A Thorough Guide to Licenses of DIFC! Read Now

02Jun, 22

A Thorough Guide to Licenses of DIFC! Read Now

Dubai International Financial Center is home to gourmet restaurants, high-end boutiques, commercial facilities, and globally famous art galleries. It is a critical worldwide financial hub for South Asian, African, and Middle Eastern markets in a Dubai outskirts near Downtown and Business Bay. DIFC, or Dubai International Financial Center, is a 110-hectare zone renowned as the 'portal to growth.' DIFC is one of the most significant neighbourhoods in Dubai for frequent commuters, with public transportation that easily connects to other city sections.  Well, that's an introduction to the DIFC, but in today's blog, Dhanguard will extensively discuss the types of Licenses available in the DIFC if you want to establish your Company. So, without any further ado, let's learn!

Understanding DIFC:

The Dubai International Financial Centre (DIFC) is a special economic zone within Dubai that provides a platform for financial and non-financial institutions to grow and thrive. It's well-known for its world-class regulatory framework, modern infrastructure, and the attractive business environment it offers. Since its establishment in 2004, the DIFC has quickly developed into a well-known international financial hub, enabling commerce across diverse industries, including banking, finance, insurance, legal services, fintech, etc. It presents an active stage for enterprises to thrive due to its robust legal and regulatory system, streamlined business infrastructure, and advantageous geographic position.

One of the world's top 10 onshore financial hubs, DIFC provides enterprises and financial institutions with a safe and effective platform to access and exit the region's rising markets. The DIFC is the ideal foundation to capitalize on the constantly expanding demand for financial and business services in the MENASA(Middle East and North Africa) region because of its superb infrastructure, independent and high-quality regulator, common law framework, and tax efficiency.

Here are some key points to explain what a DIFC freezone is:

  1. Tax Benefits: Companies operating within DIFC are subject to zero per cent tax on profits and have no restrictions on capital repatriation.

  2. Regulatory Environment: DIFC has its regulatory authority, the Dubai Financial Services Authority (DFSA), which oversees financial institutions and ensures Compliance with international standards.

  3. Business Types: DIFC accommodates various business types, including financial institutions, fintech startups, professional service firms, and non-financial businesses.

  4. Flexible Ownership: Foreign investors can fully own their companies in DIFC without needing a local partner or sponsor.

  5. Intellectual Property Protection: Companies in the DIFC benefit from strong intellectual property protection laws.

  6. Residential Facilities: DIFC also provides residential accommodations, creating a convenient environment for employees and residents.

Why choose DIFC freezone for business setup

There are several compelling reasons to choose the Dubai International Financial Centre (DIFC) free zone for setting up a business in Dubai and the broader United Arab Emirates. Here are some of the key advantages:

  1. Full Ownership: Foreign investors can have 100% ownership of their businesses in DIFC without needing a local partner or sponsor, offering more control and flexibility.

  2. Global Accessibility: DIFC is strategically located in Dubai's heart and easily accessible from major international airports. This makes it a convenient and well-connected base for companies with international operations.

  3. Strong Intellectual Property Protection: DIFC has robust intellectual property protection laws, which can be crucial for companies in knowledge-based industries.

  4. Global Recognition: DIFC is globally recognized and respected, which can boost the credibility and reputation of businesses operating within its jurisdiction.

Why set up a financial services firm in the DIFC?

The leading financial center in the area is the DIFC. The center offers a wide range of financial service operations, a world-class standard of living, and an integrated environment. It enjoys a good reputation both domestically and internationally.

Additionally, there are prospects for startups. The DIFC Fintech Hive program, which acts as an accelerator for startups to test their ideas and offer them to potential investors, was made possible by the current focus on fintech. 

Role of DFSA

The  Dubai International Financial Centre's regulatory agency is crucial in licensing entities and individuals wishing to operate financial services in the Dubai International Financial Centre (DIFC). The licensing process by the DFSA is designed to uphold the integrity and reputation of the DIFC as a financial hub. It aims to attract reputable and well-regulated financial institutions while ensuring that consumers and investors are protected and financial stability is maintained.

DIFC License categories 

The Dubai Financial Services Authority, or DFSA, requires firms interested in providing financial services from the DIFC to file applications. The type of business the applicant seeks to operate determines the type of license necessary-

  1. A DIFC Category 1 License will apply to full-fledged banks that accept deposits.

  2. A DIFC Category 2 License is required for a market maker or provider of credit.

  3. A DIFC Category 3A License is needed for an STP broker operating on a matched principal basis.

  4. A DIFC Category 3B License is needed for Custodial Guardians and Employee Capital Acquisition Systems

  5. A DIFC Category 3D License is needed Financial Service Operator

  6. A DIFC Category 4 License is required for low-risk activities such as advising or arranging, 

  7. A DIFC Category 5 License is needed for Islamic Affairs

Category Four license of DIFC

Category 4 licenses are often sought by those looking to provide professional services within the DIFC. This category encompasses law firms, accounting and auditing firms, management consultancy firms, and more. To obtain a Category 4 license, businesses must meet specific criteria, which include:

  • They are demonstrating their expertise and experience in their respective fields.

  • Meeting particular financial requirements.

  • Providing evidence of professional indemnity insurance.

  • Complying with DIFC's rules and regulations.

Advisory and Activity Planning (Category 4)

  • $10,000 in initial capital

  • US$ 140,000 - Starting Capital for a Crowdfunding Platform or Money Transfer Services

  • Activities- Advising on Financial Products, Arranging Custody, Insurance Intermediation, Insurance Management, Operating an ATS, Providing Fund Administration, Providing Trust Services, Operating a Crowdfunding Platform, Arranging or Advising on Money Services

  • Appointments Required- Depending on the extent, scope, and nature of the product portfolio intended to be offered by the DIFC, the DFSA requires the firm to be suitably staffed.

The DFSA would require the following appointments at the very least:

Board of Director

A well-organized Board of Directors with solid governance policies.

Senior Executive Officer

A senior banking executive with over ten years experience is usually based in the UAE.

Finance Officer

A senior finance professional with appropriate qualifications. The FO for a group might be from the parent firm and does not have to be a UAE resident. This job can be outsourced as well.

Risk Officer

This is a non-mandatory post that is generally outsourced.

Compliance Officer

A senior compliance specialist with over ten years of experience is normally based in the United Arab Emirates.

Money-Laundering Reporting Officer

A senior anti-money laundering specialist with more than ten years of experience who is usually based in the UAE. This function can be integrated with Compliance, allowing one person to handle both tasks. The duties of CO and MLRO can also be outsourced.

Internal Auditor 

A senior and appropriately qualified internal auditor. Usually done by a professional firm.

DFSA License Categories:

The Dubai Financial Services Authority (DFSA) is the regulatory body overseeing the financial activities within the DIFC. They offer different categories of licenses based on the nature of your business, such as:

  • Licensed Firms: Includes banks, financial intermediaries, and investment firms.

  • Authorized Firms: Includes insurance firms, operators of a recognized investment exchange, and more.

  • Registered Firms: For businesses offering legal consultancy, accounting, auditing, and related services.

  • Ancillary Service Providers: For those offering support services, such as IT providers.

DIFC Business Setup:

To establish your business in DIFC, you'll need to follow these general steps:

Decide on Your Business Structure

Select the most appropriate legal form for your business. Standard options include Limited Liability Companies (LLCs), branch offices, and representative offices.

Name Reservation

Choose a unique business name and get it approved by DIFC authorities.

Prepare Required Documents

Collect all the necessary documents, including business plans, financial projections, and legal documents.

Application Submission

Submit your license application and all the supporting documents to the DIFC authorities. You can do this online or through a registered business setup consultant.

Payment of Fees

Pay the required fees, which vary based on the license category and the nature of your business.

License Issuance

Upon approval, your license will be issued, and you can commence business operations in the DIFC.

DIFC Trade License Cost

The cost of a Dubai International Financial Centre (DIFC) trade license can vary depending on several factors, including the type of business activity, the license category, and the specific requirements of your business. 

Here are some key points to consider when it comes to the cost of a DIFC trade license:

License Categories 

DIFC offers different categories of licenses based on the nature of the business activities. These categories include Banking and Credit Services, Professional Services, Retail, Real Estate, and more. The cost of the license can vary depending on the category.

License Type

DIFC offers various licenses, including a Commercial License for trading and retail activities, a Service License for professional and service-related businesses, and a Holding Company License. The cost can vary depending on the type of license you require.

License Duration

Licenses in DIFC are typically issued for one year, and the cost is generally calculated annually. You'll need to renew your license annually, incurring the associated fees yearly.

License Application Fees

When you apply for a DIFC trade license, you must pay an initial application fee. This fee can vary based on the license category and the nature of your business.

Additional Charges

Besides the base license fees, additional charges may be for specific services or facilities you require within DIFC. These include office space, support services, and DIFC infrastructure access.

Registration and Incorporation Costs

There may be costs associated with registering and incorporating your business in DIFC, such as registration fees and legal or consultancy fees.

Visa Costs

If you or your employees require visas to work in DIFC, additional costs will be associated with visa processing and sponsorship.

Capital Requirements

Depending on your business activities and license category, there may be minimum capital requirements that you need to meet, which can affect your startup costs.

It's essential to check the most up-to-date fee structure and requirements with the Dubai International Financial Centre Authority or consult with Dhanguard. Costs can change over time and may be subject to specific conditions, so it's crucial to clearly understand the fees and requirements relevant to your particular business setup in DIFC.

Conclusion

The DIFC is an ideal destination for businesses looking to establish a presence in the Middle East. Understanding the various licenses and the regulatory framework is essential for a smooth business setup process. Whether you're interested in a Category 4 license, navigating DFSA license categories, or need information on DIFC business setup and trade license costs, this guide should be a valuable resource for your venture. To enhance openness and eliminate anomalies in financial transactions by enterprises operating in the DIFC, the DFSA maintains a careful regulatory framework based on worldwide best practices. Its goal is to ensure that enterprises operating in the Financial Center meet high quality and compliance standards. Thus, we hope this blog provides you with insightful information. For more information on other related aspects, check out our website. Dhanguard by your side, you gain more than a service—you acquire a tactical partner who cares about your success. Let's take this adventure together and see your Company prosper like never before.