DIFC is one of the world’s top ten onshore financial centers and offers a secure and efficient platform for businesses and financial institutions to reach into and out of the emerging markets of the region. The quality and independence of DIFC’s regulator, the prevailing common law framework, excellent infrastructure, and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in the MENASA region.
DIFC fills the time-zone gap for a global financial center between the leading financial centers 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 center 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) is one such success story.
Here are some specific advantages of establishing in the Dubai International Financial Centre.
The legal framework supports cross-border activities.
100% foreign ownership permitted, no restrictions on capital repatriation.
No restriction on foreign employees.
Zero tax for 50 years on profits, capital or assets.
Zero tax on personal income.
Highly regarded, independent regulator.
Independent, English-speaking, common law judicial system.
Distinct from the UAE civil courts.
Risk-based regulatory approach.
High prominence in deal making in the region.
Concentration of international financial institutions.
World-class regional and international professional services.
The leading fund domicile in the region.
GCC Management offices, holding companies and family offices are located closer to the assets they own or manage.
The UAE plays a central role in growing global trade, between Asia and Africa on one side and the West on the other.
Well-positioned to harness the potential of emerging markets.
DIFC Licensing categories
Firms interested in carrying out financial services from the DIFC are required to submit applications to the Dubai Financial Services Authority, or DFSA.
The type of business that the applicant wishes to engage in defines the category of Licence that is required. For example, a firm undertaking low-risk activities such as advising or arranging will require a DIFC Category 4 Licence, while a discretionary portfolio manager will require a DIFC Category 3C Licence. An STP broker, dealing on a matched principle basis will require a DIFC Category 3A Licence, whereas a market maker or provider of credit provider will require a DIFC Category 2 Licence. Full-fledged banks, that accept deposits, will come under a DIFC Category 1 License.
DIFC Capital requirements:
The category of the license will determine the amount of capital required. The base capital requirement for a Category 4 firm is $10,000. This rises to $500,000 for a Category 3 firm, $2 million for a Category 2 firm and $10m for a Category 1 firm.
Capital waivers may be available to the DIFC branch of a regulated financial institution having its head office in a recognized regulatory jurisdiction.
Actually, there are three components of capital - base capital, risk-based capital and expense-based capital. The higher of the three is set to be the capital requirement. These figures are calculated using the financial models that we make for the Regulatory Business Plan
during the application process, and so are mostly unique to the company that applies for the license. The figures given below are for base capital only, and actual capital may vary depending on the business model and the associated expenses and risks.
Activities are grouped into 5 main categories, as below:
Category 1 – Banks
Base Capital – US$ 10 million
Activities – Accepting Deposits, Managing a PSIAu
Category 2 – Market maker, a provider of credit
Base Capital – US$ 2 million
Activities – Dealing in Investments as Principal, Providing Credit
Category 3A – Brokerage
Base Capital – US$ 500,000
Activities – Dealing in Investments as Matched Principal, Dealing in Investments as Agent
For more information on DIFC Category 3A Brokerage License, do read our dedicated article on the subject:
Activities – Arranging Deals in Investments, Arranging Credit and Advising on Credit, Advising on Financial Products, Arranging Custody, Insurance Intermediation, Insurance Management, Operating an ATS, Providing Fund Administration, Providing Trust Services, Operating a Crowdfunding Platform
For more details about Category 4 DIFC Investment Advisory Licenses, click to read the article on the subject:
We provide turnkey services for DIFC business 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.
• Reviewing the business model and advice on the applicable regulatory framework; • Preparation of the Regulatory Business Plan and comprehensive financial projections; • Preparation of all policies, processes and manuals required; • Provision of Outsourced Compliance Officer and Outsourced Finance Officer services; • Finalising the legal structure, including holding company setup and customisation of Memorandums; and • Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.