Branch of a foreign company: what it means for UAE businesses.

What branch of a foreign company means

Also called: Foreign branch.

A branch of a foreign company is an extension of an overseas company into the UAE, not a new company. It has no legal personality of its own and acts in the parent's name. On the mainland, Article 336 of the Commercial Companies Law says a foreign company may not trade or open a branch or office without a licence from the competent authority, subject to the Ministry's approval, and Article 337 requires entry in the Foreign Companies Register kept by the Ministry. Free zones license branches under their own rules.

The branch must keep books as if it were a separate business. Article 338 requires an independent balance sheet and profit and loss account, an auditor registered to practise in the UAE, and an annual filing of the accounts, the audit report and the parent's accounts. The old rule that a foreign branch must appoint a UAE national service agent has been removed.

For Corporate Tax, a branch is a fixed place of business and so a Permanent Establishment of a Non-Resident Person. It must register within six months of coming into existence and pays tax on the profit attributable to it, with any head office charges priced at arm's length.

How it works

• A representative office is different: it may only study the market and production capabilities and cannot trade (Article 339).
• Mainland branch applications need Ministry of Economy approval in addition to the emirate licence.
• The branch registers for Corporate Tax within six months of the date the Permanent Establishment exists (Federal Tax Authority Decision No. 3 of 2024, Article 4).
• Taxable income is the branch's own profit, taxed at 0% up to AED 375,000 and 9% above, with dealings with head office tested under the arm's length rules.
• A branch registered in a free zone can be a Free Zone Person, because the Corporate Tax Law's definition includes a branch of a Non-Resident Person registered there.
• When the branch closes, the Ministry deletes it from the Foreign Companies Register (Article 337).

Worked example

A Mumbai engineering firm runs a Dubai mainland branch. The branch earns AED 4,000,000 from UAE clients, has local costs of AED 2,900,000, and is charged AED 200,000 by head office for management support priced at arm's length.

Branch revenue	AED 4,000,000
Local branch costs	AED 2,900,000
Head office charges at arm's length	AED 200,000
Taxable income of the branch	AED 900,000
Corporate Tax: 525,000 above the 375,000 band at 9%	AED 47,250

The branch is taxed in the UAE on its own profit, so head office charges must be supportable or the deduction will be challenged.

Common mistakes

• Assuming the branch is outside UAE tax because the parent pays tax at home. The UAE taxes the branch profit; relief in the parent's country is a separate question.
• Charging the branch head office fees without a contract, evidence of the service or arm's length pricing.
• Skipping the branch audit because the parent is audited. Article 338 requires the branch's own audited accounts.

The law

• Federal Decree-Law No. 32 of 2021 on Commercial Companies, Articles 336, 337, 338 and 339
• Federal Decree-Law No. 47 of 2022, as amended, Article 1 (Free Zone Person), Article 11, Clause 4 and Article 14, Clause 2(b) (a branch is a fixed place of business)
• Federal Tax Authority Decision No. 3 of 2024, Article 4 (registration of Non-Resident Persons with a Permanent Establishment)

Frequently asked questions

What is the difference between a branch and a UAE subsidiary?

A subsidiary is a UAE company with its own legal personality and is a Resident Person for Corporate Tax. A branch is part of the foreign parent, so the parent stands behind its obligations and the branch is taxed as a Permanent Establishment of a Non-Resident Person.

Does a foreign branch still need a UAE national service agent?

No. The u.ae portal notes that the obligation for branches of foreign companies to appoint a UAE national service agent was removed when the companies law was amended to allow full foreign ownership.

Related terms

Permanent establishment · Resident person · Transfer pricing · Audited financial statements · Free zone company. See every term in the UAE tax glossary.

For the full picture, read our guide: Transfer Pricing Basics for UAE SMEs That Deal With Their Own Owners.

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