The financial services industry is growing at a rapid pace in the region. The Dubai International Financial Centre (DIFC), is at the forefront of this change. Ranked among the top 10 onshore financial centres worldwide, the DIFC is arguably THE place to be for financial service companies looking at targeting not just the UAE, but the whole MENA region. Setting up a representative office in DIFC is one of the ways of testing the waters, before deciding on taking on a full-fledged license.
What is a DIFC Representative Office?
The DIFC offers a low-cost alternative for firms that wish to explore the market. It allows for the marketing of one or more financial services or financial products which are offered in a jurisdiction other than the DIFC. These products are usually of a head office that is based in a different jurisdiction.
What are the advantages of setting up a DIFC Representative Office?
Obtaining authorisations to conduct financial activities from the DIFC involves a detailed and structured process. It usually takes anywhere between 4-6 months to obtain a license, and an investment of substantial capital, leasing of suitable office space and other costs such as licensing and legal structuring at the DIFC Registrar of Companies. In short, one has to be sure of the feasibility of such an office, since it involves the investment of considerable monies and time.
Some firms, especially those that are exploring the UAE as a new jurisdiction, or are unsure of the potential of their products in the market, may prefer setting up a representative office in the DIFC, to begin with. The authorisation process, although processed by the DFSA, is relatively simplified keeping in mind the lower risks associated with operating such a setup. Costs for licensing are significantly lower as well.
Representative office setups may also be preferred in cases where firms just want to promote or market their products, and not engage in client-facing activities.
What activities can be performed by a DIFC Representative Office?
The Representative Office in the DIFC cannot engage in client-facing activities. It cannot on- board clients, nor carry out any services other that marketing and promotion of the products or services of its parent.
Marketing activities involve the following:
(a) providing information on the financial products or financial services of its parent company;
(b) engaging in promotions in relation to (a);
(c) making introductions or referrals in connection with the offer of financial services or financial products.
a Representative Office cannot represent anyone other than itself, its parent firm or a member of its Group.
DIFC Representative offices:
1. Cannot market the financial products or services of a firm that is not part of its group.
2. Cannot provide advice in regards to investments, credit or insurance.
3. Cannot have clients 4. Cannot assist in completion of application forms for account opening or financial products 5. Cannot market highly-leveraged products
Are there any mandatory appointments for a DIFC Representative Office?
Every Representative Office in the DIFC has to appoint a Principal Representative, who acts as the liaison between the parent company and the DFSA. The Principal Representative has to be resident in the UAE.
Are there any rules for naming a DIFC Representative Office?
A Representative Office must be a branch and so its legal name will be the same as its Head Office For example, a Representative Office of Disha Capital Limited would have to use the trading name "Disha Capital (DIFC Representative Office)”.
Why setup in the DIFC?
The DIFC is a leading financial hub in the region for business, fintech, and lifestyle. DIFC holding companies can be used to hold assets within the UAE, the GCC, or anywhere else in the world. These include real property and shares in other companies in the UAE and worldwide. Here are some reasons why setting up a holding company in the DIFC is a viable proposition.
Codified English Common Law:
The DIFC offers a codified version of the English Common Law, which gives foreign investors an additional sense of security and stability. In partnership with the common law framework, the Dubai Financial Services Authority (DFSA) functions as the DIFC’s regulatory body and plays a crucial role in providing as well as enforcing the international regulatory standards that make the financial hub a popular destination for businesspeople.While a DIFC holding company is not regulated by the DFSA, the robust regulatory structure of the Authority gives comfort to investors.
The DIFC is well regarded in the international community, being voted among the top 10 onshore financial centres worldwide. It’s emphasis on regulation, and visibility in the investor community, also helps to attract further investments down the road.
The DIFC Courts initiative was the first of its kind in the region, and the laws establishing the DIFC Courts were designed to ensure the highest international standards. The DIFC Wills & Probate Registry, allows eligible individuals the ability to register their wills under Common Law, and hence providing the ability for legacy planning within the centre.
A Representative Office in the DIFC is meant to be an operational entity. These entities can apply for visas for their staff and their families.
The Government Services Office in the DIFC is dedicated to providing a wide range of administrative services, and one of this is the issue and renewal of employment visas. The maximum number of visas you can apply for will depend on both the type of business you plan on setting up as well as the size of the premises you lease in the DIFC.
The DIFC is set to undergo significant expansion, and plans to use the additional space to construct more office and creative spaces, residences, retail spaces, and entertainment. That’s 13 million square feet of space dedicated to the pursuit of fintech and innovation, and designed to accommodate the needs of professionals from around the world.
Such an environment helps attract good talent from the world over. Over 24,000 professionals already live and work in the DIFC. Holding companies in the DIFC are able to source better managers and analysts, and access a pool of premium service providers within the centre, thus making it a self-containing ecosystem.
Setting up a DIFC Representative Office involves the following interactions:
Dubai Financial Services Authority (DFSA)
1. DFSA Application Fee – US$ 4,000
2. DFSA Annual License Fee – US$ 4,000
3. Registrar of Companies (DIFC ROC):
The ROC helps to set up the legal structure of the DIFC Representative Office. This would always be a branch company.
(i.)Application for Registration of a Branch Company (5 working days): US$ 2,000
(ii.)Commercial License (5 working days): US$ 4,000 (annual fee)
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 one-desk office at US$ 27,000.
DIFC Fitted Offices – from US$ 55 per square foot.
Other buildings – from US$ 32,000 per annum
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 setting up a representative office in the DIFC. 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.
The DIFC provides an ideal environment to setup your financial services firm and manage it effectively. The application process is detailed and involves thorough due diligence and background checks. This ensures that only serious members are able to establish a presence, thus maintaining the sanctity and reputation of the centre. Once set up, a whole new world of opportunities arise, where investors can effectively manage their existing portfolios, and dip into the growing MENA investment ecosystem. For firms that wish to test the waters, the DIFC Representative Office offers a low-cost alternative.