Commercial License in Dubai
As Dubai continues to grow and flourish, more and more businesses are choosing to set up shop in this dynamic city. However, starting a business in Dubai requires certain legal permissions and licenses, including a commercial license.
This license is essential for any company that wants to conduct commercial activities within the UAE.
It is important for business owners to understand the process of obtaining a commercial license in Dubai, the types of commercial licenses available, and the regulations involved.
In this blog post, we will discuss everything you need to know about commercial licenses in Dubai – from what they are, how to obtain them, and how they can benefit your business.
1. Understanding the Process of Establishing a Business in Dubai
- Start with a Plan: Before embarking on setting up a business in Dubai, it’s important to have a well-defined plan in place. This includes identifying the nature of your commercial activity, legal form for your company, and deciding on the location for your business.
- Understand the Legal Requirements: The process of establishing a business in Dubai can seem daunting, but it’s important to understand the legal requirements. All companies must obtain a trade license, and there are six types of licenses to choose from based on the nature of your business.
- Free Zone or Mainland Setup: Choosing between a free zone or mainland setup depends on the nature of your business. Free zone offers several benefits such as 100% foreign ownership, 0% tax, and no restrictions on repatriation of profits. However, setting up a mainland business allows direct trade within UAE.
- Register Your Trade Name: Registering your trade name in Dubai is crucial, and it’s important to ensure it aligns with the nature of your business. You can reserve your trade name at the Department of Economic Development (DED) or through a trademark application.
- Get a Memorandum of Association: The Memorandum of Association sets out the structure, objectives and rules of your company. This document must be drafted and notarized by a registered legal consultant in the UAE.
- Register for a Merchant’s License: A merchant’s license in Dubai is required for distributing or selling goods within the country. Other specialized activities may require additional licenses such as a professional license or industrial license.
- Estimate the Cost of Registering Your Business: The cost of registering your business in Dubai can vary depending on the nature of your commercial activity, legal form of your company, and location. In addition, factor in the cost of leasing an office space or renting a warehouse.
- Identify Relevant Departments for Commercial Licensing: Dubai Trakhees oversees licensing for commercial activities within designated free zones, while the DED is responsible for licensing businesses in the mainland. Familiarize yourself with the relevant departments to ensure a smooth application process.
- Seek Professional Guidance: To avoid confusion and ensure compliance with the legal requirements, it’s advisable to seek guidance from a professional consultant. This will not only ensure a smooth application process, but also help to identify any potential roadblocks.
- Be Patient and Persistent: Establishing a business in Dubai may take time and patience, but don’t give up! With perseverance and determination, you will achieve success and reap the rewards of a vibrant and growing economy.
2. Determining the Nature of Your Commercial Activity
So, you have decided to establish a business in Dubai, now comes the crucial step when you need to determine the nature of your commercial activity. Here are some important things to consider:
- Research Your Industry: Before deciding on your commercial activity, research your industry thoroughly. Analyze factors like competition, market demand, and regulations related to the products/services you offer.
- Evaluate Your Capabilities: Consider your strengths, weaknesses, and expertise to determine the commercial activity that you can succeed in. Evaluate the level of financial investment, infrastructure, and resources required to run the business.
- Choose a Sector: Dubai is a thriving hub of various sectors like tourism, logistics, technology, and healthcare. Choose a sector that interests you and aligns with your business goals.
- Consider the Location: Location plays a vital role in determining the nature of your commercial activity. For instance, if you want to set up a tourist-related business, then areas like Jumeirah or Downtown Dubai will be ideal.
- Seek Professional Help: Consulting with experts in your target field can provide valuable insights into the nature of your commercial activity. You can also seek the advice of legal professionals to understand the legal implications of your business.
- Consider Government Regulations: Regulations in Dubai can differ greatly from other parts of the world. Ensure that you have a thorough understanding of the regulations to avoid costly mistakes.
By considering these factors, you can choose the right commercial activity for your business and proceed with the next steps of establishing your company in Dubai.
3. Choosing the Right Legal Form for Your Company
You’ve determined the nature of your commercial activity and registered your trade name in Dubai. Now, it’s time to choose the right legal form for your company. This decision will have an impact on everything from taxes to liability, so it’s important to consider your options carefully. Here are some things to keep in mind:
- Different types of legal forms suit different categories of businesses. The most common legal forms include sole proprietorships, partnerships, limited liability companies (LLCs), and branches of foreign companies.
- The legal form you choose will depend on factors such as your business goals, the size of your business, and whether you plan to have partners or investors.
- For example, if you’re a small business owner and want to have full control over all decisions, a sole proprietorship might be the best legal form for you. On the other hand, if you plan to have partners, a partnership might be more appropriate.
- LLCs are a popular choice for many businesses in Dubai because they offer the benefits of limited liability without the complexity of a corporation. They also have no minimum capital requirements, making them a good choice for startups.
- Before making a decision, it’s important to consult with a legal professional to determine which legal form will work best for your unique situation.
Remember, choosing the right legal form is an important step in establishing your company in Dubai. Take your time, do your research, and seek professional advice to ensure you make the right choice for your business.
4. Registering Your Trade Name in Dubai
Now that you’ve determined the nature of your business activity and chosen the right legal form for your company, it’s time to register your trade name in Dubai. Here are some key points you need to keep in mind:
- What is a trade name?
A trade name is a name that distinguishes your business from others so that customers can identify you easily. It should be related to your type of business or something that indicates your business activity.
- Why is a trade name important?
Your trade name is what distinguishes your commercial license from others, and it’s essential to choose the right name that indicates the type of license you want to apply for.
- What are the conditions for registering a trade name?
There are specific conditions you need to adhere to when choosing your trade name, including that it should relate to your type of business, be unique, and not already registered by another company in Dubai.
- How can you reserve your trade name in Dubai?
You can do so through the Department of Economic Development (DED) by clicking on the login button and filling out the Dubai trade license issuance request form.
- What are the costs associated with registering a trade name in Dubai?
The fees for registering a trade name include initial approval fees, trade name reservation fees, and issuance fees. You can estimate the total cost of registering your business in Dubai by taking into account all the associated fees and costs.
Registering your trade name is a crucial step in establishing your business in Dubai. Ensure that you choose an appropriate name that reflects your business activity, adheres to the necessary conditions, and is registered with the relevant licensing department. Keep in mind the associated costs and make sure you have sufficient funds to cover all the fees and expenses.
5. Overview of Merchant’s License in Dubai
As you begin to establish your business in Dubai, one license that you’ll need to obtain is the merchant’s license. Here’s a brief overview of what you need to know about this license:
- Issuance Requirements: To get your merchant’s license, you’ll need to create an account and register on the Dubai Economy website. It’s important to note that all e-commerce licenses in Dubai require approval from the Telecommunications Regulatory Authority and the Digital Government.
- Purpose: The merchant’s license is specifically used for electronic commerce activities. It enables you to conduct online transactions and accept payments through a virtual store, marketplace or e-commerce platform.
- Duration: Most trade licenses in Dubai are valid for one year, and the merchant’s license is no exception. Make sure to renew your license prior to its expiration date to avoid fines or penalties.
- Benefits: The merchant’s license provides you with many advantages, including the ability to receive payments through UAE banks for international business transactions. Additionally, by having this license, you can operate under one commercial license and enjoy the flexibility that comes with it.
- Cost: As with any trade license in Dubai, the cost of the merchant’s license varies depending on the type and scope of your business. However, the fees generally range between AED 2,000 and AED 10,000.
By understanding the requirements and benefits of the merchant’s license, you can ensure that your e-commerce business is legally compliant and ready to thrive in Dubai’s competitive market. Remember to follow the previous steps of establishing your business, determining your commercial activity, choosing your legal form and registering your trade name before applying for your merchant’s license.
6. Commercial Licenses for General and Specialized Activities
In Dubai, there are various commercial licenses that you can obtain for your business, depending on the nature of your activities. Here are six types to consider:
- General Trading License: This is the most popular type of commercial license in Dubai, and it allows you to trade goods both within and outside the UAE. This license covers a broad range of activities, such as electronics trading or software trading.
- Service License: A service license is for businesses that provide services rather than physical goods. Activities covered by a service license can range from IT consultancy to marketing services.
- Industrial License: An industrial license is required for businesses that manufacture goods within the UAE. This license covers a range of activities, from food processing to machinery manufacturing.
- Professional License: This license is for businesses that provide professional services such as accounting, legal consultancy, or medical services. Professional licenses require a certain level of certification or qualification.
- Tourism License: If your business is in the tourism industry, such as a travel agency, hotel or restaurant, you will need a tourism license. This license allows you to operate in the tourism sector and provide services to tourists.
- National Industrial License: This license is granted to businesses that are at least 51% owned by UAE nationals. It provides the same benefits as an industrial license but with more benefits and incentives for Emirati business owners.
When considering which commercial license is right for your business, keep in mind the nature of your activities and any restrictions for foreign ownership of the company. Work with a professional business consultant to ensure that you choose the right license for your business needs. Once you have determined the appropriate license, obtaining it requires following the appropriate steps as per the process set by the Dubai Economic Department (DED) and can involve both online and physical steps.
7. Cost of Dubai Trade Licenses
Now that you have determined the legal form of your company and registered your trade name, it’s time to apply for a commercial license in Dubai. This license is a requirement for conducting business activities in the emirate. Here’s what you need to know about the cost of trade licenses in Dubai:
- Basic cost: The cost of a general commercial license in Dubai ranges from AED 1,000 to AED 10,000, depending on the nature of your business activity.
- Additional fees: In addition to the basic cost, there are additional fees you may have to pay, such as:
– Municipality fee: AED 5,000 for commercial entities and AED 7,500 for industrial entities.
– Immigration fee: AED 2,000 per partner, if your company has more than one partner.
– Labour card fee: AED 2,000 per employee.
– Chamber of Commerce fee: AED 1,000 to AED 3,000, depending on the type of membership.
– Ejari fee: AED 200 to AED 500.
- Specialized license cost: If your commercial activity requires a specialized license, the cost may vary. For example, a food trading license costs AED 10,000, while a tourism license costs AED 880.
- Renewal cost: Trade licenses are valid for one year and must be renewed annually. The renewal cost is usually the same as the initial cost.
- Estimating the cost: To estimate the cost of registering your business and obtaining a commercial license in Dubai, you may use the Dubai Trade License Calculator provided by the Department of Economic Development.
Remember to factor in the cost of obtaining various documents such as visas, legal contracts, and bank accounts. Keep in mind that the cost of trade licenses in Dubai is subject to change and may vary depending on the type of business activity, legal form, and location. Obtaining a commercial license in Dubai is an investment in your business, so make sure to budget accordingly.
8. Estimating the Cost of Registering Your Business
Now that you have a solid understanding of the process of establishing a business in Dubai, determining the nature of your commercial activity, and choosing the right legal form for your company, it’s time to estimate the cost of registering your business.
- Commercial License Fees: The cost of a trade license in Dubai ranges from AED 10,000 to AED 50,000. The fees for issuing an instant license are collected together, including trade name registration fees, initial approval, and issuance fees.
- Type of License: The fees for obtaining a general commercial license are around AED 15,000, in addition to paying AED 10,000 to Dubai Municipality and AED 3,000. This fee varies for specialized commercial activities.
- Pre- and Post-Business Support Services: Smooth and electronic registration and licensing processes are offered by Dubai Trakhees. These services can help you estimate the cost of registering your business.
- Initial Approval: The process of registering a new commercial activity consists of three steps: reserving the trade name, issuance of the initial approval, and issuance of a commercial license. A fee of AED 10 is required for the initial approval.
- Knowledge Dirham Fee: AED 10 needs to be paid for the Knowledge Dirham fee.
By taking into account the above-mentioned factors, you can expect a more accurate estimate of the cost of registering your business with a license. Keep in mind that the cost of registering a business varies depending on the nature of your commercial activity, the type of license required, and the support services you may require. With proper planning, registering your business can be a smooth and hassle-free process.
9. Dubai Trakhees: Relevant Departments for Commercial Licensing
If you’re looking to establish a business in Dubai, it’s crucial to understand the role of Dubai Trakhees in the licensing process. Trakhees is the regulatory arm of the Ports, Customs and Free Zone Corporation in Dubai, and they provide corporate licensing services to local businesses. Here are the relevant departments you need to know about when applying for a commercial license in Dubai:
- New Licenses: This department is responsible for issuing new commercial licenses to businesses that are looking to establish themselves in Dubai. You can apply for a new license through Trakhees’ online portal, and the process usually takes a few weeks.
- License Amendments: If you need to make changes to an existing commercial license, such as adding or removing a business activity, you’ll need to apply for an amendment through this department.
- License Renewal: Every commercial license in Dubai needs to be renewed annually. This department is responsible for issuing renewals and ensuring that businesses are compliant with all local regulations.
- License Cancellation: If you need to cancel your commercial license for any reason, this department will handle the process.
- Commercial Accreditation: Trakhees is also responsible for ensuring quality and performance for design, construction, health & safety environment (HSE) in all projects under their jurisdiction.
By understanding these departments and their roles in the licensing process, you can streamline the application process and ensure that your business is compliant with all local regulations.
10. Drafting the Memorandum of Association for Your Company License.
A Memorandum of Association (MoA) is an essential legal document that defines the scope of your business operations. Drafting a MoA is a crucial step in obtaining your commercial license in Dubai. Here are some important things you need to know:
- Understand the purpose of your MoA – Your MoA should clearly state the objectives of your business, the powers and duties of the company’s directors and shareholders, and the company’s share capital.
- Review legal requirements – In the UAE, all companies must have their own articles of association and memorandum of association as per Commercial Companies Law. Make sure your MoA complies with all legal requirements.
- Identify business activities – Clearly list all business activities that your company intends to engage in, including any special or regulated activities.
- Determine share structure – The MoA should specify the number and value of shares, the rights and restrictions of shareholders, and the procedures for transferring shares.
- Outline company structure – Define the management structure of your company, including the roles and responsibilities of directors, officers, and shareholders.
- Consider financial and legal liabilities – Your MoA should specify the liability of directors and shareholders, and any financial information such as capital contributions, bonuses, and profit distribution.
- Include any special clauses – If your business has any special clauses or provisions, such as confidentiality or non-compete agreements, the MoA should include these.
- Seek legal advice – Getting professional legal advice will ensure that your MoA is accurate and legally sound.
- Finalize the MoA – Once you have drafted the MoA, review it with all involved parties to ensure agreement and sign it in front of a notary public.
- Submit your MoA with your license application – Finally, make sure to include your MoA with your license application for review by the relevant government department.
Drafting a MoA can be a complex process, but it is crucial to getting your commercial license in Dubai. By following these steps and seeking legal advice, you can ensure that your MoA accurately reflects the objectives and structure of your company.