E-commerce, with the wide usage of smartphones and various e-shopping platforms, has already become a worldwide trend and is expected to even be more profitable in the future. Companies are competing for targeting a larger client base. Because e-shopping facilitates customers’ shopping experience effectively from many aspects and attracts more customers, companies are striving to further develop their e-shopping services. One of the unparalleled advantages that e-shopping provides clients with is saving time, which has proved to be a huge asset, especially in areas where most of the society is classified as working class. This is the case with the UAE in general, and Dubai as one of its emirates that is home to many of the UAE’s biggest and booming businesses. However, there is a procedure for entrepreneurs who would like to set up their e-commerce business in Dubai and apply for an e-commerce license. This license is issued by the Department of Economic Development (DED) in Dubai.
How to apply for an E-commerce license in Dubai
The following steps should be taken for entrepreneurs to obtain their e-commerce license, which makes them eligible to conduct their e-commerce activities:
Determining the legal form of the business
The first step to take is determining the business’s legal form, which can be an LLC (Limited Liability Company), one-person company, branch of a parent company, representative office, etc.
Determining the location
This step does not refer to determining the place of the shop or company entrepreneurs intend to set up their business, but rather, the location they would like to obtain their license from. Dubai has two zones: i) Mainland and ii) Free Zone. These two zones come with their cons and pros. A Free Zone allows entrepreneurs to own their business 100%, while for conducting business activities in Mainland, a local partner owning 51% of the company’s shares is mandatory. It is advised to become informed about the advantages and disadvantages of the two zones regarding the e-commerce business set up before applying for the e-commerce license.
Applying for the E-commerce license
To apply for an E-commerce license, entrepreneurs are required to approach DED as explained above. In Mainland, an E-commerce license costs AED10,000 to the DED for trade name registration, initial approval, and license issuance. In the case of the Free Zone, the relevant Free Zone authorities should issue the license. There are also various types of licenses based on the nature of the business activity.
Obtaining the initial approval certificate
An Initial Approval Certificate is a NOC from the authority that enables entrepreneurs to start their e-commerce activities. It will be valid for a period of six months and cannot be renewed. Entrepreneurs can apply for this certificate while submitting their trade name approval application.
Drafting a Memorandum of Association (MOA) and local service agent agreement
This step only needs to be followed for those entrepreneurs who wish to set up their business within Mainland. An MOA needs to b drafted with a sponsor and be submitted to the DED. Any legal firm is eligible for drafting the MOA. The special arrangements and ownership percentage among all partners should be detailed in the MOA. Companies in Free Zones can skip this step.
Registering a physical office in Dubai
It is mandatory to associate a physical office with an e-commerce business entity.
Once all the above points are carried out, the E-commerce license should take between 1-7 days to be issued by the DED. After obtaining the license, foreign entrepreneurs will be able to open their corporate bank account. This process is easy and straightforward. Regarding the import and export duties, the UAE imposes a 5% customs duty on imported goods. Companies under Free Zones are charged with zero import duty since they are limited to sell their products and services within the Free Zones.
Advantages of obtaining an e-commerce license in Dubai
- No currency limitations
- 100% income and capital repatriation
- Cost-effective business operation
- 0% corporate and personal tax
- No import duties on e-commerce license
- Enabling entrepreneurs to apply for a residence visa for 3 years
