Other BriefingsEstablishment Procedures For Russian Companies Investing In The UAE
With a pending Russia-UAE free trade agreement, using the Emirates as a base to reach out to the Middle East, Africa & South Asia is a growing trend.
Establishing a company in the United Arab Emirates (UAE) may pave the way for a complete change of direction in your business life and professional environment. The UAE is a nation of experimentation, investment, and can provide the rewards of being the transit link between Russia, the East and West. Comprising the seven emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Fujairah, and Ras Al Khaimah, the capital city is Abu Dhabi, as a huge oil and gas hub, while Dubai has taken up the international trade mantle.
The UAE total population is just under 10 million, with a GDP of US$640 billion in 2021. The GDP per capita (PPP) is US$60,920. That is now sufficient to support businesses specifically aimed at servicing the expatriate market, as well as regional trade and investment. The UAE is somewhat unique as some 90% of the total population is made up of expatriate employees at various levels. English is the most commonly spoken language followed by Arabic and Russian.
UAE laws cover all the Emirates although small regional differences can apply, however these do not affect corporate establishment procedures.
The Representative Office Route
A corporation’s representative office is an expansion of the parent company in another country. A foreign company can have 100% ownership through establishing a representative office in the UAE. In the UAE, representative offices are not permitted to earn a profit, and all work will be outsourced to the parent firm. It is only allowed to undertake marketing and advertising for its parent corporation. Given that the UAE is a natural springboard to significant other regional markets in the Middle East, North and East Africa, as well as South Asia, this is a considerable advantage. The UAE has also entered into free trade agreement negotiations with Russia.
The national carrier, Emirates Airlines has direct flights to 14 destinations in the Middle East, 22 in Africa, 47 from Asia and the Pacific, 41 to Europe and 15 to the Americas. These flights include direct connections to Moscow and St.Petersburg.
This ability to operate as a regional transit hub is what makes the UAE an important regional trade and business development centre and will be of particular relevance to Russian businesses as the geopolitical situation changes.
Legal provisions for setting up a Representative Office in the UAE
A Russian company may establish a representative office in the United Arab Emirates following Article 339 of Federal Decree-Law No. (32) of 2021 on Commercial Companies.
A business can lawfully carry out the Russian parent company’s promotional operations in the UAE through this arrangement. It becomes a legal authorization to allow foreign enterprise to be felt in the UAE. Such businesses can only engage in local market trade as their only direct commercial activity. This is made possible by following the correct procedures for setting up a representative office license, which must be obtained with the Ministry of Economy and the Economic Development’s permission.
Difference between a Branch office and a Representative office in the UAE
A Branch office and a Representative office in the UAE vary primarily in the following ways:
A Branch office in the UAE is permitted to advertise and sell its goods and services.
A Branch office in the UAE must follow the operational parameters outlined by the parent company.
A Branch office in the UAE is permitted to execute local sales contracts, generate invoices for regional UAE clients, and collect payments from them.
A Representative office is a wholly foreign-owned company.
In contrast to a Branch office in the UAE, a Representative office cannot carry on company operations or promote its own services and goods in the UAE.
The Representative office can conduct market research and marketing operations on behalf of the parent company’s business.
On the other hand, a Representative office cannot make profits in the UAE, as its activities are limited to selling and promoting the parent company’s goods or services. For example, a Russian energy services provider may establish a Representative office in the UAE and conduct marketing, promotion and maintenance advisory and related services across all the Emirates and use that as a base for promoting these activities throughout the region. The caveat is that any resulting contracts must be with the Russian Head Office and any UAE entity and not the Representative Office.
Benefits of opening a representative office in the UAE
There are several tax benefits to setting up a Representative office in the UAE, as the formation of a Representative office has low tax obligations and a 0% corporation tax rate.
A Representative office in the UAE may be set up for a low overall government and professional fees.
Unlike standard business structures, a UAE Representative Office has the freedom to create a Representative with several shareholders.
A Representative office may be established in the UAE without a minimum share capital requirement.
Foreign businesses may greatly expand their worldwide contacts through a Representative office in the UAE.
The administrative procedures are straightforward. The UAE ranks in the Top 20 of Global Ease of Doing Business rankings.
Russian businesses may establish bank accounts in the UAE.
Establishing a Representative Office in the UAE
- Locate a reliable local service provider
Identifying a local agent is the first task that needs to be performed by both branch and representative offices in the UAE. The local agent must be a UAE citizen, or a corporation wholly controlled by UAE nationals.
- Reserve trade names
To register a representative office and reserve a trade name, submit an application to the Department of Economic Development (DED) of the respective Emirates. We are also able to provide trademark and patent registrations.
- Application to the Ministry of Economy.
The application must contain a detailed overview of the company, including information about the share capital, the headquarters, the nature of the business, the name of the general manager in the UAE, and any other papers necessary for approval.
- Obtain preliminary approval
The Department of Economic Development (DED) grants initial permission for establishing a representative office in the UAE upon receipt of all required paperwork, including copies of shareholders’ passports and corporate records.
- Obtain Ministry of Economy permission
The UAE Ministry of Economy offers an application that requests information about the parent company, such as the type of the firm, head office address, share allocation, and so forth.
- Obtain the DED license
Submit the Ministry of Economy’s clearance to the Department of Economic Development (DED), along with any additional papers required based on the type of the representative office. After that, the DED will grant the final license.
- Register with the Dubai Chamber of Commerce and Industry
The last step is registering with the Dubai Chamber of Commerce and Industry. To do this, applications must be made with copies of the office leasing contract and a business license issued by the Department of Economic Development.
Documentary requirements to establish a Representative Office in the UAE
Commercial License/ Trade License
Attested Board Resolution
Power of Attorney (PoA)
Articles of Association (AOA)
Memorandum of Association (MoA)
Notarized local agent agreement
Investors’ passports
Government approval.
Application Submissions
Dezan Shira & Associates work closely with Farahat & Co in the UAE to assist in obtaining your business license for your Representative Office in the quickest period feasible, by ensuring that everything is in order at each step of the procedure. We are dedicated to providing you with all the information you need to manage your Representative Office in the UAE. When creating a Representative Office in the UAE, we collaborate closely with our legal team and our panel of auditors to ensure that the experience is nothing short of international standards. We can also provide help with other related services such as commercial property agents, work visas and permits, bank account establishment, and on-going tax, audit, and compliance requirements.
Only local professional and government fees are charged.
Enquiries to dubai@dezshira.com
This article originally appeared on Russia Briefing
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About Us
Middle East Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Dubai (UAE), China, India, Vietnam, Singapore, Indonesia, Italy, Germany, and USA. We also have partner firms in Malaysia, Bangladesh, the Philippines, Thailand, and Australia.
For support with establishing a business in the Middle East, or for assistance in analyzing and entering markets elsewhere in Asia, please contact us at dubai@dezshira.com or visit us at www.dezshira.com. To subscribe for content products from the Middle East Briefing, please click here.
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