Do I need a business license for a Shopify E-Commerce website in Dubai/UAE?

by Julia Jackle - Sep 24, 2019

Like anywhere else in the world, a business license is surely a requirement if you are looking to open a business aka your Shopify store in Dubai or the UAE. Fortunately, the process is more intricate and complicated like in other countries or regions such as the UK, Europe and the USA.

Once you have your license, you can commercially trade and also open a business bank account.  The type of license you choose to set up will depend on the nature of your business and how you ultimately choose to commercially operate your business. Secondary to the license solution you choose, it is very important to choose the best suited business activities. Logically, if you will be importing and exporting products through your online store, you will be required to apply for a trading activity license, but if your business is all about selling third-party products already registered in the country, you will have to apply for an e-commerce activity license. You can also set up your business in the mainland or in one of the many free zones and get to enjoy the many benefits that along with them, again, it really depends on how you intend to operate the business commercially. We recommend that you consult with an independent corporate services/company setup provider to ensure you consider all options and information available before you make your choice for your business license. Keep in mind, laws and regulations can quickly change in our region too.

Trading activity license vs. E-commerce activity license

An e-commerce activity license allows you to set up a business with which you can sell products that have already been registered in the UAE. With a trading activity license, you can export and import certain goods in and out of the country. This implies that if your online store will be selling foreign goods, you have to apply for a trading license. But if you will be dealing with local products, an E-commerce activity license will be enough. It is also possible to add both these business activities to the same license in most cases, to suit your individual requirements.

Business operations under the two licenses

If your E-commerce business is operating under an E-commerce activity license, you are allowed to sell your products in the local market via agents or local distributors which means via a third party such as a last mile delivery service provider. This means that you can’t sell your products directly to consumers on the mainland.

Local Distributor   

When using a mainland license, the law doesn’t require you to appoint an agent or distributor to sell your products directly to the consumer within the UAE. However, if you are operating under a free zone license, you have to engage local distributors and agent to handle your products. The mainland license and associated infrastructure costs are usually much higher then via a free zone solution, and the free zone solution also ensures you own 100% of the company, where in almost all cases a mainland license will require you to have a 51% local sponsor.

Payment Gateways

Businesses with an E-commerce license are allowed to open bank accounts with local banks to receive payments for their sales. Payments for your sales will be credited to you through payment gateways.

Office Requirement   

Once your E-commerce license application is approved, you are not required to have a physical office or warehouse location since most free zones provide a service known as Flexi Desk from where you can run your business. A warehouse is not a requirement since your third party delivery partner will be handling the products for you.

Operational Costs under each license

Businesses that operate under mainland licenses are likely to spend more since the law requires them to have physical offices and sometimes warehouses. For those with Free Zone licenses, the costs of operation are lower since physical offices and warehouses are not a requirement unless you want to have them.

 

Get to know more about E-Commerce with our Online training’s Academy:  https://tv.creative971.com

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About the Author:
Julia Jackle
Julia is the co-founder and CEO of Creative971 and has written blogs in the past for the Entrepreneur Magazine UAE. Her extensive knowledge in the E-Commerce industry in the UAE and GCC is widely appreciated.

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