As consumers move from traditional to online shopping, the demand for e-commerce licenses is growing. This demand is expected to further grow in the next few years. The UAE is a hub for online business. It has the most advanced e-commerce market in the Mena region, with the country’s e-commerce transactions expected to hit $50 billion by the end of 2021.

The UAE’s retail online shopping grew 53 per cent to a record $3.9 billion in 2020, largely driven by the digital shift in consumer shopping habits amid the Covid-19 pandemic, said the Dubai Chamber of Commerce and Industry. E-commerce accounted for eight per cent of the country’s overall retail market in 2020.

Several factors contributed to Dubai’s e-commerce positioning, including an increase in the number of start-ups, the growth of tech-savvy consumers, and the government’s push for smart transactions.

Officials say demand for Dubai’s e-commerce licences jumped 63 per cent in the first half of 2021. The emirate issued 3,243 DED Trader licences in the first six months of 2021, compared with 1,989 during the same period last year. IT topped the list of licensed activities, followed by ready-made garments, ladies tailoring and design, handicraft workshops, gents tailoring and design, food preparation, commercial brokerage, exhibitions and other professional services.

How to set up an e-commerce business

Business Activity: Identify the permissible business activity to be carried out. E-Commerce normally covers all aspects of commercial activities and services conducted online. The Department of Economic Development (DED) and free zones have licencing categories that cover e-commerce in addition to traditional trading activities.

Logistics, Warehousing and Delivery: An e-commerce business requires logistics, warehousing and delivery services. These activities are critically important for operating an e-commerce business. Dubai is a competitive market place and all consumers expect a seamless service, from online purchasing and doorstep delivery.

Outsourcing: An e-commerce business has the option of outsourcing logistics and delivery to third-party logistics providers (3PL). The 3PL has to obtain customs clearance for the goods to be sold in the country if being sourced from overseas. The e-commerce provider has to obtain an import code to import goods into the country. The logistics and warehousing aspects of the e-commerce business could be undertaken in-house.

Staffing: Employment law considerations have to be kept in mind. One requires a visa quota to be obtained to hire expat employees from the Ministry of Human Resources & Emiratisation.

Warehouses: All business entities are required to have a place of business (office/warehouse) in the country and a lease of office or warehouse premises have to be considered.

Taxation: The business entity has to register with the Federal Tax Authority (FTA) if it anticipates taxable supplies to exceed Dh375,000 in the financial year. Registration is voluntary if taxable supplies will be above Dh187,500 and no greater than Dh375,000.

Online payments: Consideration has to be given to an online payment gateway to allow consumers to make payments online. This includes credit card/ pre-paid card payments. The option for cash-on-delivery (CoD) option has to be provided.

Types of e-Commerce licences

Dubai has three types of e-commerce licences:

E-Trader License

This is for offering your services or sell products online.  This is monitored by the Department of Economic Development (DED) and can only be obtained by the UAE and AGCC nationals residing in Dubai. An e-trade licence can be obtained only under single ownership. One cannot have a physical office space or open a shop with this licence.

Portal License

A Portal licence can be obtained by non-Emiratis. One can start an online business with a portal license that will link buyers and sellers. This is ideal for a listing website that includes products, services or reservations. The cost of a portal licence is around Dh12,000 when one is applying for a business establishment in mainland Dubai. The cost of an e-commerce licence varies based on your business requirements.

Virtual Company Licence

Virtual company licence allows overseas investors and non-residents of the UAE to undertake commercial activities. This licence is limited to only three sectors – computer programming and related activities, designing activities, and services related to printing and advertising.

For an e-commerce licence, take the following steps

• Finalise a legal structure of the company
• Select a location for the business
• Register the company’s trade name
• Submit the e-commerce licence application
• Apply for the initial approval certificate
• Draft the MOA/ local service agent agreement
• Rent a decent office
• Register with ports/customs (if the business involves import/exports)
• Collect the licence from the DED
• Open a corporate bank account

Cost of an e-commerce licence

One can obtain an e-commerce license for the digital venture for as low as Dh14,500. The cost of an e-commerce licence will depend on various factors such as the exact business activity, number of visas, office space and location. The cost of an e-commerce licence depends on whether one would like to opt for a trading or a professional activity. The most common costs incurred to start an online business in Dubai include the DED registration fees, office rent, sponsorship cost for UAE local partner, investor visa cost, immigration card cost, fee for a stamp of the company, investor’s medical and Emirates ID costs, foreign name registration charges, if any, medical insurance fee of investor and any other government fees.