UK to UAE: Should You Open a Branch or Form a Company? 

The UAE has emerged as one of the most popular locations for UK businesses seeking to grow overseas. With its low-tax regime, top-notch infrastructure, and status as a gateway to the Middle East, Africa, and Asia, the Emirates present strategic and economic benefits. 

For UK companies, the attractiveness is even more so post-Brexit. The UAE provides access to rapidly expanding markets, a zero personal income tax environment, and double taxation treaties with the UK that can make borderless operations more effective. 

Yet, before you begin doing business in Dubai, Abu Dhabi, or one of the UAE’s numerous free zones, you must determine the form of your business presence. The two principal options are establishing a branch office or a new company. This decision will influence your taxes, regulatory requirements, brand positioning, and time to market. 

What is a branch office in the UAE, and how will it operate for UK businesses?

 Within the UAE, a branch office is a continuation of your UK parent business, not a distinct legal entity. It is operated under the same name and is deemed a part of your current UK business. 

A UAE branch office can perform the same operations as the parent business, as long as they are among its authorised activities. It cannot perform operations that the parent business is not permitted to do in the UK. 

Key characteristics for UK businesses: 

• Foreign ownership of up to 100% permitted for most activities. 

• Profits can be remitted back into the UK without limit. 

• Need a local service agent (an Emirati company or individual) for administrative reasons, this agent does not have any ownership or control over the branch. 

A branch is suitable for UK companies that would like to replicate their current businesses in the UAE without having a distinct corporate entity. 

What is a new company in the UAE, and how is it different from a branch?

 When a UK company decides to establish a new business within the UAE, it forms an independent legal entity, typically in the capacity of a Limited Liability Company (LLC) or a Free Zone Company (FZCO). 

In contrast to a branch, setting up a whole new company has the option to include a wider range of activities and is issued under the UAE law as a standalone business. Such a structure is more flexible when expanding services or changing in the UAE market. 

Two common paths for UK companies:  

Mainland LLC: Under this legal structure, you can do business anywhere in the UAE and overseas. It permits 100% foreign ownership in the majority of business activities in recent reforms. It has to comply with mainland-specific requirements and obtain the necessary permits. 

Free Zone Company (FZCO): This structure also offers 100% foreign ownership. It is usually quicker and less expensive to establish, and allows import and export from within the free zone and globally, but mainland trade must go through a distributor or local agent. 

How are the legal forms of a branch office and a new company different in the UAE?

 The largest difference is liability: 
Branch office: The UK parent company is 100% liable for their UAE debts, contracts, and legal liabilities. 

New company: Liability is confined to the UAE entity alone, safeguarding the UK parent from direct liability. 

There is also a regulatory difference. A branch office can only perform activities already under the scope of the UK parent company and is bound by its business model. A new company can have a wider or distinct list of activities, which facilitates diversification within the UAE. 

Which is more tax-effective for UK businesses in the UAE?

 The UAE traditionally had a zero corporate tax policy, but since June 2023, there has been a 9% corporate tax on profits over AED 375,000 for most companies. 

Branch office: Profits are subject to UAE taxation at the same rate as a domestic business. The UK–UAE double taxation agreement tends to stop the same profits from being taxed twice in the UK. 

New company: Treated by the same UAE tax regime. Based on your business structure, profits may be left to be reinvested in the UAE without current UK tax. 

Qualifying Free Zone Persons companies are allowed to retain 0% tax on some income sources, which could make the new company option more appealing for tax planning purposes. 

Which arrangement provides UK companies with more control of operations in the UAE?

 A branch office retains decision-making in the UK. This can keep your markets consistent, but can impede your speed of response to local opportunities. A new company, particularly one with a local UAE management team, can take quicker, market-driven decisions.  

This is usually advantageous in industries such as retail, hospitality, or technology, where timely adjustment to trends matters. 

Which is more economical to establish and operate in the UAE: a branch or a new company?

 A branch is usually more economical to establish since it bypasses the entire incorporation process of a new company. Nevertheless, it still needs to: 

• Sign up with the Department of Economic Development (DED) or the relative free zone governing authority. 

• Engage a local service agent. 

• Pay the annual renewal fees. 

A new entity, specifically, a free zone entity, will cost a little more to set up but provides greater operational flexibility and sometimes even access to free zone incentives, including lower operating expenses or employee visa packages. 

What is the impact of each of these options on brand image and market perception in the UAE?

 Market perception is very important in the UAE. A branch office is often seen as an international extension, which works well for the UK companies with strong global reputations. 

A new UAE company is viewed as a fully committed local player, which can build trust with Emirati clients, government entities, and local partners. 

For example, if you’re a UK engineering firm bidding for UAE government contracts, a locally incorporated entity may carry more weight than a branch. 

Which structure allows for faster market entry in the UAE?

 Speed depends on the governing authorities: 

Branch office: Often faster to set up because you’re not creating a new legal entity, sometimes operational within 2–4 weeks in the mainland. 

Free zone company: Also relatively quick, with many free zones offering incorporation in under 10 days if documents are in order. 

Mainland LLC: May take slightly longer due to more detailed approvals and compliance steps. 

If your UK company is moving into the UAE to capture a time-sensitive opportunity, such as an expo or a seasonal market, a free zone or branch company will be quicker than a mainland LLC. 

Which option provides better risk management for UK companies in the UAE?

 Risk management tends to tip the scales in favour of establishing a new company. Limited liability insulates the UK parent from direct legal or financial consequences in the UAE. 

For a branch office, liabilities attach directly to the UK company, and it can be dangerous in a business where there is significant contractual or regulatory risk. 

What are the errors made by UK businesses when deciding between the two in the UAE?

 Some of the typical missteps include: 

• Selecting solely based on price without long-term planning considerations. 

• Failing to recognise the significance of local credibility in contract wins. 

• Misinterpreting the UAE rules of business setup and restrictions on activities. 

• Failing to consider the UAE corporate tax reforms. 

• Believing that free zones provide limitless mainland trading with no further arrangements. 

An impulsive choice can result in expensive restructuring down the line, such as having to shut a branch and re-incorporate as a company. 

How should a UK business determine whether a branch or a new company is appropriate for the UAE?

 Select a branch if: 

• You wish to replicate your UK operations in exact terms. 

• You intend to pilot the UAE market first. 

• You do not mind the UK parent having absolute liability. 

Select a new company if: 

• You require liability protection. 

• You wish to freely trade in the UAE market or bid for government tenders. 

• You want to replicate your services for UAE clients. 

• You wish to access free zone benefits or 0% tax relief. 

What are some real-life examples of the advantages and disadvantages of each?

 Branch Example: A UK law firm established a Dubai branch to maintain current corporate clients with UAE interests. The establishment was rapid, and the company maintained complete control from London. But all the liabilities rested with the UK entity, necessitating strong insurance. 

New Company Example: A British technology start-up set up a free zone company in Dubai Internet City. The company enjoyed 100% foreign ownership, zero tax on qualifying income, and authenticity when transacting with local clients and investors. 

What are the procedures to open a branch office or a new company in the UAE?

 Branch Office (Mainland or Free Zone): 

1. Choose your jurisdiction (mainland DED or free zone). 

2. Appoint a mainland service agent (for a free zone entity). 

3. Get initial approval for operations. 

4. Rent office space (or utilise flexi-desk in certain zones). 

5. Obtain the trade permit. 

New Company (Mainland or Free Zone): 

1. Select business activity and jurisdiction. 

2. Select legal structure (LLC, FZ-LLC, etc.). 

3. Submit incorporation documents. 

4. Rent office space or utilise free zone facilities. 

5. Get the trade permit and open a corporate bank account. 

Collaborating with a UAE business setup consultant may make both procedures easier and validate conformity to changing regulations. 

What is the last thing to remember for UK businesses looking to expand to the UAE?

 The UAE presents great prospects for UK companies, but getting the business structure right is essential. 

A branch office is quicker and less costly to establish, keeping operations linked closely to the UK. 

A new company provides more flexibility, credibility, and protection of liability, usually a necessity for long-term UAE expansion. 

Your choice should align with: 

• How quickly you must enter the market. 

• Regulatory requirements for your industry. 

• Your tolerance for risk. 

• Whether you intend to localise your business for the UAE market. 

Seek our professional on-the-ground guidance, contact us via mail at info@radiantbiz.com or WhatsApp & call us at +44 7398 573313!