Business Entity Types in the UAE

Branch of a Foreign Company

Legal personality:

A Branch is not a separate legal entity from its foreign parent company; it is merely the parent’s operational extension in the UAE.

Legal liability:

The foreign parent retains full, unlimited liability for all obligations and liabilities of the Branch in the UAE.

Ownership:

The Branch is entirely controlled by the foreign parent; it cannot have additional local or foreign shareholders.

National Service Agent (NSA):

In the Mainland regime, a Branch must appoint a National Service Agent—a local figure with no shareholding who performs administrative and representational functions before local institutions.

Limited Liability Company (LLC)
Legal personality:

An LLC is a separate legal person, distinct from any foreign parent, with its own contractual capacity and assets.

Legal liability:

Shareholders’ liability is limited to the capital invested in the local company.

Ownership:

Up to 100% foreign ownership is permitted in Free Zones and, for many activities, also in the Mainland (subject to regulated exceptions requiring local partnerships).

Specific legal form:

Incorporation requires a formally registered Memorandum of Association (MOA) approved by the local authorities.

Branch of a Foreign Company

Corporate tax:

As an extension of the parent, a Branch is locally subject to Corporate Tax only on profits generated in the UAE. Since June 2023, the rate is 9% on profits above AED 375,000.

Profit treatment:

Branch profits may be repatriated freely to the foreign parent with no additional UAE withholding taxes.

VAT:

Obligation to register for UAE VAT at the standard 5% rate if conducting taxable activities in the UAE.
Limited Liability Company (LLC)

Corporate tax:

An LLC is subject to the 9% corporate tax on locally generated net profits above AED 375,000. In Free Zones, specific tax reliefs may apply if regulatory conditions are met.

Profit treatment:

Distributions of profits by the LLC to foreign shareholders are not subject to additional UAE withholding taxes.

VAT:

Obligation to register and account for 5% VAT on taxable local supplies and on imports into the UAE.

Branch of a Foreign Company

Activity limitations:

A Branch may carry out only those activities expressly included in the foreign parent’s corporate purpose; it cannot autonomously diversify local activities.

Banking operations:

Typically enjoys less operational autonomy within the local banking system, as it relies on the parent’s credit standing and financial documentation.

Commercial contracting:

Local contracts entered into by the Branch directly involve the foreign parent’s legal and asset liability.
Limited Liability Company (LLC)

Broader operational freedom:

Subject to formal approval, an LLC can undertake a wide range of commercial and industrial activities, independently of any foreign parent’s corporate purpose.

Banking and finance:

Full operational autonomy in banking relationships, with the ability to obtain local financing based on the LLC’s own credit profile and assets.

Commercial contracting:

The LLC can contract locally in its own name without directly involving the foreign parent’s liability, thereby limiting cross-border exposure.

Branch of a Foreign Company

HR management:

Staff hired by the Branch are its employees, but contractual and labour obligations are ultimately attributable to the foreign parent’s responsibility.

Labour compliance:

Employment contracts follow UAE Labour Law (Mainland) or the specific rules of each Free Zone and must be registered with the competent local authorities.

Compensation and benefits:

Often aligned with the European parent’s policies, while meeting UAE minimum statutory requirements.

Limited Liability Company (LLC)
Autonomous HR management:

As an independent entity, the LLC has full decision-making autonomy over local and expatriate staff, enabling market-specific compensation and benefits policies.

Independent labour compliance:

Application of UAE Labour Law in the Mainland (or Free Zone regulations), with contractual and legal obligations fully separate from the European parent.

Compensation and benefits:

Freedom to define pay packages, incentive plans, and welfare policies tailored to local strategic needs.

Branch of a Foreign Company

Accounting and audit:

The Branch must keep accounts separate from the parent’s. Branch financial statements are generally subject to mandatory local audit.

Reporting to the parent:

Obligation to prepare detailed periodic reports on local activity for inclusion in the parent’s consolidated reporting.

Limited Liability Company (LLC)
Independent accounting:

The LLC must maintain its own accounts under international (IFRS) and local standards, with an annual statutory audit.

Reporting autonomy:

Obligation to prepare and approve certified local annual financial statements, with scope to build independent internal control and administrative systems.