Before setting up a business in Dubai, one of the key requirements is obtaining a trade license. This license grants businesses the legal authority to operate within the UAE, allowing them to engage in various activities based on the type of business. Whether you’re looking to import, export, or provide professional services, a trade license is essential for complying with local laws. In this blog, we’ll explore what a trade license is and why it’s crucial for your business in Dubai.
What is a Trade License?
A trade license is an official permit issued by the Department of Economic Development (DED) in Dubai, granting businesses the legal right to operate within the UAE. This license is necessary for any organization looking to conduct business, industrial or professional activities in any region to assess compliance with legal requirements. The type of trade license issued depends on the nature of business, whether it involves goods, services, or professional expertise.
Why You Need a Trade License in Dubai
Obtaining a trade license in Dubai is essential for any business looking to operate legally within the UAE. This ensures guarantees with National law and allows the businesses to conduct several operations such as importation, exportation or practicing a vocation. Every business requires a trade license to legally operate; failure to do so results in fines, penalties, or outright closure. Regardless of whether you are starting a small business or a big company, a trade license is necessary for efficient functioning in the UAE.
Types of Trade Licenses in Dubai
Dubai offers various types of trade licenses to suit different business activities. While there are four main types, some free zones and specific business activities may require specialized licenses. Here’s an overview of the primary trade licenses available:
Commercial License
A commercial license allows businesses to engage in the buying and selling of goods. It is specific to the items listed on the license, and businesses can only conduct trade involving those goods. Currently, the average cost of a commercial license in the mainland Dubai costs about AED 24500 while in free zones the cost starts at AED 12500.
Industrial License
This license is designed for businesses involved in manufacturing. It allows companies to assemble the products, purchase materials from all over the world and sell the finished products globally. Setting up of a physical office in Dubai is compulsory for obtaining this license. That cost for an industrial trade license in Dubai is approximately AED 25000.
Professional License
The professional license is aimed at service providers and professionals, such as consultants, healthcare providers, and educators. One major advantage is that it does not require a local sponsor, allowing for 100% ownership of the business.The price for setup a company in mainland Dubai begins from 9950 UAE dirhams and in free zones is from 12500 UAE dirhams to 50000 UAE dirhams depending on the type of services to be offered.
Tourism License
With Dubai’s emphasis on tourism, businesses in this sector must obtain a specialized tourism license. This license involves specific regulations, compliance standards, and tax requirements tailored to the industry. It also enables businesses to tap into Dubai’s thriving tourism market, attracting a global customer base.
Instant License
For businesses that do not require external approvals, the instant license offers a fast-track process, allowing you to receive your license in just five minutes. This license includes membership with the Dubai Chamber, an establishment card from GDRFA and the Ministry of Human Resources and Emiratisation and the ability to employ up to three persons. It applies to legal forms like LLC, Sole Establishment and Civil Company. It also comes with the package for the one year use of a virtual office.
eTrader License
The eTrader license is a sole establishment license for home-based businesses, found through the Invest in Dubai platform. Small business individuals who operate from the comfort of their homes can benefit from it. The fee for this license is AED 1,370 which comprises AED 1,070 for the license and knowledge and innovation fees and AED 300 for membership of Dubai Chamber.
The Cost of Obtaining a General Trading License in Dubai
The cost of a general trading license in Dubai depends on whether you’re registering your business on the mainland or in a free zone. For businesses on the mainland, the general trading license costs from AED 12,500 to AED 15,000. However, extra charges will be incurred including DED Activity Fee of AED 15000 and Trade Name Registration Fee of AED 620.
In free zones, the cost is almost the same but no local partner is essential and you will be eligible for tax incentives after getting the license. It should also be noted that free zones such as DMCC provide bundled packages for company incorporation that include office space, visas, as well as the general trading license, meaning you will be able to tax and fee everything at once.
Additional Costs to Consider
Apart from the above, businesses should also consider additional expenses for visas, office space, and other operational costs. Here’s a breakdown of extra fees:
- Visa Fees: AED 5,000 initially; AED 3,000 – AED 6,000 per employee
- Office Rent: An average of AED 34,189 per year
- Document Clearing Fees: AED 150 per document
- Trademark Registration: AED 620
- Initial Approval Fee: AED 345
- Notarization of MOA: AED 350
- Sponsorship Fees: AED 6,000 (if applicable)
- Customs Registration Fees:
- Import: AED 15 – AED 100
- Export: AED 15 – AED 100
- Transit: AED 15 – AED 80
- Transfer: AED 80
The total cost of a general trading license in Dubai typically ranges between AED 28,000 to AED 32,000, depending on the structure and type of your business.
How to Register for a Trade License in Dubai
Registering for a trade license in Dubai is a straightforward process, but careful attention to detail is required to ensure everything is done correctly. Here’s a step-by-step guide to the registration process:
Decide on Your Line of Business
The UAE offers over 2,000 approved business activities.The first and important step entails choosing the right activity for your business. Assure that your activity is allowed by UAE laws.
Choose the Right Jurisdiction
Your choice of jurisdiction affects ownership options, cost, and the benefits your business can enjoy:
- Mainland: Ideal for businesses looking to directly engage with the UAE market.
- Free Zone: Offers 100% foreign ownership and attractive tax incentives.
- Offshore: Best suited for businesses focusing on international trade, without physical presence in Dubai.
Register Your Trade Name
Your business trade name should reflect the services or products you offer. When filing your trade name, there are some name restraint policies that you should consider, which include; extreme name restraint, prohibition of names that may be deemed obscene, religious names or names that are in bad taste. These are regulations that must be referred to the UAE authorities to confirm compliance with the rules.
Secure an Office Space
To register your business, you must provide a physical address. Whether it’s a virtual office, a shared workspace, or a dedicated office, you’ll need a valid tenancy contract (Ejari) to proceed. This step is essential for legal registration and operational functioning.
Apply for Initial Approval
Once you’ve chosen your business activity and location, the next step is obtaining initial approval from the UAE government. This approval acts as confirmation that your business idea aligns with local regulations and that you have permission to move forward.
Submit the Required Documents
You’ll need to submit several documents, including a passport copy, visa details, and a Memorandum of Association (MOA). These documents are useful and should be prepared and submitted complete and on time to prevent any additional time consumed.
Pay the Fees
The cost of obtaining a trade license includes various fees such as registration, trade name, office space, and more. Make sure you provide for all these expenses and also account for any additional fees that depend on your business type and geographical location.
Obtain Your Trade License
Once all the necessary steps are completed and fees are settled, your trade license will be issued. At this stage, the business is legally recognized and legal to conduct its operation in Dubai.
Documents Required to Obtain a General Trading License in Dubai
- Trade License Application Form
- Passport Copies of Owners and Shareholders
- Residency Visa or Entry Permit
- No Objection Certificate (NOC) from Sponsor (if applicable)
- Tenancy Contract (Ejari)
- Initial Approval Certificate
- Memorandum of Association (MOA)
- Name Approval Letter from DED
- Business Plan
- License Application Fees Payment Receipt
How to Renew Dubai Economic Department Trade License
Trade License is only valid for one year, and thus, its Renewal is required. If you do not perform renewal under the valid period, your license is disqualified, and a restriction to business operations is placed. The renewal of an expired trade may attract a license penalty. Hence, renewal is like getting a DED Trade License for every business operational in Dubai. Go through the detailed process to make sure you get your license renewed.
A Requirement of the Tenancy Contract
It is necessary to have a tenancy contract that has at least one month of validity from the expiration date of the Dubai Trade License. If your tenancy contract does not have the required validity period, you need to get that renewed first.
License Renewal Application
For doing business in Dubai, you need to renew the license by applying for renewal at DED and submitting the required documents. The process is facile, and you need to submit the following documents mentioned below :
- A typed BR/1 form
- Copy of Tenancy Contract
- Copy of current Trade License
- Passport copies of business partners and investors
Make the Payment
After the documents are submitted and the authenticity is approved, you receive a DED voucher for making the payment. You need to make the payment, and then you will instantly get your license renewed.
Benefits of Having a Trade License in Dubai
Low Import Duty
Dubai offers reduced import duties, which helps businesses cut costs on importing goods. This makes it more affordable for companies to bring in products and materials from other countries, improving profit margins.
No Paid-up Capital Requirement
Setting up a business in Dubai is more accessible as there is no requirement for paid-up capital. This makes it easier for entrepreneurs to establish their businesses without the burden of large initial investments.
100% Repatriation of Capital and Profits
Dubai allows foreign investors to fully repatriate both their initial capital and profits. This flexibility is a major advantage for global entrepreneurs who want to invest in and benefit from the UAE market.
Extensive Banking Benefits
Businesses in Dubai gain access to a broad range of banking services, including business accounts, loans, and financial support. This helps companies manage their finances efficiently and access funding when needed.
Tax-Free Jurisdiction
Dubai’s tax-free environment offers significant financial advantages, with no corporate or income taxes. This provides a favorable atmosphere for businesses to grow and maximize their profitability.
Gateway to Local and International Markets
A trade license in Dubai opens doors to both local and international markets, enabling businesses to expand their reach. Dubai’s strategic location makes it a key hub for global trade.
Business Networking Opportunities
Dubai is a vibrant business hub, offering ample networking opportunities. Entrepreneurs can connect with other businesses and professionals, leading to potential partnerships, collaborations, and growth prospects.
Conclusion
Securing a trade license in Dubai is crucial for businesses aiming to thrive in a global market. With benefits like low import duties, tax exemptions, 100% profit repatriation, and access to extensive banking services, Dubai offers a prime environment for entrepreneurs. The Straightforward registration process and numerous existing prospects for business development make it an ideal destination for both local and international trade.
FAQs
What is the cost of obtaining a trade license in Dubai?
The cost of a trade license in Dubai varies based on the type of license, business activity, and jurisdiction. On average, it ranges between AED 12,500 to AED 15,000.
What factors affect the price of a trade license in Dubai?
Key factors include the business activity, office space requirements, free zone or mainland jurisdiction, and additional approvals needed from regulatory authorities.
Are there additional fees beyond the trade license cost in Dubai?
Yes, additional costs may include visa fees, office rental costs, and government approvals, depending on the business setup requirements.
Can I reduce the cost of a trade license in Dubai?
Opting for shared office spaces, choosing a suitable free zone, or selecting fewer business activities can help reduce the overall cost of a trade license.
