If you are thinking of doing business in Dubai, did you know you can set up your own Holding Company in UAE? This gives you many advantages, such as protecting your assets, being tax efficient, having limited liability, and more. It’s easy to open a holding company in Dubai and doesn’t require a lot of money. In this article, we’ll explain what a holding company is, how it works in the UAE, the benefits of having a holding company, the types of companies allowed, the requirements to open a holding company, the costs involved, and more.
What is a Holding Company?
A holding company is a type of business entity that owns and controls other companies. The primary function of a holding company is to hold assets and investments, such as stocks and bonds, in other companies. By doing so, holding companies can exercise control over the operations and management of these companies. This allows businesses to diversify their assets, mitigate risks, and increase profitability.
Now, we will look at how holding companies work in the UAE.
Benefits of a Holding Company
There are numerous benefits of forming a holding company in the United Arab Emirates (UAE). Firstly, a holding company offers limited liability protection to its shareholders, meaning that their personal assets are not at risk in case of any legal claims or liabilities against the company.
Secondly, holding companies provide asset protection by insulating assets from potential risks and liabilities associated with the operating company.
Additionally, holding companies can take advantage of the UAE’s favorable tax environment, centralize management structures, facilitate business expansion, assist in estate planning, and provide access to funding. These benefits make holding companies an attractive option for investors and business owners in the UAE.
Importance of a Holding Company in the UAE
The importance of a holding company in the United Arab Emirates (UAE) lies in its ability to offer numerous advantages to business owners and investors. Firstly, a holding company provides a layer of protection to its shareholders by limiting their liability and protecting their personal assets in case of legal claims or liabilities against the company.
Secondly, a holding company can hold shares in other companies, real estate, and other assets, thereby providing a platform for diversification and growth.
In addition, a holding company can take advantage of the UAE’s favorable tax laws, including no corporate income tax or personal income tax. This can result in significant tax savings for the company and its shareholders. Holding companies in the UAE can also centralize management structures, provide greater efficiency and cost savings, and facilitate business expansion. With its many advantages, a holding company in the UAE is a valuable tool for businesses looking to expand their operations in the region and beyond.
What are the allowed activities for holding company?
In the United Arab Emirates (UAE), a holding company is allowed to engage in a variety of activities related to holding investments and managing subsidiaries. Some of the permitted activities for a holding company in the UAE include
Holding shares in other companies and providing funding to subsidiaries
Owning and managing real estate assets
Holding intellectual property and licensing it to subsidiaries
Providing management and consulting services to subsidiaries
Holding financial instruments such as bonds, stocks, and other securities
Providing loans to subsidiaries and investing in other financial instruments
Managing and administering pensions and other employee benefits.
Types of Holding Companies in the UAE
In the United Arab Emirates (UAE), there are two main types of holding companies that can be established: onshore and offshore. Onshore holding companies are established within the UAE and are subject to local regulations and laws. They can be formed as either a limited liability company (LLC) or a public joint stock company (PJSC). Onshore holding companies are required to have a minimum of two shareholders and must follow the UAE’s commercial companies law.
Offshore holding companies, on the other hand, are established outside of the UAE and are subject to a different set of regulations. They are often used for international business and are generally exempt from local taxes. Offshore holding companies in the UAE are established in free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These free zones offer a variety of benefits, including 100% foreign ownership, zero taxes, and simplified regulatory requirements.
In addition to these two main types of holding companies, there are also specialized holding companies that can be established in the UAE, such as property holding companies and investment holding companies. These companies have specific functions and are subject to unique regulations and laws. Ultimately, the type of holding company chosen will depend on the specific needs and objectives of the business owner or investor.
Licensing and Permitting of a Holding Company in UAE
In order to establish a holding company in the United Arab Emirates (UAE), the company must obtain the appropriate licensing and permits. The specific requirements for licensing and permitting may vary depending on the type of company structure chosen and the jurisdiction in which it is established.
For onshore holding companies, the company must be registered with the Department of Economic Development (DED) in the relevant emirate. The company must also obtain a trade license, which is issued by the DED and permits the company to engage in its chosen activities. Depending on the nature of the activities, the company may also need to obtain additional permits and approvals from other government agencies.
For offshore holding companies, the process for obtaining licensing and permitting is typically simpler. Companies established in free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), are subject to their own regulatory frameworks and can obtain a single license that permits them to operate within the free zone.
Overall, the process for licensing and permitting a holding company in the UAE can be complex and requires careful consideration of the specific requirements and regulations that apply. It is important to consult with legal and financial professionals to ensure that the company is fully compliant with all applicable laws and regulations.
Why open a Holding Company in UAE?
Creating a holding company in Dubai and other regions of the UAE bestows several advantages. Below are some of the benefits:
Limited liability One of the most momentous perks is that your assets are safeguarded from legal actions taken against your business. In case of any untoward incident befalling your business, the assets belonging to other subsidiary companies will remain secure. Moreover, even if one subsidiary faces financial issues, the remaining subsidiary companies will remain immune from liquidation measures or regulatory oversight.
Tax Efficiency with offshore status Establishing a holding company in the UAE can lead to tax savings, as income generated by foreign companies is not yet taxable in the UAE. Additionally, you can enjoy the benefits of double tax treaties with more than 80 countries spanning Europe, Asia, and Latin America.
Establishing Credit Establishing credit with banks, creditors, and other organizations will be more straightforward since lenders will evaluate the financial strength of the subsidiaries managed by the parent company. Interestingly, you can acquire a loan for your holding company and invest it in other assets.
Governmental support in the UAE The UAE government provides a supportive and convivial environment for businesses. Furthermore, foreign investors can avail of several incentives such as tax exemptions and trade privileges.
No minimum share capital requirement To encourage both foreign and local investment, the UAE government does not mandate a minimum amount of paid-up share capital. This makes the entire business registration and formation process hassle-free and affordable for many investors.
Different company structures You can form a holding company through various corporate structures, depending on your investment, preference, and business type. Some examples include a partnership business, limited liability company or LLC, joint stock company, or free zone business.
Greater privacy The UAE legal and regulatory authorities do not require you to disclose complete operational details of the subsidiaries frequently as long as you comply with all legal requirements. So, you can enjoy a greater level of privacy compared to owning any of the subsidiaries directly.
How to open a Holding Company in UAE?
Opening a holding company in the United Arab Emirates (UAE) involves several steps, which may vary depending on the type of company structure chosen and the jurisdiction in which it is established. Here are some general steps to follow:
Choose the type of holding company: There are different types of holding companies in the UAE, including onshore and offshore companies. Onshore companies are established within the UAE and are subject to the country’s laws and regulations, while offshore companies are established in free zones and are subject to their own regulatory frameworks.
Choose the jurisdiction: If you decide to establish an onshore holding company, you will need to choose the jurisdiction in which to establish the company. Each emirate in the UAE has its own Department of Economic Development (DED), which is responsible for business registration and licensing.
Choose a company name: The company name must be unique and should comply with the naming guidelines set by the DED.
Prepare the documents: You will need to prepare various documents, including the memorandum and articles of association, the company’s business plan, and the shareholders’ agreement. You may also need to provide proof of identity and other relevant documentation.
Obtain the necessary licenses and permits: Depending on the type of holding company and the activities it will undertake, you may need to obtain various licenses and permits from government agencies, such as the DED, the Ministry of Economy, and the Central Bank of the UAE.
Open a corporate bank account: You will need to open a corporate bank account in the name of the holding company. This will require providing the necessary documents and meeting the bank’s account opening requirements.
Register with the relevant authorities: You will need to register the company with the relevant authorities, such as the DED, and obtain a trade license.
Opening a holding company in the UAE can be a complex process that requires careful consideration of the specific requirements and regulations that apply. It is important to seek professional advice and assistance to ensure that the process is completed correctly and in compliance with all applicable laws and regulations.
Setup Cost of a Holding Company in UAE?
The process of setting up a holding company in the UAE involves certain expenses that you should know about. These include:
- Paying AED 120 for getting initial approval
- Spending AED 600 on registering your company’s trade name
- Paying AED 600 for applying for a license
- In case you need to rent a business center, it may cost you AED 25,000
- Additionally, there are fees associated with choosing a free zone, which could start at AED 15,000 for licensing.
It’s important to note that these costs don’t include expenses like taking business advice or drafting the Memorandum of Association. When you factor in these additional expenses along with rental, consultation, and administrative costs, the total cost of establishing a holding company in the UAE could be around AED 20,000 or more.
We are here to help you
A holding company is a good option in the UAE to manage and safeguard your assets. It has several advantages, including tax efficiency, reduced risks, flexibility, and diversity of subsidiary firms.
The process is not complicated, but you need to ensure that all the required documentation is complete and correctly filled out to avoid any hassles. Our experienced business consultants at EBMS Business specialize in setting up business in Dubai and the UAE, and we can assist you in making the process smoother. Contact us today to get started with your holding company in the UAE.