A holding company is an association of smaller businesses engaged in diverse industries and linked together. The primary business entity would have significant shareholdings and a strong presence in the enterprises' business environments. However, the holding company cannot direct their business operations, issue policy directives, develop a retail enterprise, or engage in commercial activity. Setting up a holding company in the United Arab Emirates (UAE) can be a strategic move for businesses looking to optimize their corporate structure, enjoy various financial benefits, and expand their international reach. This blog will guide you through establishing a holding company in the UAE, focusing on the processes, benefits, and considerations.
What is a Holding Company?
A holding company is an entity that primarily exists to own and manage investments in other companies, known as subsidiaries. It does not engage in active business operations but instead holds shares in subsidiary companies. These subsidiaries can be based locally or internationally. In other words, A holding company is a type of legal corporation that possesses the assets and shares of other companies. Although it holds its subsidiaries responsible for managing them, it does not conduct any business operations directly. By separating its support from the liabilities of its subsidiaries, it also shields its stockholders from liability concerns. Holding corporations are popular among local and foreign investors and entrepreneurs in the United Arab Emirates, much like many other company types. Those who wish to enjoy ownership benefits and combine their corporate investments into a single organization will find it appealing.
Why Set Up a Holding Company in the UAE?
There are many benefits to establishing a holding company in Dubai and other UAE cities. To name a few, these are:
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Tax Benefits: The UAE offers a favourable tax environment, with no corporate income tax, no capital gains tax, and no withholding tax on dividend distribution.
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Asset Protection: Holding companies can help segregate and protect assets from potential risks and liabilities.
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Strategic Expansion: Establishing a holding company in the UAE can facilitate international expansion by acting as a central hub for subsidiaries across various jurisdictions.
Some more benefits of a Holding Company are:
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The owner is qualified to apply for a resident visa.
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Fastest business establishment
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There is no business tax.
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Holding corporations are excluded from paying VAT.
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Paid-up share capital is not necessary.
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The Holding Company has access to UAE financial infrastructure and financing possibilities. To finance further enterprises
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Complete discretion about investing
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The subsidiary companies bear no risk or accountability for the debts.
How Do UAE Holding Companies Operate?
Holding firms operate under the framework of the UAE, both in Dubai and other regions. Holding companies are not allowed to engage in commercial activities such as trade, product manufacturing, or customer service, but they are allowed to possess shares in other firms.
In the United Arab Emirates, possessing a certain amount of paid-up capital is unnecessary to establish and manage a holding company. This streamlines the company formation procedure and lowers obstacles to entry. You can own a holding company with as little as $1 as a minimum capital.
Permitted Activities for the Holding Company
In the United Arab Emirates, a holding company can control and own shares of businesses operating in any industry. The parent or holding corporation may also possess the intellectual and material assets of the subsidiaries that it manages and owns. The parent firm can only engage in direct business operations with some managerial control over its subsidiaries.
Types of Holding Companies in the UAE:
A holding company in Dubai or the UAE may incorporate different business entities. The holding company has the best potential for growth because it can hold shares in several businesses. Investment diversification is one of the most fruitful and beneficial business strategies, as is well recognized.
The holding company could be:
Onshore Holding Company
Creating an onshore or mainland holding company is your first choice. This holding company operates within the UAE mainland, allowing more flexibility in conducting business activities locally. Any holding company must register as a commercial business or activity with the UAE government. For such establishments, the Ministry of Economy (MoE) of the United Arab Emirates is the regulatory agency, and compliance with the Company Laws of the UAE is mandatory. Without participating in direct trade or commercial activity, the law permits your mainland holding company to carry out administrative and commercial operations through its subsidiary firms in the United Arab Emirates and overseas.
Free Zone Holding Company
You can set up a holding company in one of the UAE's many free zones, each with unique advantages. To encourage international investment and trade, the UAE government established more than 60 economic free zones in the country's main Emirates, including Dubai, Abu Dhabi, and Sharjah. You can operate more freely in a free zone, providing benefits like extensive tax exemptions, no currency limits, and the opportunity to repatriate your profits and initial investment. One of the several business-friendly free zones in the UAE must be selected before you may establish a Free Zone Holding Company there. These include, among many others, the Sharjah Airport International Free Zone (SAIFZ), Abu Dhabi Global Market (ADGM), Jebel Ali Free Zone Authority (Jafza), and Dubai International Financial Centre (DIFC).
Setting Up a Holding Company in Dubai, UAE:
Let us now examine the process of setting up a Holding Company in the UAE:
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Legal Structure: Choose the legal structure for your holding company, such as Limited Liability Company (LLC), Public Joint Stock Company (PJSC), or Free Zone Company.
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Registration Process: Register your company with the Department of Economic Development (DED) if you choose an onshore setup or the relevant free zone authority for a free zone holding company.
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Capital Requirements: Some jurisdictions may require a minimum share capital.
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Shareholding and Directorship: Determine the shareholding structure and appoint directors for your company.
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Bank Account Opening: Open a corporate bank account in a UAE-based bank.
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Obtain Necessary Licenses: Depending on the activities you plan to undertake, you may need specific licenses.
Requirements for Setting Up a Holding Company in the UAE
The government of Dubai and other UAE emirates has established precise guidelines for starting a holding company. A UAE holding company license will be granted after confirming that the business satisfies all standards. The rules and specifications contain the following:
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A board of management is required for a holding company to develop shared policies for its subsidiaries.
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Every subsidiary company must appoint a representative director from the controlling company.
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The holding company should properly oversee all business operations carried out by the subsidiary firms.
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Risks associated with the industry, such as stock market involvement and accepting foreign capital, must be curbed by holding company directives.
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The holding company is responsible for ensuring the subsidiary companies have sufficient capital.
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The holding company would make the final determination regarding the contracts and agreements entered into by the companies.
Our qualified staff will work with you to complete the holding company's incorporation and the necessary paperwork for a holding company license in the United Arab Emirates. Contact us right away.
Conclusion
Setting up a holding company in the UAE, particularly in Dubai, can offer numerous advantages, including favourable tax treatment, asset protection, and a strategic platform for international expansion. By carefully following the legal requirements, regulations, and best practices, you can effectively make the most of this business structure and achieve your corporate goals. Dhanguard invites you to start your entrepreneurial adventure in the UAE. In recent years, we have assisted numerous expats in realizing their aspirations. Our path is energized by the good identity developed throughout that time. Our strengths are highly experienced professionals. They would significantly contribute to your project's success and your company's advancement. You can rely on us to give you the best help possible.