Do I need a Trade License for Shopify DropShipping in Dubai

by Julia Jackle - Jul 11, 2020

Do I need a Trade License for Shopify DropShipping in Dubai/UAE?

As online continues on an upward trajectory in Dubai, the Department of Economic Development has introduced e-commerce activities in a bid to establish itself as the regional capital of e-commerce. To operate these online businesses, merchants are required to obtain licenses. As a result, the move has sparked several questions in relation to if DropShipping merchants in the UAE/Dubai need trading licenses to operate. This is pretty understandable because when activities are conducted over the internet there is a lot of confusion of if they constitute commercial activities within the UAE. To understand this, let’s have a look at what DropShipping is.

What is Drop Shipping?

In simple terms, DropShipping is a business model whereby merchant retailers ship items from a 3rd party to the buyer. The 3rd party can be wholesaler, retailer, or even a manufacturer. However, the seller does not stock the products they are selling on their online store. Basically, it is more of transferring shipping details of the customer to the manufacturer, and the product is sent directly to the customer.

The company or wholesaler is responsible for logistics of the customer alongside the inventory. This purely constitutes a commercial activity since you as the Drop Shipper earns a profit. Moreover, the products being shipped to a customer could be imports or exports, which are both regulated by DED.

So, is trading license necessary for Shopify DropShipping in the UAE/Dubai?

Definitely yes! Article 6 of 2011 regulates how commercial activities in the UAE and Dubai are conducted. It states that no foreign company is allowed to conduct business within the UAE without applying for a trading license. Under article 355 of the CCL, companies, or businesses that are found doing business with out a license are liable to a penalty. This means that if you are DropShipping products to the UAE without obtaining a license, you could end paying a hefty fine which could spell the end of your business.

Some people might be of the opinion that since DropShipping with Shopify doesn’t require them to have physical premises, offices or employ workers from the UAE, they should not have to apply and obtain trading licenses. However, the strict policy of the UAE is that no one has the right to conduct any form of business within the country without a valid and relevant license.

In reality, several online stores are DropShipping within the UAE/Dubai without valid licenses. Nevertheless, it is not guaranteed that the regulators of this industry will pinpoint and fine them according to article 355. That is not to say that you should not license your DropShipping business. If you are looking to establish a brand or conduct serious business within the UAE – whether you are located there or not, it is highly advisable that you apply for a license so that you can have peace of mind. This will give you the moral and audacity to run, market, and operate your business effectively without the fear of being fined and your business being closed down. After all, it makes no sense to build a successful DropShipping business only for it to be closed down and receive hefty fines. Therefore, stay safe by ensuring that you have the relevant license to operate your business

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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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