How can you set up a holding company in Dubai?

People who don’t have first-hand experience with Dubai believe “Dubai’s revenue comes primarily from oil!” which is in fact a wrong belief.. Dubai is considered the wealthiest emirate in the UAE after the capital, Abu Dhabi, and the UAE’s financial capital. Dubai has developed as a global hub in trade and tourism. Dubai is also known for service industries such as IT and finance since the Dubai International Financial Centre (DIFC) opened in 2004. Though it may be a surprise, Oil is only less than 1% of Dubai’s GDP. Nowadays, Dubai has entrepreneurs and investors from all corners of the world. One popular structure for business operations in Dubai is the holding company. If you’re considering establishing a holding company, Dubai is certainly one to keep in mind. Holding companies in Dubai can enjoy multiple perks and competitive advantages due to the friendly business setup procedures in Dubai.

What is a holding company?

“A holding company is a company that owns other companies and oversees their operations but exists solely to operate those subsidiaries.” They do not produce goods or services directly but instead hold shares or interests in other companies or the subsidiaries. It does not engage in the day-to-day operations of its subsidiaries but instead focuses on strategic management and investment. This structure offers several advantages.

The bright side of setting up a holding company in Dubai

Dubai as a prime location for business offers many opportunities and advantages for businesses. Some of the advantages for businesses and entrepreneurs include the following:

1. Tax advantages: Entities planning to start a holding company in Dubai can get multiple tax advantages, as there is only a minimal percentage of corporate tax, which is around 9%. The businesses can take advantage of utilizing the profit for further operations. Also, there is no personal income tax, which opens the door for all business entities.
2. Risk management: The best way to reduce or mitigate the risk is to diversify the assets and liabilities. This process can help the parent companies and the entities reduce the huge consequences of any losses.
3. Synergy and Diversification: By acquiring multiple subsidiaries and businesses, the parent company or the holding company in Dubai can ensure to acquire strategic synergies and to get a competitive edge over the competitors.
4. Business friendly environment: For the holding business setup in Dubai, the business environment provides multiple advantages and easy set-up procedures, which can enable the entrepreneur from any part of the globe to come and set up the holding company in Dubai.

Setting up a holding company in Dubai

The procedure of setting up a holding company is quite like the procedures of setting up usual businesses; hence, there are some instances where the entities might come across various procedures that are dependent on multiple factors like nature, size, capital of the business, range of operations, etc. The common procedures for setting up a holding company in Dubai include the following:

Step 1: Select type of business

Figure out what sort of holding company fits your needs before doing any paperwork. Because depending on your choice, some nuances may change. The company’s structure, jurisdiction, and requirements depend on your company’s nature. For example,

• If it’s an investment, holding the DIFC (Dubai International Financial Centre) offers some unique benefits.
• If what you are looking for is asset protection, a free zone might be the ideal location.

Step 2: Decide on jurisdiction

1. Mainland allows you to directly interact with the UAE market. But it comes with certain local ownership requirements (recently, certain sectors are exempt from this).
2. Free zones are special areas that offer 100% foreign ownership, tax exemptions, and easier import/export processes. You can pick your free zone based on your interests because each caters to specific businesses. DMC (Dubai Media City) is a free zone catering to the media sector. Popular free zones are DMCC, JAFZA, and DIFC.
3. If you are looking to hold international assets, offshore jurisdiction is the ideal choice. Although they are not allowed to do business directly with the country.

Step 3: Paperwork and Legal Procedures

1. Choose a name for your company. It should comply with the naming conventions of the chosen jurisdiction and also avoid offensive names.

Click here to know more about selecting a name for your business in the UAE

1. Prepare the Memorandum of Association (MOA), which outlines the company’s activities, ownership structure, and management. A MOA is a foundational document required to form a company in the UAE.
2. Prepare the Articles of Association (AOA), which outline the rules and regulations that govern a company’s operations. This is not strictly necessary. 
3. Submit Required Documents (passport copies of shareholders and directors, proof of address, and sometimes a bank reference letter). These are typically submitted to the relevant licensing authority or regulatory body based on your chosen jurisdiction.
4. Secure a registered office. A registered office is a legal requirement for a company in many jurisdictions, including Dubai. This ensures that your business is accountable and reachable for regulatory matters.
5. Get approval from authority. Some businesses may require additional approvals, so it is important to check with the free zone authority or DED (Dubai Economic Development) if setting up on the mainland.

Step 4: Open a corporate bank account

To create an account, provide 

• Company registration documents
• Proof of shareholder identities
• Business plan or description of intended activities

It may take a few weeks to get the account approved.

Step 5: Compliance and obligations

There are some obligations even though there is a favourable tax environment.

• ESR (Economic Substance Regulations): Your holding needs to meet economic substance requirements.
• UBO (Ultimate Beneficial Owner) Reporting: You should disclose the ultimate owners of the company to authorities.
• Annual Audits: Some jurisdictions require annual financial audits.

Now that your company is up and running, the real work begins! To effectively manage, you should

• Centralize your management
• Consider tax optimization strategies.
• Stay compliant 

Setting up your holding company in Dubai with CDA

Whatever your specific goal is, a holding company in Dubai opens up a lot more than you think. With the right planning and guidance, choosing the appropriate jurisdiction, and keeping up with regulatory requirements, you’ll be well on your way to leveraging Dubai’s benefits for your holding company. The business setup consultants in Dubai, like CDA can assist your holding company to get set up and get the required licenses for the operations. Our team of experts can serve you with compliance services, PRO services, HR services, and other multiple business setup services for your holding company.

To know more, connect with CDA professionals now!