DIFC fills the time-zone gap for a global financial centre between the leading financial centres of London and New York in the West and Hong Kong and Tokyo in the East.
Why setup a financial services firm in the DIFC?
The DIFC is a leading financial hub in the region. Besides offering a wide range of financial service activities, the centre also provides an integrated environment and world-class standard of living. It is well regarded in the international community as well.
There exist opportunities for startups as well. The recent focus on fintech led to the DIFC Fintech Hive initiative, that serves as an accelerator for fintech firms to test their products and pitch it to prospective investors. Sarwa (https://www.sarwa.co) and SmartCrowd are two such success stories.
Here are some specific advantages of establishing in the Dubai International Financial Centre:
LEGAL AND REGULATORY FRAMEWORK:
- Legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004
- Zero tax on employee income
- Highly regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- Central to regional deal making
- High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
- World-class regional and international law and auditing firms, and other professional services
- The largest fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
- Dubai plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets
What is fintech?
Fintech, or financial technology, is the marriage of old-school financial services with new-age technology.
Examples of fintech include mobile applications for banking, investing and borrowing services, platforms, cryptocurrency and digital assets, quant trading, algo-based financial applications, robo advisory etc.
All technologies that are applied to improve financial service activities, comprise fintech.
Is fintech always regulated?
While there may be some fintech that can be non-regulated, in most cases, fintech is subject to regulation due to the very nature of it’s activities. There are some grey areas though.
Regulated Fintech Licenses In The DIFC:
Firms interested in carrying out fintech activities from the DIFC are required to submit applications to the Dubai Financial Services Authority, or DFSA.
The DFSA, for the purposes of authorisation and supervision, categorises fintech activities based on the type of activity being carried out, and the minimum base capital required.
Consequently, fintech activities can form part of Category 3 and Category 4 licenses, which various related activities such as advising and arranging investments, portfolio management (discretionary and non-discretionary), money service businesses and digital/robo advisory activities.
How to go about it:
Due to the higher risks associated with these activities, the DFSA places higher entry-level requirements and restrictions on the license itself. Chances are that the first point of entry be through the DFSA Innovation Testing License, rather than a full-scale application. This is however, decided on a case-to-case basis.
You can also setup in the DIFC with a DIFC Innovation License, which is for non-regulated technology startups. Such a license encourages startups to establish a presence in the region, employ staff and prepare for regulation by then applying to the DFSA for regulatory approvals. You cannot however, carry out regulated activities until a Financial Services Permission has been obtained.
DIFC Regulatory Capital requirements:
The base capital requirement for a regulated fintech business license is usually US$ 10,000. Actual capital required will depend on the nature, quantum of business and forecasted annual expenditure, as per the financial model of the proposed firm.
There are three components of capital considered – base capital, risk-based capital and expense-based capital. For smaller firms, expense-based capital is usually the highest, and can be around US$ 150,000 for a Category 4 regulated fintech license application.
Setting up a DIFC Regulated Firm involves the following interactions:
Dubai Financial Services Authority (DFSA):
The DFSA is responsible for reviewing and approving all applications for financial services. Costs depend on the activities applied for, which puts the applicant in one of five categories.
Generally, there are two components of DFSA fees. One – an application processing fee, and the other, an annual licensing fee.
Application fee: from US$ 5,000
License fee: from US$ 5,000
Registrar of Companies (DIFC ROC):
The ROC helps to set up the legal structure of the DIFC Regulated Firm. Shareholders can be individual, or corporate. There are many options available, such as ‘Private Company Limited by Shares’ and ‘Limited Liability Partnerships’. In case of Private Company Limited by Shares, the costs for setting up include:
Application for reserving a name (2 working days): US$ 800
Application for Incorporation of a Private Company Limited by Shares (5 working days): US$ 8,000
Commercial License on Incorporation (5 working days): US$ 12,000 (annual fee)
This can vary, depending on the entry strategy adopted.
The data protection notification is part of the process of registering a new entity in the DIFC. The costs involved are as follows:
Registration - US$ 500
Annual renewal – US$ 250
Every entity registered in the DIFC is required to lease a physical office. You can choose from the Gate and surrounding buildings, or other buildings within the DIFC, such as Emirates Financial Towers, Central Park, Park Avenue, Burj Daman and Currency House.
Prices vary, depending on the space availed and the building. Here is an indication of the prevailing rates:
DIFC Business Centre – from a two-desk office at US$ 35,000.
DIFC Fitted Offices – from US$ 55 per square foot.
Other buildings – from US$ 32,000 per annum
For fintech licenses, DIFC has attractive packages starting from US$ 15,000 per annum. Get in touch for more details.
Establishment Card Application – US$ 630
PSA Deposit – US$ 682
Visas (per visa) – from US$ 1,500
PSA Deposit (per visa) – US$ 682
We provide turnkey services for fintech license applications. From fintech consulting, to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the DFSA Rulebook and submit an application that is comprehensive, complete and compliant.
Our services include assistance in:
1. Reviewing the business model and advice on the applicable regulatory framework;
2. Preparation of the Regulatory Business Plan and comprehensive financial projections;
3. Preparation of all policies, processes and manuals required;
4. Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
5. Finalising the legal structure, including holding company setup and customisation of Memorandums; and
6. Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.
Get in touch today! for more information on regulated fintech license in the DIFC