Freelance Permit or Trade License – Which One Is Better?

by commitbizadmin 03, May 2019

Freelance Permit or Trade License – Which One Is Better?

The short answer: depends. On the value proposition you are seeking. If you plan on working independently for the foreseeable future, and want to keep your costs and business formalities low, a freelance permit is the way to go. If you have aggressive expansion plans and are looking to cater to large corporate or government clients, you should opt for a trade license.

The long answer: read on…

Procuring a business license is arguably is most pivotal step in starting your business in Dubai or the rest of the UAE. To decide whether to go for a freelance permit or a trade license, you’d have to first understand what these mean, and how they are different.

What is a freelance permit?

A freelancer is a self-employed person offering a certain service. A freelance permit identifies you as a sole practitioner and allows you to start your business in your name. As of now, the following free zones allow freelancers:

Getting a freelance permit in the UAE is relatively simple. Here are the steps involved:

  1. Apply with one of the aforementioned free zones
  2. Submit an application along with your passport copy
  3. You would then receive a customer confirmation letter, which must be signed and submitted back
  4. Pay the requisite clearance payments
  5. Collect the certificate for a freelancer visa approved by the UAE free zone
  6. The freelancer license will be issued within 7-10 working days

Pros and Cons of a Freelance Permit

Pros

Cons

  • Obtaining a freelance permit is relatively easier, with fewer processes and documents required
  • Consequently, a freelance permit is the best choice if you don’t want your costs to go up – there are lucrative freelance permit packages for professionals in the UAE. A freelance permit in the UAE could cost, in total, between AED 10,000 and AED 25,000
  • A freelance permit allows only you (the named person) to work in the business, precluding the possibility of hiring employees
  • A freelance permit can be issued only in case of a limited set of domains – education, fashion and media
  • Freelancers are not issued a Tax Registration Number (TRN) by the Federal Tax Authority

 

What is a trade license?

general trade license allows one to carry out multiple trading activities that are in the same or different industries in the UAE. The activities under trading license include import, export or trading of goods or products like clothes, accessories, furniture, electronics, etc. Furthermore, anyone who intends to do wholesale business in the UAE should have a general trade license. It is worth noting that regulated products like alcoholic beverages, pharmaceutical products, and frozen goods, etc. call for special approval from the respective authority. Someone having a trade license in the UAE can carry out one’s business locally, nationally or internationally.

Here are the steps to obtain a trade license in Dubai or the rest of the UAE:

  1. Select a legal structure and trade name for your company
  2. Determine the business activities to be carried out [a maximum of 10 per license]
  3. Apply for initial approval
  4. Procure any external approvals, if applicable
  5. Draft the Memorandum of Association (MoA) and any other documents required by government authorities
  6. Choose a business location and get a tenancy contract attested by Ejari
  7. Submit an application to the Department of Economic Development (DED) to get the final license
  8. Pay the required charges, including an issuance fee for obtaining the license

Pros and Cons of a Trade License

Pros

Cons

  • A trade license allows one to hire employees. In case a freelancer wants to do so, they’d have to de-register their freelance permit and upgrade it to a trade license. But it’s easier to go for trade license from the start
  • With a trade license, you can operate anywhere in or outside the UAE
  • A trade license brings with it more trust and credibility, which is essential if you are looking to work with huge corporates or government agencies
  • The cost of obtaining a trade license in somewhat higher than that of a freelance permit. A trade license in the UAE could cost anywhere from AED 30,000 to AED 40,000

 

In Summary

  • If you intend to work with big companies or government agencies, a trade license might be a good option since it brings along with it a transparency and credibility that such organizations may look for while getting into business with someone. Additionally, if the nature of your business is not restricted to your free zone, a trade license is the only option for you since a freelance permit allows one to operate only locally. Again, if you plan on hiring employees in your company, obtaining a trade license is the only way you can do so.
  • If cost is your biggest consideration, work as freelancer. This way, you are allowed to work as a one-person business. You don’t even need to rent an office space for your business as Dubai free zones let you rent a workstation for that purpose.

Looking to set up your business in Dubai, but confused about whether to go for a trade license or a freelance permit? We’ve got your back. Commitbiz has been helping firms and entrepreneurs in starting their business in the UAE for over a decade. We take care of your business requirements and customizations, liaising with government authorities and external agencies in the UAE. Once we understand what you are looking for, we can assist you on the path from deciding on the type of license to actually obtaining it. Do contact us for a free advice – we'd be happy to help!