When incorporating a business in Dubai and the UAE, you have several setup types to choose from. If you’re looking to start a company to trade from or within the UAE, you can set up a mainland business or a free zone company.
If, however, you are looking to start a business in order to purchase real estate or hold investments in other corporate entities, you can start a UAE Holding company.
If you think this might be the most suitable option for your intended business activities, keep reading – what follows is a simple guide to opening a holding company in the UAE.
What is a holding company?
The holding company structure here in the UAE is similar to that of that rest of the world.
In short, holding companies are not permitted to engage in any standalone commercial activities. This means a holding company is not authorised to produce or sell any goods or services.
The primary activity of a holding company is to hold stakes in subsidiary companies or to purchase and own real estate. Holding companies are also ideal for owning trademarks, patents and shares.
When you hold a holding company license, your business activity is listed as ‘activities of holding companies’. Under this activity you are only permitted to hold assets and stakes as listed above. This business activity excludes any active management, strategy and planning.
It is possible to open corporate bank accounts with a holding company, however, you are unable to sponsor resident and employment visas as the holder of a holding company license.
Formation of a holding company in the UAE
The process involved in the formation of a holding company in the UAE differs slightly depending on exactly where you intend to set up. In most cases you should make your application to the managing authority of the free zone that you wish to trade from.
It’s a good idea, when making your application, to work with a company setup expert. As well as making and managing your application on your behalf, company setup experts can also handle all legal requirements, liaising with all relevant industry bodies and government authorities.
By establishing your business, you agree to comply with UAE Company Law and its regulations regarding holding companies.
To comply with Company Law, you must appoint a management board which will oversee the organisation of any subsidiaries held by the company. The management board must also supervise all activities undertaken by the subsidiaries.
It is also the responsibility of the holding company shareholders to appoint a director for each subsidiary and to ensure that the subsidiaries have the funds to carry out their business activities.
Holding company benefits
Starting a holding company is one of the fastest routes to company ownership in the UAE. There is usually no requirement for paid-up share capital when starting a UAE holding company and licensing tends to be less expensive than alternative options.
Tax-efficiency is another major benefit of starting a holding company. UAE holding companies receive profits from their subsidiaries after tax. In the UAE, the corporate tax rate is 0% meaning there are no tax deductions to subsidiary profits. Holding companies are also exempt from any further taxes such as VAT.
Many international entrepreneurs also look to UAE holding companies for greater privacy over their dealings as owners are able to stay anonymous.
Starting a holding company in the UAE is also a great way to spread risk. Holding companies limit shareholder liability as you will not be liable for the debts and obligations of any subsidiaries. Finally, starting a holding company out here allows you to access the UAE banking system. As well as opening a corporate account in the UAE, shareholders of holding companies are able to access a range of financial products, including bank loans which can be used as investment capital.
Holding company structure
A holding company is controlled by an appointed management board. The members of this board are responsible for implementing processes regarding the running of the subsidiaries and ensuring the flow of money to subsidiaries in order to carry out business activities.
Profits from subsidiary companies can be paid to the holding company in the form of dividends. These are entirely free from taxation.
The holding company is not liable for the debts or obligations of the subsidiaries; however, it does have a responsibility to ensure that subsidiaries remain solvent. Where a holding company is in control of multiple subsidiaries, which is often the case, the operations and assets of the subsidiaries must be kept separate.
Holding company cost in Dubai, UAE
The cost of opening a holding company in Dubai, UAE, will depend on various factors.
However, as holding companies are registered in UAE free zones, the cost of opening a holding company in Dubai is usually lower than elsewhere. The total cost is made up of several components. There are fees for making your application, obtaining your license, registering your company name and safeguarding your privacy. In all, you should expect to pay in the region of AED10,00 to open a holding company in Dubai, UAE.
Opening a holding company in Dubai, UAE
The process of setting up a holding company in Dubai has been designed with simplicity in mind. That said, it does take some in-depth knowledge of the UAE and its many customs and regulations.
That’s why it’s always advisable to acquire the services of a business setup company who can not only advise on the process but also seek out the most suitable license and setup type for your business, based on your needs and your budget.
When you use business setup services, you also gain peace of mind that your applications are free from errors and omissions – both of which can lead to delays and rejection.
When you work with a company formation specialist, all you need to provide is some basic documentation and a little information about the nature of your business. Then, sit back and let the experts take care of the rest – managing your license and visa applications, communicating with all relevant departments and authorities, and reporting back when you’re ready to start trading. It really is that simple.