Posted on: Thursday May 14, 2020
Just like rest of the world, having a business license is definitely mandatory if you want to open an online business i.e. Shopify store in Dubai or UAE. But, the process of doing this is more complicate and intricate unlike other regions or countries such as Europe, UK, and USA.
After having a license, you can start commercial trading along with opening a bank account for business. Remember that type of license to set up is totally dependent upon business nature and your preference on how to commercially operate the business. You must also prefer choosing the best suited business activities apart to the license solution since its very important since you will be exporting and importing products via your online store. It’s also required to apply for a trading activity license, but if your business is poised for selling third-party products already registered in the country, you need to apply for an e-commerce activity license too.
Also you can set up business in the mainland or free zone to enjoy many benefits that come along with them; again, it is totally dependent on your how you preference of operating the business commercially. Go for consulting with an independent corporate services/company setup provider to make sure no options and information is left behind before you set your mind for any business license. But remember that laws and regulations can quickly change in our region too.
Trading activity license vs. E-commerce activity license
Typically an e-commerce activity license provides opportunity to set up a business for selling the products already registered in UAE. Moreover a trading activity license, allows export and import of certain goods within and outside the country. In brief, if your online store is set for selling foreign goods, you need to apply for a trading license. But if you are dealing with local products, only e-commerce activity license will suffice. The good thing is possibility to add both these business activities in the same license to suitably fit your individual requirements.
Operations under 2 licenses
Any online commerce business operating under an e-commerce activity license is allowed to sell products in the local market through agents or local distributors like a third party or last mile delivery service provider. It also means that you can’t sell your products directly to consumers on the mainland.
While using a mainland license, you don’t require appointing an agent or distributor for selling your products directly in UAE. But, those operating under a free zone license require having local distributors and agent to handle product distribution. The cost of mainland license and associated infrastructure are usually much higher than via a free zone solution.
Businesses having e-commerce licenses are allowed to open bank accounts within local banks for receiving payments of their sales which gets credited to you through payment gateways.
After getting e-commerce license approvals, you didn’t need to have a physical office or warehouse location since most free zones offer a service known as ‘Flexi Desk’ where you can run your business. Also warehouse is not a requirement since your third party delivery partner handle products for you.
Businesses operating under mainland license usually spend more due to the law of having physical office and warehouses. But in Free Zone license, cost of operations is lower since physical office and warehouse is not necessary until you want to have them.