Expanding into the United Arab Emirates is a strategic move for international businesses aiming to enter the Middle East market. The UAE is known for its business-friendly environment, stable economy, and easy access to global trade routes. Many global corporations, startups, and family-owned companies choose to establish a subsidiary company in UAE as part of their regional expansion strategy.
A subsidiary allows a foreign company to operate as a separate legal entity while still being owned and controlled by the parent company abroad. Whether your business operates in technology, manufacturing, consulting, or logistics, setting up a subsidiary in the UAE helps you reach new clients, secure local contracts, and benefit from tax advantages.
This guide provides everything you need to know about how to set up a subsidiary company in the UAE — including the process, licensing, benefits, documents, costs, and compliance requirements.
Understanding What a Subsidiary Company Is
A subsidiary company is a separate legal entity established by a parent company (foreign or local) to operate in another region or market. In the UAE, this means your parent company can open a locally registered business that operates under its ownership but has independent liability.
Key Characteristics of a Subsidiary Company
A subsidiary operates independently from the parent company but remains under its full or majority ownership. It can conduct local business, open bank accounts, sign contracts, hire staff, and hold assets in its name.
This makes it different from a branch office, which operates as an extension of the parent company and cannot engage in new business beyond its parent’s approved activities.
Why Choose a Subsidiary Over a Branch?
A subsidiary gives you more flexibility, especially when expanding your product lines or entering new markets. It also limits financial and legal liability to the UAE-based entity, protecting the parent company from direct exposure.
Benefits of Setting Up a Subsidiary Company in the UAE
Setting up a subsidiary in Dubai or other Emirates offers strategic and operational benefits that attract global investors.
Limited Liability and Risk Protection
A subsidiary is treated as a separate company under UAE law. This structure limits the parent company’s liability to its investment in the subsidiary, safeguarding global assets from local risks.
Access to Local Markets
A UAE-registered subsidiary can directly trade within the UAE, bid for government contracts, and build partnerships with local clients — something foreign entities cannot do without local registration.
Tax Efficiency
The UAE offers 0% personal income tax, low corporate tax rates, and multiple free zones with full tax exemptions. For many global businesses, a UAE subsidiary improves their international tax planning and profit repatriation strategies.
Ease of Ownership
The UAE allows 100% foreign ownership for most business activities, making it simpler for international corporations to control their subsidiaries fully.
Gateway to Regional Expansion
Dubai’s global connectivity and access to GCC, African, and Asian markets make the UAE a perfect base for regional headquarters.
Types of Subsidiary Companies in the UAE
When you establish a subsidiary company in UAE, you can choose to operate in the mainland or within a free zone. The structure you choose determines your ownership rights, tax benefits, and scope of operations.
Mainland Subsidiary Company
A mainland subsidiary is licensed by the Department of Economy and Tourism (DET) in Dubai or equivalent authorities in other Emirates. It allows you to trade anywhere within the UAE and internationally.
This structure is ideal for companies planning to offer services, retail operations, or construction activities that target UAE clients directly. Mainland subsidiaries can participate in government tenders and open offices across the country.
Free Zone Subsidiary Company
A free zone subsidiary is formed within one of the UAE’s designated free zones. Each free zone caters to specific industries such as logistics, technology, media, finance, or manufacturing.
Free zones such as DMCC, IFZA, RAKEZ, JAFZA, and Dubai South offer attractive benefits like:
- 100% foreign ownership
- Full repatriation of profits
- Zero import and export duties
- Simplified customs processes
However, free zone subsidiaries cannot trade directly in the mainland market without using a local distributor or obtaining additional permits.
Offshore Subsidiary Company
An offshore subsidiary, such as one registered in JAFZA Offshore or RAK ICC, is primarily used for international holding, asset protection, and tax optimization. Offshore entities cannot conduct business within the UAE but are useful for global corporate structuring.
Legal Framework for Setting Up a Subsidiary in the UAE
The UAE has strong legal frameworks that promote business growth while ensuring transparency and accountability.
Commercial Companies Law
Under the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021), subsidiaries are recognized as separate legal entities. They must comply with UAE commercial, labor, and tax regulations like any other local company.
Ownership and Shareholding
Most activities now allow 100% foreign ownership, meaning your parent company can fully own the UAE subsidiary. However, certain strategic sectors such as defense, security, and natural resources may still require local participation.
Licensing and Regulation
The licensing process depends on your business activity. Mainland companies are licensed by DET or the Department of Economic Development (DED) in each emirate, while free zone entities are managed by the respective free zone authorities.
Steps to Set Up a Subsidiary Company in the UAE
Setting up a subsidiary company in Dubai or the UAE involves a structured process. Each step ensures compliance with UAE’s regulatory standards while enabling smooth operations.
Step 1: Define the Business Activity
The first step is identifying the activities your subsidiary will perform. Each business activity must align with the UAE’s approved activity list. Choosing the correct category is vital because it determines the type of license — commercial, industrial, or professional.
Step 2: Choose a Suitable Jurisdiction
You must choose between mainland, free zone, or offshore jurisdictions based on your goals. If you plan to serve UAE clients and the domestic market, the mainland is ideal. For export-oriented or specialized industries, free zones offer better benefits.
Step 3: Reserve a Trade Name
Your trade name must comply with UAE naming regulations. It should reflect your business activity, not include restricted words, and must be approved by DET or the relevant authority.
Step 4: Apply for Initial Approval
Submit your application with details about the parent company, intended activities, and ownership structure. The authority will issue an initial approval certificate, confirming that you can proceed with registration.
Step 5: Draft the Memorandum of Association (MOA)
The MOA outlines shareholding, ownership, management structure, and operational guidelines between the parent company and the subsidiary. It must be notarized and attested by the UAE authorities.
Step 6: Lease Office Space or Register a Business Address
A physical office or warehouse address is mandatory for business licensing. For free zones, flexi-desk options may suffice during the initial phase.
Step 7: Obtain Final Approvals and Trade License
Once all documents and premises are verified, the relevant authority issues your trade license. This marks the legal establishment of your subsidiary in the UAE.
Documents Required for Setting Up a Subsidiary in UAE
Documentation is crucial to ensure compliance with UAE company law. The following are generally required:
- Certificate of incorporation of the parent company
- Memorandum and Articles of Association of the parent company
- Board resolution authorizing the formation of the subsidiary
- Passport copies of shareholders and directors
- Attested Power of Attorney for company representatives
- Lease agreement or tenancy contract (Ejari for Dubai)
- Application forms and initial approval certificates
All foreign documents must be legalized and attested at the UAE Embassy and the Ministry of Foreign Affairs before submission.
Licensing Options for Subsidiary Companies in UAE
Depending on your activity, you’ll need the correct type of trade license.
Commercial License
Issued to companies involved in trading, importing, exporting, or distribution of goods and services. Ideal for retail, wholesale, and e-commerce operations.
Professional License
Applicable for service-oriented subsidiaries, such as consulting, design, IT, legal, or marketing firms. This license allows 100% ownership and is widely used by foreign service providers.
Industrial License
If your company manufactures or processes goods, you’ll need an industrial license. This is often required for companies producing, assembling, or packaging products locally.
Banking and Financial Setup for Subsidiaries
Opening a corporate bank account is a vital step after obtaining your trade license.
Choosing the Right Bank
The UAE hosts both local and international banks offering tailored services for subsidiaries. Options include Emirates NBD, FAB, ADCB, and HSBC. Choose a bank that supports international transactions and parent company fund transfers.
Account Opening Requirements
Banks will require:
- Valid trade license
- Shareholder and manager documents
- Parent company profile
- Proof of office lease
- Company stamp and MOA
Depending on your business model, the KYC process can take a few weeks. Maintaining transparent financial records is essential for compliance with UAE tax and anti-money laundering regulations.
Compliance and Regulatory Requirements
Once your subsidiary company in UAE is operational, you must adhere to local laws and reporting standards.
Corporate Tax Compliance
As of 2023, the UAE introduced a 9% corporate tax on business profits exceeding AED 375,000. Free zone companies may continue to enjoy tax holidays if they meet qualifying criteria.
VAT Registration
Companies with annual taxable supplies exceeding AED 375,000 must register for Value Added Tax (VAT) and file returns periodically.
Accounting and Auditing
Subsidiaries must maintain audited financial statements, prepared by UAE-approved auditors, to ensure compliance and transparency.
Employee Visa and Labor Laws
You’ll need to register with the Ministry of Human Resources and Emiratisation (MOHRE) to hire staff. Work visas are issued through the General Directorate of Residency and Foreigners Affairs (GDRFA).
Advantages of Establishing a Subsidiary in Dubai
Dubai is the UAE’s business heart — offering advanced infrastructure, global connectivity, and investor-friendly policies. Setting up your subsidiary company in Dubai provides unmatched strategic advantages.
Global Connectivity and Infrastructure
Dubai’s ports and airports connect your business to over 200 global destinations. The city offers advanced logistics networks for easy trade and supply chain management.
Free Zone and Mainland Flexibility
Dubai allows subsidiaries in both free zones and the mainland, giving businesses flexibility to choose based on ownership, taxation, and customer access.
Ease of Doing Business
Dubai consistently ranks among the world’s easiest places to do business. Streamlined registration, digital documentation, and government support make setup fast and efficient.
Common Challenges and How to Overcome Them
While the UAE makes company formation simple, foreign investors may face challenges without proper guidance.
Understanding Local Regulations
Navigating local labor laws, tax systems, and visa procedures can be complex. Working with professional consultants ensures compliance and prevents costly mistakes.
Choosing the Right Jurisdiction
Picking between mainland and free zone depends on your long-term goals. Expert advice helps match your structure to your expansion plan.
Banking Delays
Corporate bank account opening can be time-consuming due to compliance checks. Prepare all documents and maintain transparent financial records to speed up the process.
Costs of Setting Up a Subsidiary in UAE
The total cost depends on jurisdiction, size, and industry, but on average:
- Mainland setup: AED 25,000 – 60,000
- Free zone setup: AED 15,000 – 50,000
- Office rent and utilities: AED 20,000 – 100,000 annually
- Visa and labor costs: AED 5,000 – 15,000 per employee
Industrial or large-scale subsidiaries may require additional investment in warehouses, equipment, and machinery.
Conclusion
Setting up a subsidiary company in UAE is one of the best ways to expand your global business footprint in the Middle East. The UAE offers a perfect blend of infrastructure, stability, tax efficiency, and global connectivity. Whether you choose the mainland or a free zone, you’ll gain access to a world-class market that encourages foreign investment and growth.
With proper planning, documentation, and professional support, your subsidiary can become a profitable gateway for international expansion. For expert assistance and a smooth setup process, it’s best to work with an experienced Business Setup Company in Dubai, UAE.
FAQs
What is a subsidiary company in the UAE?
A subsidiary is a separate legal entity owned by a parent company. It operates independently in the UAE and can conduct local business, hire employees, and own assets.
How long does it take to register a subsidiary in Dubai?
The process typically takes 2 to 4 weeks, depending on jurisdiction and document readiness.
Can a foreign company own 100% of a UAE subsidiary?
Yes. Most business activities now allow 100% foreign ownership in both mainland and free zones.
What’s the difference between a branch office and a subsidiary?
A branch office operates as an extension of the parent company, while a subsidiary is an independent entity with its own license and liability.
What documents are required to set up a subsidiary in UAE?
You’ll need attested parent company documents, board resolutions, MOA, passport copies of shareholders, and a lease agreement for your UAE office.
Do subsidiaries in UAE pay corporate tax?
Yes. Subsidiaries are subject to the UAE’s 9% corporate tax on profits exceeding AED 375,000, unless exempt under free zone rules.
Can a subsidiary operate in multiple Emirates?
Yes. Mainland subsidiaries can operate across all Emirates, while free zone subsidiaries may need additional permits for inter-emirate operations.
Why should I hire a business setup company in Dubai?
They simplify legal, financial, and licensing procedures, ensuring your subsidiary is compliant and operational quickly.
