DIFC Licensing Categories Explained – Get 4th for Crowdfunding

Dubai International Financial Centre (DIFC) offers a secure and efficient platform for businesses wishing to expand their services to the MENASA (Middle East, Africa, and South Asia) region. The DIFC Authority acts as a facilitator and helps financial businesses to establish themselves in the region. 

Setting up a business in the DIFC provides significant benefits. First, it allows the company to expand its activities to 73 countries of the MENASA region, which has a population of almost 3 billion people. The legal framework supports cross-border activities with no restrictions on foreign ownership, foreign employees, or capital repatriation. 

The tax rate on profits, capital, or assets is zero until 2054. The company also pays no taxes on employee income.

The DIFC also offers an independent English-speaking law judicial system distinct from the UAE legal system.

License types and basic requirements

The Dubai Financial Services Authority (DFSA) is an independent regulator that authorizes and oversees all companies that provide financial services from the DIFC. All companies that would like to provide financial services from the DIFC must submit an application to the DFSA and obtain a license. The license category depends on the company’s activity.

The table lists the main types of licenses and the basic requirements that a company must meet.

DIFC Category 4 License for crowdfunding platforms

Not all crowdfunding businesses require a license. The DIFC licenses only three types of crowdfunding platforms:

• Investment-based (equity-based)
• Loan-based
• Property-based

Charity-based crowdfunding is not regulated, and the platforms do not need a license. 

The DIFC has specific requirements for property-based crowdfunding platforms. Such platforms can list only residential real estate, and not commercial. The maximum value of a listed property is limited to $5 million; and while retail investors are permitted to invest, the maximum investment sum is limited to $50,000 per year. 

Platforms that want to establish their presence in the region can apply for a DIFC innovation license. This allows the company to employ staff and prepare whatever is needed to apply for a Category 4 license. Performing any business activities is not allowed until the license is issued.

The application process starts with a formal introduction to the DIFC and the DFSA. The company prepares a detailed Regulatory Business Plan and financial projections which are further reviewed by the regulators. Once these documents are reviewed and the comments provided by the regulators are incorporated into them, a comprehensive application can be filled in and submitted.

The application is reviewed for 15-20 days, and once all fees are paid, it is accepted, and the review process commences, which can take another 90-120 days. 

One of the most important parts of the process is the live demo of the crowdfunding platform. During the demo, the regulator may make comments and suggestions or ask for clarifications.

The DFSA also meets SEO, FO, CO, and MLRO and interviews them.

If the application is successful, the applicant proceeds with setting up a legal structure, opening a bank account, getting professional insurance, among others.

Once these details are finalized, the company makes the final submission to the DFSA and gets permission to provide financial services.

Fees

There are a number of fees that crowdfunding platforms need to be aware of, including:

• Application fee – $5,000
• Retail endorsement fee – $20,000
• License fee – $10,000 per year.

Along with the DFSA fees, the company pays the following:

To the Registrar of Companies

• Application with the Registrar of Companies for reserving a name – $8,000
• Application for Incorporation of a Private Company Limited by Shares – $8,000
• Commercial license of incorporation – $12,000 per year.

For data protection

• Registration cost – $1,250
• Cost for annual renewal – $500

Office spaces

A company is required to rent a physical office. The prices vary depending on the facility and its location, from $55 per square foot in a DIFC-fitted office to $35,000 for a two-desk office in a DIFC business center. 

Additionally, visa costs are paid. So, an establishment card application would cost $630, the personnel sponsorship agreement deposit is $682, and the visa cost starts at $1,500. 

How to launch a crowdinvesting platform in the DIFC with LenderKit

If you are looking to launch a crowdfunding platform in UAE, check out white-label crowdfunding software offered by LenderKit. Our software comes with a set of ready-made features, functionality and integrations that will help you get started quickly while also having the benefits of unique platform customizations on demand. 

If you’d like to learn more about LenderKit, book a demo or discuss your project requirements, reach out to us via a contact form.