Whether you are planning to expand your business or set up a new one, Dubai is an ideal place for entrepreneurs. Running a business in Dubai means accessing a global audience and benefitting from the favorable tax environment, logistics infrastructure, lucrative trading opportunities, and a pool of skilled talent and resources. Being strategically positioned, Dubai also serves as a gateway to vast markets such as the Middle East, Asia, Africa, and Europe. Streamlined visa processes, less paperwork, world-class technology infrastructure, supportive government, and zero corporate tax & personal tax — all the elements required for businesses to flourish are successfully placed here.
However, before starting a business in Dubai, a license needs to be availed as per the law. The license suitable for your business can be determined by the nature of your business activities. The different types of licenses offered in Dubai are industrial, professional, and commercial licenses.
A commercial license is a trade license issued for businesses that engage in trading activities, shipping & logistics, rental businesses, etc. It covers a range of available and tangible commodities ranging from clothes, hardware, foodstuff, and construction materials, among others.
The popularity of commercial licenses among entrepreneurs can be attributed to the presence of numerous international airports coupled with the UAE’s direct access to the Persian Gulf, which makes the country incredibly favorable for cargo businesses. In addition, the UAE’s simplified company incorporation process makes it easy to set up a trading business with the help of a specialist.
If you are thinking of setting up a business in Dubai and within the commercial sector, here are some key factors for your consideration.
What is a Commercial License?
Simply put, a commercial license permits businesses to import & export goods as stated by the law. The goods can be either imported and sold in the UAE, exported to sell internationally, or traded specifically within the UAE. The license can also be obtained for new licenses and subsidiaries of foreign companies interested in operating in Dubai.
A commercial license approves businesses to trade in a wide range of goods, from toys and jewelry to food, packaging, and electronics. It is suitable for both general traders as well as specialized traders in Dubai and across the UAE.
The Department of Economic Development (DED) in Dubai and the Federal Ministry of Economy in the UAE are the main organizations that issue commercial licenses for companies. As of June 2021, the UAE Commercial Companies Law (CCL) has been amended to allow 100% foreign ownership for some 1,000 designated commercial activities.
Earlier, a company set up on the mainland had to have 51% of its shareholding owned by a Local Partner (an Emirati or a citizen of the UAE) or another company incorporated in the UAE that was 100% owned by Emiratis or 100% owned by GCC Nationals. Such restrictions to foreign ownership have been a concern for foreign investors, causing additional complexity and barriers to investments in onshore companies. However, the revised law helps avoid cumbersome arrangements, added costs, and legal uncertainties for investors.
Who Should Apply for a Commercial License?
Before applying for a commercial license in Dubai, it is essential to decide upon the activities you would be conducting. It is also important to note that the tertiary activities together with the main activity cannot exceed 10 per license. Following are some of the activity groups that are covered in a commercial license in the UAE:
- Import & export activities
- Banks, finance and credit group
- Contracting & building works
- Broadcasting & communications
- Travel & tourism
- Auto vehicle rental business
- General stores and shops
Advantages Offered by Commercial Trade License
- You can take on up to ten commercial activities with a single commercial license
- You are allowed exemption from taxes and can fully repatriate your capital and profits
- You can hire as many foreign workers or employees as you want, as long as you have adequate commercial space to employ them
- You can provide your services to all the local customers based in the UAE
- You can have your head office anywhere in Dubai Mainland
- Commercial trade license involves easier procedures for obtaining employment visas for foreign workers
How to Apply for a Commercial License in Dubai?
Individuals who seek to acquire a commercial license for their company incorporation are required to fulfill certain requirements and criteria. Here is the step-by-step process to register your commercial trade license.
Step 1 — Free zone vs. Mainland entity
When establishing a business, the applicant is required to choose between free zone set-up and Mainland set-up. This is the first step and one of the most important decisions for entrepreneurs. Both sectors offer certain benefits and investment prospects, and both are designed to engage different types of investors.
Free zones offer several economical license packages and involve a non-elaborate incorporation process. In many free zones, it is not mandatory for the applicant to be present in the UAE to set up the license.
Each free zone entity is permitted to operate from inside the free zone. The main reason why foreign investors opt for a free zone for their business is to get complete ownership benefits in addition to leveraging world-class infrastructure and being near the port.
Alternatively, mainland licenses allow businesses to operate from a wide range of locations within the city and trade directly within the UAE market as well as to take on potentially government contracts.
The choice between mainland and free zone depends on the nature of business you want to opt for and the regulations that apply to the ultimate products being traded. A business set-up consultant can help you make this decision by advising you on the best option for your specific requirements.
Step 2A — Documentation for new license application
- Filled application form with the company name mentioned in English and Arabic
- The original as well as a copy of the company’s statutory documents
- Memorandum of Association (MOA) with the partner
- Permit issued by Dubai Municipality Building Department sanctioning the tenancy contract
- Proof of the fee paid for the trade license
Step 2B —License renewal
A commercial license is valid for one year and can be extended before the expiry date. Renewal is an annual process. For certain activities, additional approvals may also be required before its renewal.
- Original or copy of the trade license
- Copy of the registered office lease contract
- Approval from relevant authorities, if required
- Details of employees’ accommodation, for companies with a foreign shareholder
Step 3 — License issuance
The final step in the application process is paying the requisite fees. After the submission of required documents and payment of fees, the business license is issued in the following week. The license fee can vary depending on the number of business activities included in the license as well as on the type of your company. The more activities included, the higher the cost of the license. Similarly, the higher the number of business partners, the more will be the fees payable. The fee amount may also vary by the emirate.
A business set-up consultant can help you determine the exact costs of getting a commercial trade license for your intended business activity.
Things to consider Post Company Formation
After you register your company there are a lot of other things which need to be fulfilled. These post-company formation activities are vital for the proper operation of any commercial company in the UAE. They are as follows:
Bank Account Openings.
UAE Banks are known for their banking solutions & flexibility. Many other jurisdictions struggle with adequate transactional & private banking solutions, Whereas UAE is comparatively more receptive & has a broader banking network.
There are plenty of benefits once you are onboarded with the bank. Like multicurrency accounts, cards, Cheque book facilities, Online banking, Business/loan & Credit facility, etc.
Banks have different categories of corporate accounts ranging from those for small startups to multinational companies. As per the requirement and transaction volumes they can opt and select the best option.
The bank requirements state that the company representative must be a resident of the UAE and that the company must have an official office in the country.
After the license is issued the company has to apply for an immigration card with the authorities, post which the company becomes eligible to apply for work/residency permits for the owners & employees of the company.
A Residence Visa is required for foreign nationals who wish to live in the UAE for an extended period. In addition, if you want to work in the UAE, you must first obtain work permission.
However, you must first find an employer ready to recruit you and begin the process of obtaining an employment visa and work permit in the UAE.
The employment visa for Dubai, or any other emirate in the United Arab Emirates, comes with special rules to ensure that workers’ rights are protected.
Associated with the company there are two categories of residency /work permit.
- Investor Visa- Applicable to owners/shareholders/partners in a Free Zone or mainland company & valid for 3 years.
- Employment Visa – It is subject to quota approval from the Labour department & acceptance of the profile of the applicant.
The hiring of employees.
If the company has a requirement to hire employees then the first step will be to apply for the labor card. It is mandatory to apply for the e-sign card, PO Box number, and company stamp to obtain a labor card. The number of work quotas is subject to the license type & office size availed.
Once the labor card is processed depending on the requirement the company can apply for an employment visa.
Want to apply for a commercial license in Dubai? Hexagon Advisory can help.
Getting a commercial license in Dubai doesn’t have to be a complex process. However, it does require certain prior knowledge of the laws and requirements. Your application process can be a seamless and hassle-free one if you work with a business set-up consultant.
Hexagon Advisory is a business setup firm that is committed to the dreams of aspiring entrepreneurs and SMEs. For years, we have helped our clients set up their businesses in Dubai and leverage the city’s many business advantages. Our insider knowledge and expertise allow us to provide an expert solution for company formation – whether offshore or local. If you are looking to apply for a commercial trade license in Dubai, you can rely on our team of professionals to guide you through the timely submission of your documents that comply with all the requirements, ensure a smooth application process.
Apart from handling your license application, Hexagon Advisory also offers services for international tax planning, accounting & finance, private wealth and estate planning, fiduciary services, and corporate management.
Simply put, Hexagon Advisory is a one-stop solution. We can assist you with establishing your company, making your license, designing and implementing effective strategic corporate solutions, and taking care of all the necessary legalities – leaving you free to get on with running your business.