The UAE’s e-commerce scene is continually growing. UAE, particularly Dubai, remains one of the fastest-growing e-commerce countries globally. Thanks to the government’s support for continuous innovation and developments. This May 2020 alone, 196 licenses were issued to the e-commerce retail business sector in the UAE. Just recently, Dubai recorded an 83% year-on-year increase in the number of e-commerce business licenses issued in the first half of the year as consumer demand for online shopping grew during the Covid-19 pandemic as per Dubai DED.
Dubai Mainland or Free Zone?
The Dubai Department of Economic Development (DED) issues Dubai mainland licenses. One of the main aspects of having a Dubai Mainland license is the ability to conduct business directly to the local UAE market compared to a business with a Free Zone license. There is also flexibility and a variety of options for physical space within the mainland area. However, if you are a foreign investor or expatriate, you will be required to obtain a local service agent or a local partner to set up a mainland company.
On the other hand, Free Zone’s major disadvantage is that you will only be allowed to conduct your business activities within the Free Zone. However, obtaining a Free Zone license will give you full company ownership without obtaining a local partner or local service agent. You will also benefit from full repatriation of profit and import and export duty exemptions.
Here are some of the things you need to consider before starting an e-commerce business in Dubai Mainland or Free Zone:
- E-commerce License: The type of Trade License will depend on the nature of your e-commerce business. The Dubai Department of Economic Development (DED) directly issues this license for incorporating e-commerce companies. If you are starting up an e-commerce business in one of the UAE’s free zones, this would require you to acquire a license from the relevant free zone.
- Physical office space: Based on the type of e-commerce business, there will be a requirement for associating a physical space with the company. If you decide to incorporate in the Dubai Mainland, you must obtain a physical space to be considered a legal company.
- Import-Export related e-commerce: If an e-commerce business needs to import goods to the UAE and sell them online, the company authorities need to request an importer’s code associated with the ports and relevant customs authority. Goods imported are subject to 5% duty, while business set up in free zones are exempted from taxes. This tax exemption covers both selling goods inside the free zone or abroad.
Besides the above requirements, e-commerce business owners will also need the following:
- Well-developed websites as an e-commerce platform: The website’s domain typically includes your company name and should be easy to remember. A secured and stable online payment gateway is important if you sell products or services online, especially in this type of business.
- Logistic support: Efficient in-house logistics or third-party logistics support are good choices for making online businesses successful.
- Warehousing: To ensure the on-time delivery of products and manage the supply chain in a more organized way, warehousing can be a huge asset. You can lease or own a warehouse in the UAE.
- Online marketing: Online marketing for online businesses are extremely important. Recognizing and identifying customers’ needs and aligning the business’s marketing strategy is the key to making an online business successful.
This November 2020, you can set up an e-commerce business in the UAE for just AED 5,750. Talk to one of our Business Setup Advisors today. Call +97155 233 0077 today.
