How to Reduce your Business License costs in the UAE

The right structure of a Company and its location in the UAE depends on its business activities. This depends on the target customers and where they are located.

If your company’s business activities necessitate that you need to establish a company in the Mainland UAE entity, then a Foreign company like yours is left out with two options; To set up as an LLC (Limited Liability Company) as a Foreign Branch.

You will be interested on: LLC Company Formation

Table of Contents

Differences between an LLC and a Foreign Branch

A Foreign branch is owned 100% by the Mother Company. It will require an NSA (National Service Agent), also known as LSA (Local Service Agent), who is a local UAE individual/ company, owned by UAE Nationals alone.
An LLC has a UAE National (Company/individual) as the major shareholder (51%). In comparison, the foreign investor can hold no more than 49% of shares.
As the Foreign branch is a direct extension of the Mother Company, it does not bear separate legal standing. The Mother Company bears the full financial, legal, and technical liability for the Foreign branch office.
An LLC is considered a separate legal personality. For a Foreign Company establishing a new LLC in UAE, the liabilities are separate from the Mother Company. The shareholder Liability in an LLC is limited to the value of a subscription to the Share Capital.

Can A Foreign Branch be Converted into an LLC?

Processes for conversion of Foreign Branch into an LLC is available. This involves the DED and other UAE government departments. The process involves the reconstitution of new legal documents (MOA), termination of NSA, and a local UAE partner engagement. To know more about this process, please do Contact Us.

Cost differences between a UAE Foreign Branch and an LLC

Government fee: The government fee for a Foreign Branch is marginally higher than that of an LLC, as the Foreign Branch needs to register with the Ministry of Economy.

Ministry of Economy Deposit: A bank guarantee of AED 50,000 needs deposition with the ministry of Economy in the case of a Foreign Branch. This guarantee needs to remain during the whole lifetime of the branch and is returned only upon deregistration.

Tax differences between a UAE Foreign Branch and an LLC

As the Foreign Branch accounts for the profits to its Mother Company, its income is taxable under the Mother Company’s local tax jurisdiction.
LLC s are taxable under UAE tax, which is currently 0% Income Tax and 0% Corporation Tax.
Income from an LLC repatriated by a foreign shareholder as part of the group may be subjected to the foreign country’s prevailing tax rate in case the income is the dividend. Profits generated in the UAE are 0% taxed. They will not be taxed again if a double taxation treaty exists between the two countries.
Expert advice is advisable on your tax position before you commit to either structure.