Opening a branch of a foreign company in the UAE: the accounting and tax setup guide

A branch is the fastest legal way to put a foreign company on the ground in the UAE, and also the most misunderstood. Founders treat it like “a subsidiary but simpler.” It is not. A branch has no separate legal identity from its parent, and that single fact changes how you book it, how you report it, and how much liability sits with the head office back home.

This guide covers the three questions we get asked in almost every branch setup call: how branch accounting differs from a subsidiary’s, when a branch triggers UAE corporate tax as a Permanent Establishment, and what the parent company still has to keep on file.

Branch or subsidiary: the accounting difference that matters

A subsidiary is a new UAE company. It has its own trade license, its own legal personality, and its own balance sheet that stands apart from the parent’s. Liability generally stops at the subsidiary’s own assets.

A branch is none of that. It is the same legal entity as the parent, simply licensed to operate from a UAE address. There is no separate share capital, no ring fenced liability, and no independent legal existence to point to if something goes wrong.

	Branch	Subsidiary (LLC / Free Zone company)
Legal personality	Same entity as the parent	Separate legal entity
Parent liability	Full, unlimited	Generally limited to invested capital
Ownership	100% by definition, it is the same company	Can bring in local or other shareholders
Accounting books	Own books required in the UAE, consolidated into the parent’s group accounts	Own books, own standalone financial statements
Profit repatriation	Internal transfer, not a dividend	Dividend distribution, may carry its own tax and timing considerations

Since Ministerial Resolution No. 138 of 2024 replaced the older framework, a mainland branch of a foreign company no longer needs to appoint a UAE national service agent. That removed one layer of cost and dependency, but it did not change the underlying liability picture: the parent still stands fully behind everything the branch does.

The branch still needs a trade license from the relevant mainland authority or Free Zone, and certain activities on the UAE’s strategic activities list may need extra approvals before a branch can be licensed at all. This is a licensing question to run past your corporate service agent or lawyer before you commit to the branch route over a subsidiary.

Corporate tax and permanent establishment: when does the branch become taxable

This is the part that catches founders out. A foreign company does not need a UAE trade license to become taxable here. What creates a tax presence is a Permanent Establishment, a fixed place through which the foreign company carries out its core income generating activity in the UAE. A licensed branch is the clearest possible example of one.

Once a Permanent Establishment exists, the branch’s UAE sourced profit falls under the normal UAE Corporate Tax regime:

• 0% on taxable profit up to AED 375,000
• 9% on taxable profit above that threshold

The registration deadline depends on timing. A Permanent Establishment that already existed before 1 March 2024 had nine months from that date to register with the Federal Tax Authority. One created on or after 1 March 2024 has six months from the date it came into existence. Miss either deadline and the standard AED 10,000 late registration penalty applies, the same penalty that applies across the whole corporate tax system.

One detail worth flagging directly: a mainland branch of a Free Zone parent does not inherit the parent’s 0% Qualifying Free Zone Person rate. The FTA assesses the mainland branch as its own domestic Permanent Establishment, taxed at 9% above the threshold on its own UAE profit, entirely separately from whatever rate the Free Zone parent enjoys. Assuming the branch rides on the parent’s Free Zone status is one of the more expensive mistakes we see in group structures.

Because Permanent Establishment status can arise even without a formal branch license in some circumstances, and because the strategic activities list and Free Zone interaction both depend on your specific facts, this is a determination worth confirming with an adviser before you open the doors, not after your first invoice goes out.

Bookkeeping and reporting: what the branch and the parent both need to keep

A UAE branch has to maintain its own accounting records in the UAE, sufficient to support VAT filings if it is VAT registered, corporate tax filings as a Permanent Establishment, and any audit the licensing authority or bank requires. Bookkeeping cannot live only in the parent company’s head office system, the UAE side needs a clean, standalone set of books that a UAE auditor or the FTA can review on demand.

On the parent side, the obligations run the other way. Because the branch is legally the same company, its results usually need to be consolidated into the parent’s own financial statements under the parent’s home country accounting standards, not treated as an arm’s length investment the way a subsidiary would be. Your home country tax adviser, not us, is the right person to confirm exactly how the branch is reported at home and whether it changes your parent company’s own tax position there.

Practically, that means two sets of books that have to reconcile with each other:

1. UAE branch books, IFRS based, supporting VAT and corporate tax filings and any UAE audit requirement
2. Parent company books, prepared under the parent’s home standards, with the branch results folded in as part of the same legal entity, not as a separate investment

Getting this structure right from day one avoids a scramble later when the corporate tax return, the bank, or the parent’s own auditor all ask for numbers that were never reconciled to begin with.

Conclusion

A branch gets you into the UAE market faster than a subsidiary and, since the national service agent requirement was dropped, with fewer moving parts on the licensing side. What it does not remove is liability, and it does not exempt you from corporate tax once a Permanent Establishment exists. Decide with your eyes open: full parent liability against simpler setup, and Free Zone status that stays with the Free Zone entity, never with a mainland branch.

We handle the UAE side of a branch setup end to end: bookkeeping to IFRS, VAT and corporate tax registration, and Permanent Establishment filings, at fixed prices.

Talk to us, the initial consultation is free.

As of July 2026. This article is general information and is no substitute for advice in an individual case.

Read on: The Qualifying Free Zone Person conditions in full · Building a UAE holding company structure · UAE bookkeeping and record keeping rules