documents for review.
A local activity permit is required despite the parent company already having a license. In addition, certain types of activities in Dubai may not be allowed. Therefore, it’s crucial to consult with Dynasty Business Adviser experts before starting the branch opening process.
The cost of opening a representative office or branch in the UAE
The cost of the service ranges from 15,000 to 100,000 dirhams. The price is influenced by various factors such as jurisdiction, office format and size, type of activity, and its scale. Here are the approximate expenses for a representative office setup in Dubai:
| COST ITEM |
AMOUNT |
|---|---|
|
Business licensing and registration |
from 15,000 dirhams (about $4080) |
|
Service agent fee (one-time) |
from 20,000 dirhams (about $5440) |
| Office rent for a year |
from 40,000 dirhams (about $10,880) |
| Monthly utilities and service charges |
from 1,000 dirhams (about $272) |
| Work visa for one employee |
from 4,000 dirhams (about $1089) |
| Legal and consulting services (comprehensive) |
from 10,000 dirhams (about $2720) |
In addition to these costs, you must calculate employee salaries and other operational expenses yourself. To estimate the cost of registering your company’s branch or representative office, we recommend contacting our company.
How we assist with setting up a branch office in Dubai
We have been operating officially in the UAE for over 8 years. As a licensed agent, we confidently bring new companies to this promising market. We not only provide turnkey registration services for companies and their representative offices but also offer specialized services in the following areas:
- Assist with the preparation, processing, and notarization of documents.
- Conduct company audits to ensure compliance with local regulations.
- Provide company licensing services.
- Assist in selecting a service agent.
Advantages of cooperation
Advantages of working with us:
- we offer a high level of data confidentiality;
- we are well-versed in local laws and regulations, both in the UAE and in free economic zones;
- we provide high-quality service and 24/7 consulting support;
- we are ready to take unconventional approaches to fulfill individual client requests.
We focus on long-term cooperation and always strive for high efficiency in our work. We are guided by principles of honesty and trustful relationships. If you appreciate our approach, feel free to contact us!
