Branch Office vs Subsidiary in Dubai: Which Structure to Choose

Key Legal Concepts: Branch Office And Subsidiary On The Dubai Mainland

Before reviewing procedures, costs and tax, it is essential to understand what you are actually setting up when selecting a branch or an LLC. The UAE framework distinguishes clearly between a branch of a foreign company, which is legally an extension of the foreign entity, and a limited liability company (LLC), which is a separate juridical person.

When expanding operations, companies assess Dubai general trading activities to select the right corporate structure.

A correct understanding of this distinction underpins later decisions about liability allocation, contract structuring, regulatory approvals and Corporate Tax planning. It also affects how banks, counterparties and regulators will view your Dubai presence.

What Is A Dubai LLC Subsidiary?

In contrast, a Dubai mainland subsidiary is usually set up as a Limited Liability Company (LLC) under the UAE Commercial Companies Law. An LLC incorporated in the UAE is treated in law as a separate juridical person from its shareholder or shareholders. It can own assets, incur liabilities and enter into contracts in its own name, and it has its own rights and obligations.

Under the UAE’s foreign direct investment framework and reforms introduced by Federal Decree‑Law No. 32 of 2021 on Commercial Companies, companies and investors of various nationalities may own 100% of all legal structures listed in the Commercial Companies Law. This includes LLCs, provided that their chosen activity is not classified as having a “strategic impact” and is otherwise permitted by local regulations. In practice this means that a Dubai mainland LLC subsidiary can often be wholly foreign‑owned, just like a Dubai branch.

Because the LLC is a separate juridical person, its liabilities are, in principle, limited to the company itself, and shareholders’ exposure is generally confined to their capital participation, subject to company‑law rules and any guarantees or other commitments they may give. The LLC, not the foreign parent, will be the named contracting party in the UAE, and the company’s profits belong to the LLC, which can then distribute dividends to its shareholders.

Below is a concise, high‑level comparison of the two structures.

Licensing And Registration Pathways In Dubai

Once you have decided on the general direction, the next question is procedural: what are the steps, authorities and indicative federal fees for each route? Branches and LLC subsidiaries are licensed at the emirate level in Dubai, but only branches undergo an additional federal registration and oversight step at the Ministry of Economy.

Setting Up A Foreign Company Branch On The Dubai Mainland

For a Dubai mainland branch of a foreign company, you must satisfy both Dubai DET and MOEC requirements. The sequence typically proceeds as follows.

First, you work through the “Invest in Dubai” portal operated by Dubai DET. This platform allows you to select the legal type (in this case, a branch of a foreign company), search and reserve a trade name, and choose business activities permitted on the Dubai mainland. The emirate‑level authority will issue initial approvals and, ultimately, a Dubai mainland licence for the branch.

There is also a timing obligation: if a foreign company fails to register its branch with the MOEC within one month from the date of licence issuance by the relevant local authority (e.g. Dubai DET), the MOEC may impose a registration delay fine of AED 100,000. Additionally, where the same foreign entity operates multiple branches across the UAE, the MOEC requires them to be linked under a single registration number to ensure unified tracking.

Throughout, the branch must have a valid commercial address in Dubai that complies with local zoning and authority requirements, just like any other business on the mainland.

Setting Up A Dubai Mainland LLC Subsidiary

For a Dubai mainland LLC subsidiary, the incorporation and licensing process is handled at the emirate level without the separate MOEC foreign‑branch registration step.

Liability, Control And Contractual Relationships

One of the most significant differences between a branch and a subsidiary is how liability and contractual risk are allocated within the corporate group.

Because a UAE branch of a foreign company is not a separate juridical person, the foreign parent remains directly responsible for the branch’s obligations. Contracts signed in Dubai in the name of the branch are, in law, contracts of the foreign company itself. If the branch incurs debts or regulatory penalties, these are obligations of the foreign company. This structure can provide operational simplicity but also means that local risks in Dubai are not ring‑fenced from the head office.

Corporate Tax Treatment Of Branches And Subsidiaries (Including Free Zones)

UAE Corporate Tax is a federal tax that applies in all emirates, including Dubai. According to the UAE Government’s official portal, Corporate Tax is imposed at 0% on taxable income up to and including AED 375,000, and at 9% on taxable income exceeding AED 375,000. This rate structure applies both to resident juridical persons and to non‑resident persons with a permanent establishment (PE) or certain other UAE nexus.

For Corporate Tax purposes, a Dubai mainland LLC subsidiary is usually a resident juridical person, because it is incorporated in the UAE. Under Federal Tax Authority guidance, a resident juridical person is generally subject to UAE Corporate Tax on its worldwide taxable income, subject to specific exemptions and reliefs set out in the Corporate Tax Law and related decisions. The LLC would usually register for Corporate Tax in its own name and file a single Corporate Tax return that includes all its UAE branches, if any, because UAE branches of a domestic juridical person are treated as part of the same taxpayer.

Free zones introduce a further layer of consideration. In Dubai and other emirates, free zone authorities offer specific legal forms such as free zone LLCs, free zone companies and free zone establishments, and generally also allow branches of foreign and local companies. Free-zone-specific regulations on issues such as minimum capital and corporate governance govern these entities. Under the Corporate Tax regime, a qualifying free zone person (which may be a free‑zone company or, in some cases, a branch) can benefit from a 0% Corporate Tax rate on “qualifying income”, while non‑qualifying income is taxed at 9%, provided detailed conditions on substance, activities and transactions are met.

For investors comparing a Dubai mainland branch with a Dubai mainland LLC, the key Corporate Tax question is therefore not just the rate—because the 0%–9% thresholds are the same—but how and where income will arise and be attributed, and whether it is preferable for Dubai operations to be taxed as part of a foreign non‑resident with a UAE permanent establishment or as a UAE‑resident company. This analysis is fact‑specific, and any decision should be informed by current FTA guidance and professional tax advice.

Practical Factors When Choosing Between A Branch And A Subsidiary

Once you understand the legal and tax frameworks, the choice between a Dubai mainland branch and an LLC subsidiary becomes a strategic question. Several practical considerations usually guide the decision.

One important issue is strategic positioning: does your group prefer the foreign parent or a UAE‑incorporated company to be the visible contracting party in Dubai? A branch keeps the foreign company front and centre, which some groups favour for branding or global‑contract reasons. An LLC allows you to present a local UAE corporate identity, which may be attractive for local tenders or partnerships.

Liability and risk management is another core factor. If you operate through a branch, the foreign company is directly on the hook for all obligations incurred by the Dubai establishment. This may be acceptable for limited‑risk representative operations but more sensitive for high‑value contracts or regulated activities. An LLC, by contrast, provides a degree of ring‑fencing: its liabilities are confined to the UAE entity, subject to capital adequacy, guarantees and law‑based exceptions.

Profit flows and funding are closely linked. With a branch, profits are automatically profits of the foreign company, and intra‑group distributions take the form of internal transfers rather than dividends. With an LLC, profits sit at the level of the UAE company and can be retained for local reinvestment or paid out to shareholders as dividends, following UAE company‑law procedures. This can influence how you structure group financing, capitalisation and any potential future sale.

Finally, think about growth, restructuring and exit. If the Dubai vehicle may later hold investments, acquire local companies, or serve as a regional hub, a standalone UAE entity can sometimes offer more flexibility for joint ventures, equity participation and corporate reorganisations. A branch can be efficient for focused operational activities but may be less adaptable if your business model evolves.

If you decide on a foreign company branch, you will then interact with the Ministry of Economy for initial approval and branch registration, including the payment of the MOEC fees, the submission of duly attested corporate documents, and the provision of the AED 50,000 bank guarantee. The MOEC’s online services explain conditions, time limits (including the one‑month window after the Dubai licence is issued) and the unified registration‑number system for multiple branches of the same foreign entity.

In parallel, you should refer to the UAE Government Portal (u.ae) and the Federal Tax Authority website (tax.gov.ae) for up‑to‑date Corporate Tax rules and explanatory guides. These resources explain concepts such as resident juridical person, non‑resident with permanent establishment, qualifying free zone person, and the applicable 0% and 9% Corporate Tax rates.

FAQ: Branch Office Vs Subsidiary In Dubai

Should I Open A Branch Or Subsidiary In Dubai For My Business?

The choice between a branch and a subsidiary depends on how you want to balance legal liability, corporate control, tax administration and long‑term strategy. A branch of a foreign company in Dubai keeps the foreign company as the contracting party and does not create a separate juridical person, which can simplify group governance but exposes the parent directly to local liabilities. A Dubai LLC subsidiary creates a separate UAE company, usually with 100% foreign ownership for permitted activities, offering more risk ring‑fencing and flexibility for local growth. Most investors compare both, then decide after taking tailored advice.

What Is The Main Difference Between A Branch And Subsidiary In Dubai Mainland?

The core legal difference is juridical personality. A Dubai mainland branch of a foreign company is an extension of the foreign entity, which remains responsible for its obligations and owns its profits. A Dubai mainland LLC company, used as a subsidiary, is a separate juridical person that contracts in its own name and is liable for its own debts, with shareholders’ exposure generally limited to their participation. This affects liability, contract structures, bank relationships and Corporate Tax treatment.

How To Register A Foreign Company Branch In Dubai?

To register a foreign company branch in Dubai, you start with the Dubai Department of Economy and Tourism, using the Invest in Dubai portal to choose the branch legal form, reserve a trade name and obtain local initial approval and a Dubai mainland licence. You then apply to the Ministry of Economy for initial approval as a foreign company branch, submitting duly attested corporate documents and paying the initial approval fee (AED 3,500). After satisfying conditions, you complete the MOEC registration, pay the branch registration fee (AED 7,500), provide the required AED 50,000 bank guarantee, and ensure registration is finalised within one month of the local licence being issued to avoid a possible AED 100,000 delay fine.

What Are The Process And Fees For A Foreign Company Branch In Dubai?

The process involves (1) emirate‑level licensing with Dubai DET via Invest in Dubai, and (2) federal‑level initial approval and registration with the MOEC. At the MOEC level, indicative service fees currently include AED 3,500 for initial approval and AED 7,500 for branch registration, plus the obligation to lodge an AED 50,000 bank guarantee with a UAE‑operating bank in approved form. Additional costs can arise from document attestation, local professional services and commercial premises. The branch may not conduct business until the required approvals and registrations are completed.

How Is Corporate Tax Applied To A Dubai Branch Of A Foreign Company?

For Corporate Tax, a foreign company with a Dubai branch is treated as a non‑resident juridical person with a permanent establishment in the UAE. UAE Corporate Tax applies to taxable income attributable to that permanent establishment (and other UAE connections), which can include income from both UAE and non‑UAE sources where functionally attributable to the Dubai establishment. The generally applicable rates are 0% on taxable income up to and including AED 375,000 and 9% on taxable income above this threshold. The foreign company must use adequate standalone financial statements for the Permanent Establishment (PE) when determining the taxable base, in line with Federal Tax Authority guidance.

What Is The Corporate Tax Treatment For A Dubai LLC Subsidiary?

A Dubai LLC subsidiary is usually treated as a resident juridical person for Corporate Tax purposes because it is incorporated in the UAE. It is generally subject to UAE Corporate Tax on its worldwide taxable income, subject to reliefs and exemptions specified in the Corporate Tax Law and implementing decisions. The same rate schedule applies: 0% on taxable income up to and including AED 375,000, and 9% on taxable income above that. The LLC would typically register for Corporate Tax in its own name and file a single Corporate Tax return covering its main office and any UAE branches it may have.

Can A Foreign Company Own 100 Percent Of A Dubai LLC?

Yes, subject to activity‑specific rules. Following reforms under Federal Decree‑Law No. 32 of 2021 on Commercial Companies, foreign investors may own 100% of all legal structures listed in the Commercial Companies Law, including LLCs, provided the activity is not categorised as having a “strategic impact” and is permitted by local regulations. In practice, this means foreign companies or foreign individuals can wholly own a Dubai LLC subsidiary for a wide range of commercial and professional activities, though you should always verify current requirements for your specific business activity.

Which Is Better: Branch Or Subsidiary For Dubai Operations?

Neither structure is inherently “better”; each serves different objectives. A branch may suit companies that want their foreign head office to be the direct counterparty for contracts and are comfortable with the parent bearing all UAE‑related liabilities, while an LLC may be preferable for investors seeking liability segregation, local branding, and flexibility for future expansion or sale of the UAE business. The optimal choice often emerges from a combined analysis of legal risk, sector regulation, Corporate Tax implications and group strategy, undertaken with professional advisers.

Does Using A Free Zone Change The Branch Vs Subsidiary Analysis?

Using a Dubai free zone adds additional variables. Free zone authorities provide their own legal forms (such as free zone LLCs and establishments) and often allow branches of foreign and local companies. Under the Corporate Tax regime, a qualifying free zone person may benefit from a 0% rate on qualifying income and 9% on non‑qualifying income, if detailed conditions are met. While the branch‑versus‑subsidiary logic around liability and contracting still applies, you must also consider free‑zone‑specific regulations, permitted activities, substance requirements and how income will be classified for Corporate Tax. This usually warrants specific advice.