E-commerce in UAE: trends & prospects

In Western European countries and the USA, where the market has long passed its peak of development, the share of e-commerce accounts for more than 10% of the total population purchases. In the UAE, online sales are growing at an average rate of 15.3% per year, and currently, they account for 12.6% of the total sales volume, as calculated by the Dubai Chamber of Commerce. Therefore, the opportunities for e-commerce development in the UAE are quite significant, especially since the market continues to grow rapidly.

The prospects of the Emirates can be explained by well-developed logistics and digital infrastructure. Moreover, the country's authorities are trying to increase the attractiveness of e-commerce by introducing various initiatives to regulate this market. Thanks to this, many entrepreneurs are considering the feasibility and seeking ways to open businesses in the field of e-commerce. The most common option considered is expanding the sales area on online platforms.

Do you need a separate license for e-commerce in the UAE?

In order to conduct any entrepreneurial activity within the country, a valid license is required. This applies to any commercial activity, including those entirely or partially conducted online.

Often, the licensing document has territorial limitations within the free trade zones (FTZs). Typically, these zones coincide geographically with the territory of the free economic zones where the license was obtained. The document specifies the permitted area of business operations. Entrepreneurs are also required to rent an office within these territories. However, if it's a FTZ, there's a possibility to rent a shared workspace instead of an office.

If the enterprise is already officially registered in the UAE but wishes to expand its activity on online platforms, it should consult with the authority where the business license was obtained. There's a possibility that the licensing document also covers this type of activity.

For example, the Department of Economic Development (DED) and the Dubai Multi Commodities Center (DMCC) do not issue an e-commerce license. There's a license for portals, issued to companies managing websites that act as portals on the internet via PCs and digital devices to link buyer and seller transactions. It also includes listing seller products and hotel tariffs for consumers to make online purchases and travelers to book hotel rooms. The role of such companies is limited to brokerage activities, excluding the completion of transactions between the specified parties.

However, there are cases where an existing license does not include entrepreneurship on the internet. For instance, in the Dubai Airport FTZ, when entering e-commerce, adding the corresponding type of business activity to the existing license is required.

Can you engage in e-commerce in the UAE when registering a company in a free zone?

A free economic zone in the UAE is a geographically defined area where foreigners can own companies. This means that there's no need to involve local partners or agents to start a business. Moreover, FTZs are a popular choice due to relatively low operational costs and tax incentives.

After selecting a specific zone, you need to submit an application to the licensing authority to obtain permission for e-commerce. However, requirements may vary in different FTZs. Once you have obtained the authorization document, your company can sell goods on online platforms beyond the country's borders.

Currently, there are over 50 FTZs in the UAE where you can conduct online sales after obtaining a license. For foreigners, it can be challenging to make a decision. In such cases, you can use the services of business support companies, such as The Level Consulting. Our experts will help you register a business in the UAE, obtain all necessary documents, including e-commerce permits.

Can you obtain residency visas in the UAE if registered in a free zone?

To attract investments, the UAE government has introduced the possibility of obtaining residency visas for entrepreneurs for two years, with the duration extendable up to 10 years. To obtain such a document, known as a golden visa, one must invest two million dirhams, equivalent to 558 thousand US dollars. To apply for the visa, you need to fill out an online application on the website of the Federal Authority for Identity and Citizenship (ICA).

When registering a company, it can be done both on the mainland and in a free zone. Each zone has its own authority responsible for licensing. Typically, free zones in the UAE focus on a particular sector with their legislative peculiarities. New company registration or branch establishment of an existing enterprise is permissible in free trade zones.

Types of e-commerce licenses in Dubai

Obtaining an e-commerce license in Dubai enables the sale of various products through online platforms and facilitates online payments. If the company plans to expand its activities internationally, it's advisable to choose an appropriate license. There's also a special document allowing operations with different product groups.

The Department of Economic Development offers three types of e-commerce licenses:

• E-trader: The license is the cheapest option for opening an e-commerce business in Dubai. Investors planning to sell products online can obtain this license. However, certain restrictions apply, such as the prohibition for the company owner to open retail outlets in physical spaces or establish physical offices. The license is available for those registered as sole proprietors.
• E-commerce marketplace: This license allows the operation of marketplaces where various sellers can display their products. The platform can also serve as an advertising space for sellers and their products.
• Virtual company: This document enables non-resident businessmen to sell their products through their own online platform. Currently, the virtual company license can be obtained for providing advertising and design services, as well as in the fields of information technology and printing.
  

How to obtain an e-commerce license in Dubai?

To apply for an e-commerce license in Dubai, submit an application to the DED. You'll need a document package, including:

• NOC certificate (from the current employer if you're in the UAE on a work visa)
• Copy of the owner's passport (if there are multiple owners, documents from all are required)
• Passport-style photo
• Mobile number and email address
• Copies of owners' visas if present in the UAE

Additionally, each case is considered individually, so the Dubai Department of Economic Development may request other documents.

Moreover, to open a bank account in the UAE, you'll need documents such as:

• Bank account statement for the last 6 months
• Translated into English, notarized, and apostilled statutory documents of the existing company
• Copies of supplier and buyer invoices

The United Arab Emirates is a rapidly growing e-commerce market. The earlier a company starts exploring it, the more opportunities it will have. However, understanding the nuances of legislation can be challenging. That's where business consultants come in, assisting with the establishment and support of commercial enterprises.