The convenient accessibility of internet facility, in addition to the rising usage of smartphones, has helped drive the growth of e-commerce industry. Shopping online for clothes, furniture and other accessories is a trend these days. It should not come as a surprise that the e-commerce sector is booming in every corner of the world. e-commerce makes things easier for an individual as it is not time-consuming, and with an internet access one can shop anything online with a simple click of a button. With it, your company can reach a wider range of audience. For example, if you set a shop at a local market in your country, the target audience for your business is limited but in case of e-commerce, the organization can reach an extended pool of users due to broader target market with no barriers.
In case of Dubai, the market is as lucrative as any. It is estimated that the e-commerce sector in the UAE will be valued at $10 billion (Dh36.7 billion) by the end of 2018. But if you want to start an e-commerce business in Dubai, you need to go through a set of processes, i.e., from deciding a layout of the website to getting your license approved.
About E-Commerce License in Dubai
Incorporating an e-commerce company in Dubai is easy, but you can’t flout the laws and regulations while doing so. The Dubai authorities do not allow any random person to launch an e-commerce store and start selling products. If you want to set up an online business in Dubai, you have to apply for an e-commerce license. It is issued by the Department of Economic Development (DED) in Dubai. Your business is not considered legal if you do not have a license for it. There is a procedure you need to follow while applying for this license.
How to Obtain an E-Commerce License in Dubai?
Research conducted by Google reveals that 91.9% of the population in the UAE has internet access. So, factors like the increasing usage of the internet, favourable tax environment, etc. show that having an e-commerce business in Dubai can be profitable. You need to go through the following steps to obtain an e-commerce license in Dubai:
Decide a legal structure for your business
The first step to obtaining an e-commerce license in Dubai is to decide the legal structure of your business. In simple words, whether to set up an LLC (Limited Liability Company), one-person company, branch of a parent company, representative office, etc. LLC formation and Branch offices are most common in Dubai as they come with an innate set of advantages.
Choose a location
The location here does not mean the place where you will set up a shop or an office, but the place from where you want to get your license. Dubai has two types of zones, namely (1) Free Zone, and (2) Mainland. A free zone allows you to have 100% ownership of your company. In case of mainland, you need to have a local sponsor whose ownership in the company should be at least 51%, and remaining would be your share. Similarly, both the zones have their share of advantages and disadvantages. You have to consider all the factors and decide where you want to set up your online business.
Register a trade name
Since your business does not have any physical presence, choose a name that people will remember easily. The trade name can be used as your domain name so that people can easily find your company online. Make sure that your domain name does not resemble that of any other existing company as it may lead to legal complication.
Apply for a license
After deciding the location, you have to apply for an e-commerce license. The Department of Economic Development issues this license; therefore it is important to approach them first. For a company set up in the mainland, you have to pay around AED10,000 to the DED for trade name registration, initial approval, and issuance of license. In case you are looking to set up within a free zone, the license will have to be acquired from the relevant freezone authorities. The type of license issued depends upon the nature of your online business.
Apply for initial approval certificate
An Initial Approval Certificate is an NOC from the authority to start your e-commerce business in Dubai. It will be valid for 6 months, and it is not renewable. One can apply for initial approval certificate at the same time as submitting their trade name approval application.
Draft an MOA and local service agent agreement
You have to draft a Memorandum of Association (MOA) with the sponsor and submit it to the DED. If you select the location of your company in the mainland, then you have to follow this step. Any legal firm can type out the memorandum which must specify the special arrangements and ownership percentage among all partners. Companies setting up in free zones can skip this step.
Register a physical office in Dubai
The next step would be to set up a physical office in Dubai as the authorities in Dubai have made it mandatory for a company to have an office to consider it a legal entity.
Final Approval of the license
Once you complete all the above actions; you will get a business license within 1-7 days, depending on the authority.
Your business must be registered with one of the ports and customs authorities so that you can receive an importer’s code. UAE imposes 5% customs duty on imported goods. The companies that come under free zone will not have import duty since they have to sell their product/services within the free zones.
Opening a corporate bank account
Once you have successfully applied for an e-commerce trade license and established your business, you will be able to set up your corporate bank account. Since the application process is quick and simple, you just have to look into which bank suits your needs.
Advantages of Obtaining an E-Commerce License in Dubai
- Autonomy to repatriate capital and income
- No currency restrictions
- 100% foreign ownership in the free zones
- 0% corporate and personal tax
- Low operating costs
- No import duties on e-commerce license
- Resident visa granted for 3 years
E-commerce business has become a necessity since people are connecting globally through internet. Dubai, from the last few years, has seen a gradual rise in the online retail business. In the coming years, the e-commerce sector will add more revenue to the economy. So, if you think you are ready to take the plunge and take your small business or idea to the cloud, then an e-commerce business could be a nice option to consider.