E-Trader VS E-Commerce License in UAE: Which is Most suitable for your business?

22Jul, 21

E-Trader VS E-Commerce License in UAE: Which is Most suitable for your business?

Starting a home business in Dubai or Sharjah is exciting, but navigating the legal requirements can be daunting. Two standard licenses for operating home-based companies in the UAE are the E-Trader License and the E-Commerce License. Before beginning the process of business formation in Dubai, aspiring entrepreneurs must understand the distinctions between the two types of licenses. This blog will explore the differences between these two licenses and help you determine the most suitable choice for your business. 

Understanding the E-Trader License:

The E-Trader License is designed for individuals who wish to conduct online business activities from the comfort of their homes. This license is viral among freelancers, artisans, and small-scale entrepreneurs. With minimal documentation requirements and a straightforward application process, it's an accessible option for many home-based businesses in Dubai. The Dubai Economic Development(DED) launched the E-trade license in Dubai solely for UAE and GCC nationals to control their business activity on social media platforms. The E-trade license is issued electronically by the DED and offers a legal framework for social media firms to sell their products or services. To summarize, anyone doing business activities using Facebook, Instagram, Snapchat, or any other social media site in Dubai must obtain an e-trader license. To be eligible to start a business, license applicants must be residents of Dubai.

E-Commerce License in Sharjah:

The E-Commerce License is a broader option that allows businesses to conduct online and offline sales. It is ideal for companies that plan to grow beyond a home-based setup. Sharjah offers its version of the E-Commerce License with some unique advantages. An e-commerce license is a permit issued by the government of the United Arab Emirates that enables its holders to carry out business operations involving the acquisition and upkeep of product inventories, as well as a legal authorization that permits the business to supply said inventory. For this license to apply to the business, all of this must be done via an internet platform like a website or social media platform. 

Differences in Licenses for E-commerce vs. E-trader License

In Dubai, e-commerce has grown into a thriving business sector thanks to customers' preference for online shopping. More people are seeking e-trader and e-commerce licenses in Dubai due to the renewed vitality of the industry. Both licenses allow for internet commerce, but they are different. Some of the significant distinctions between the two licenses are as follows:

  • In comparison to an e-trader license, an e-commerce license allows for a more substantial number of commercial operations.

  • Foreign investors can apply for an e-commerce license. However, only UAE/GCC nationals can apply for an e-trader license.

  • E-trader licenses are only valid for selling on social media, whereas e-commerce enterprises can trade on their websites.

  • The sale of products outside of Dubai is not possible with an e-trader license; however, an E-commerce license on the Dubai mainland allows the sale of products anywhere in the UAE.

  • Comparatively speaking, e-trader licenses offer fewer commercial activities than e-commerce licenses.

Why should you get a Dubai e-trader or e-commerce license?

The e-trader and e-commerce licenses allow entrepreneurs to participate in Dubai's growing e-commerce development. Because of the following criteria, starting the process of e-commerce business setup in Dubai is a profitable endeavour:

The E-commerce Market is Exploding:

The UAE's e-commerce business is expanding quickly, and the future seems promising. The UAE still has much to learn about e-commerce compared to other countries. The UAE's e-commerce market is predicted to be AED 104 billion, with a projected annual growth rate of 23%—the profitability of e-commerce company formation in the UAE.

Increased Spending on Online Shopping:

Following the COVID-19 epidemic, a significant shift in consumer spending boosted Dubai's e-commerce industry's growth potential. Many customers have abandoned traditional shopping methods in favour of using e-commerce websites to purchase both needed and non-essential things. According to Visa research, shoppers in the UAE are the Middle East's most significant online spenders. According to the report, the UAE has the highest annual spend per online consumer at $1,64813.

Strong Logistics Infrastructure:

The UAE's logistical strength is a factor that favours the expansion of e-commerce. A series of beneficial improvements, such as the shift to digital services, the transition from land to sea freight, and new technologies, helped the UAE's logistics sector adapt quickly to the pandemic shocks. The e-commerce sector now has a competitive advantage because of flexible supply chains. 

Which License Should You Get: E-commerce VS E-trader?

The e-trader and e-commerce licenses reflect the whole e-commerce sector, but the latter has a more significant reach. While the e-trader license is designed for small-time, home-based enterprises, the e-commerce firm structure is appropriate for both small businesses and large organizations if investors want to start a company like Noon.com or the formerly known as souq.com (previously Amazon. ae).

Setting up an e-commerce firm in Dubai for UAE residents can be done through an e-trader or e-commerce license. For a foreign investor, however, an e-commerce license is the sole way to start an online retail business in Dubai. Given its broad reach and flexibility to trade anywhere in the UAE, the e-commerce license is more tempting. Business Setup Specialist in Dubai advises international entrepreneurs to obtain an e-commerce license to exploit the present e-commerce boom.

What is the purpose of obtaining a trade license?

An online business is no different than any other. Every company in Dubai requires a license.

You will need an E-trader license in Dubai if you are an individual who promotes or sells products and services through social media accounts or a personal website. For example, stay-at-home mothers advertising homemade products or photographic services and marketing on Instagram in Dubai would be eligible for this home business license.

Which E-commerce Trade License Should You Get?

It's important to note that the UAE has only two licensing jurisdictions: 

  1. Freezone

  2. Mainland

In terms of cost-effectiveness, an e-business license is less expensive in a freezone. All Freezones are restricted to operating solely inside the boundaries of the freezone in question or worldwide and hence have jurisdictional constraints.

As a rule, Freezone licensees are only allowed to trade on the mainland (within the UAE) wholesale to the importer company, or goods must be provided through a local distributor in the UAE who will operate as an importer of goods from the free zone and distribute them to the final consumer. You can participate in government tenders, sell in local markets, open a store, and participate in government tenders with a Mainland license issued by the Department of Economic Development.

How can we assist you in obtaining the right license?

At Dhanguard, we specialize in business consultancy services in Dubai and Sharjah. Our team of experts can guide you through the intricacies of obtaining the appropriate license for your business, ensuring a smooth and hassle-free process.

Conclusion

Both the E-Trader License and the E-Commerce License in Dubai and Sharjah offer viable options for home-based businesses. To make an informed decision, consider the nature of your business, growth plans, and target audience. The entrepreneur's nationality and the scope of his objectives play a role in determining which license is suitable for beginning an Internet business in Dubai. An e-commerce license is recommended to reach larger aims because entrepreneurs can sell their items anywhere in the UAE. DED can provide an e-trader license to UAE or GCC nationals in Dubai to conduct small business activities within the emirate. Because each license's process and requirements differ, investors need the help of business establishment experts in Dubai, like Dhanguard.

Foreign investors are frequently concerned about their need for more understanding of the restrictions that prevent them from starting a business in Dubai. Dhanguard consultants, on the other hand, are well-versed in UAE labour and immigration legislation, making the company creation procedure go more smoothly. Dhanguard makes it simple for international investors to obtain an e-commerce license. We have experience interacting with government officials, which benefits UAE nationals and foreign investors. As a result, Dhanguard's customized help makes obtaining an e-trader or e-commerce license in Dubai a breeze.