What is a Holding Company in UAE?

A Holding Company is a strategic business structure designed to possess the controlling stock of other companies. Its primary function is not to produce goods or provide services, but rather to oversee a group of related companies and manage their legal liabilities. By establishing a holding company in a tax haven such as the UAE, management can reap the advantages of tax savings. This approach allows for enhanced word choice, improved structure, increased readability, and added eloquence, while preserving the original meaning.

How Business Owners Are Leveraging a Holding Company in UAE?

Business owners are constantly seeking ways to safeguard their valuable assets. Throughout their years of operation, they have devised numerous strategies to ensure the security of their ventures. Among these strategies, the establishment of a holding company stands out as one of the most effective methods for unifying businesses across diverse sectors and activities. In the UAE, a holding company can either possess 100% ownership of its subsidiary or hold a sufficient amount of stocks or membership interests to exert control over it.

Holding companies are corporate entities or LLCs that do not directly engage in commercial trade activities. Instead, they oversee and manage a diverse range of subsidiary businesses involved in various operations such as manufacturing, sales, service delivery, real estate, and ownership of intellectual property.

How is a Holding Company Financed?

The Holding Company holds the responsibility of allocating investments and has the option to raise funds by offering equity shares of its subsidiaries to the public. Additionally, the subsidiaries contribute their earnings to the holding company through dividends, distributions, interest payments, rents, payments for back-office functions, and capital investment.

How is a Holding Company Used?

The holding company structure is a widely adopted framework utilized by businesses across diverse industries and sizes. Not only large business groups with multiple subsidiaries and ventures spanning various sectors, but also individuals and small companies find value in this structure. For instance, an entrepreneur seeking to invest in real estate can establish a company and acquire properties under its name. It is worth noting that many publicly traded multinational corporations operate as holding companies. This versatile structure empowers businesses to navigate different sectors and seize opportunities effectively.

A holding company can own the company, allowing the business owner to establish new subsidiaries while maintaining separate yet interconnected businesses under the umbrella of the holding company. This arrangement ensures clarity, unity, and optimal corporate structure.

Advantages of a Holding Company

Discover the multitude of benefits that come with registering a Holding Company in the UAE. Gain a competitive edge, unlock new opportunities, and enjoy a strategic advantage in the dynamic business landscape of the United Arab Emirates.

1. Liability Protection

By shielding the owner and the holding company from the liabilities of subsidiary companies, this approach offers protection. Each subsidiary operates as a distinct legal entity with its own shareholders and management, accountable for driving business growth. Consequently, the holding company and other subsidiaries can mitigate risks in the event of a downturn in one particular company.

2. Control Assets for Less Money

In the UAE, a holding company can exercise control over a subsidiary without needing to possess 100% of the shares or membership interest. As a result, the holding company incurs lower ownership costs compared to acquiring full ownership of the subsidiary. This strategic approach allows for greater flexibility and efficiency in managing subsidiary investments.

3. Lower Debt Financing Costs

The holding company possesses superior financial strength, enabling it to secure loans at a more favorable interest rate compared to the operating companies. Additionally, in situations where the business necessitates capital infusion, particularly during its initial stages, the holding company offers support by allocating funds to its subsidiary.

4. Foster Innovation

The reorganization of the company into subsidiaries, along with the establishment of a holding company, brings significant advantages to entrepreneurs. It facilitates efficient fund allocation and growth management, safeguarding against potential setbacks if any venture fails. Moreover, this strategic move fosters breakthroughs in research and innovation while nurturing revenue-generating businesses.

5. Better Control

The holding company possesses superior management capabilities, as its focus lies solely on overseeing the subsidiary companies rather than generating profits or conducting business operations. Each month, the subsidiary provides the holding company with reports on profits and business information. Consequently, the holding company gains a comprehensive overview of the subsidiary’s activities, enabling prompt corrective actions when necessary.

Types of Holding Companies in UAE

In the UAE, there are primarily two business jurisdictions that provide provisions for establishing a holding company.

• The Onshore or Mainland in UAE
• The Free Zones in UAE

Based on the business structure, the holding company is required to appoint a minimum of one director or a board director.

Can a Holding Company Purchase Properties in Dubai & RAK Emirate?

RAKICC Offshore has forged a strategic alliance with the RAK Municipality Department, empowering investors to effortlessly acquire and register properties in the captivating Emirate of Ras Al Khaimah. Moreover, it offers a seamless avenue for structuring investments through the establishment of a RAKICC Offshore Holding Company. Notably, the Dubai Land Department warmly welcomes registration from RAKICC Offshore companies for freehold plots and properties, as part of a mutually beneficial memorandum of understanding (MOU).

There are numerous advantages to investing in properties in the UAE through RAK ICC Holding Company (RAK ICC Holdco). Some of these benefits include:

• No Paid-up share capital and 100% profits repatriation
• Re-distribute assets to the holding company for tax purposes.
• Lower the withholding tax on income and capital gains.
• Ease of transfer when buying and selling properties.
• Greater privacy, with no shareholder details on the public register.
• Easy transfer of domiciliation or continuation.

As a shareholder in a RAK ICC Holding Company, you have the opportunity to open a bank account in the UAE. This enables you to effortlessly send and receive payments within the country, while being subjected only to local taxes.

Requirements for Opening a Holding Company in UAE

In order to establish a holding company in the UAE, the company must adhere to the following requirements:

• Establishing a management board responsible for leadership and decision-making requires the passing of a shareholder resolution.
• To ensure effective governance, it is advisable to establish a Director Board with representation from each subsidiary firm.
• Share Certificate representing the share capital and shareholding pattern for the holding company
• Copies of the directors’ and shareholders’ passport along with their photographs.
• Business plan and subsidiary company details (Company documents, trade license, etc.)

In summary, establishing a holding company offers numerous advantages to organizations. A holding company enjoys the same benefits as a Free Zone/Mainland Company. The entrepreneur retains 100% ownership of the Free Zone company, with no restrictions on capital repatriation or employment of foreign nationals. Additionally, there are no corporate or personal income taxes, ensuring secure company ownership. Shareholders benefit from various business advantages, protecting their subsidiaries and share capital. For more information on opening a holding company in the UAE, reach out to our experienced business consultants immediately!