A popular way for foreign companies to retain 100 per cent foreign ownership in the UAE is to open a branch or representative office of a foreign company (Setting up a branch or representative office of a foreign company in the UAE). Whilst this initially appears to be an attractive proposition, many foreign entrants often fail to realise that, despite having full control, there will still be hurdles to overcome in order to bring overseas employees into the UAE to run local operations.
By way of background, employment in the UAE is governed by Federal Law No. 8 of 1980 as amended (the Labour Law). The Labour Law applies (with certain limited exceptions) to all employees working in the UAE, whether those employees’ contracts of employment were executed in the UAE or overseas. The Labour Law would thus apply to all branch or representative office employees working in the UAE for foreign companies.
Even in circumstances where the employee has signed his/her employment contract overseas and made that contract subject to foreign law (and has subsequently relocated to the UAE to assist with branch office operations), he/she will still be required to execute a standard form Arabic/English employment contract, in the form prescribed by the Federal Ministry of Labour and Social Affairs (MOL) (the UAE Employment Contract). The UAE Employment Contract is essential as, without it, no work or residence permit can be obtained.
How do you get your foreign employees here initially?
Prior to an employee entering the UAE, the employer should, based on the UAE Employment Contract, apply for a work permit which is valid for two months. Once the employee has arrived in the UAE he/she must thereafter attend a Government hospital for a blood test and other medical checks within the two months. Provided the results are clear, appropriate health insurance for the employee can be arranged and the Ministry of Labour will (assuming all is in order) issue a labour card. Thereafter, the employee can obtain a residence visa from the General Directorate of Residency and Foreigners Affairs (the Residency Department) – these are usually valid for two years. In addition, an application must also be made for an Emirates ID Card at the time of applying for the residence visa.
How many staff can a branch or representative office take on?
The Labour Law and accompanying regulations do not place a specific limit on the number of employees a branch or representative office can employ. In practice though, the MOL will look at the size and intended activity of the branch office and will only grant work permits that reflect this. As operations grow, and the branch or representative office needs to increase its workforce, it can only do so by demonstrating to the MOL that it has sufficient physical space (such as renting a larger area and increasing desk space). If the MOL is satisfied, it may issue further work permits.
What practical steps should the foreign company follow?
One of the requirements for setting up either a branch or representative office (save in a limited number of circumstances) is the appointment of a local services agent. The agent will not play a role in running the office but will be important in carrying out certain administrative functions – including obtaining permits and visas (in return for a fee). It is therefore imperative to select a services agent who has sufficient experience in this area. It can be immensely frustrating to delay operations or the natural growth of a business simply because of visa and immigration requirements.