Free Zones for Setting up an Ecommerce Business in the UAE

By Sakshi Srivastava - 09 Apr 2022 Last Updated: 12 Apr 2022
Free Zones for Setting up an Ecommerce Business in the UAE

The global e-commerce industry has made an identity for itself and is continuing to expand at a rapid pace. Everything is now just a click away, thanks to the availability of almost all online products and services. Because of the region's tremendous opportunity, many e-commerce companies are now going to relocate to the Middle East.

E-commerce is a booming market in the UAE, which has the fastest-growing e-commerce market in the MENA region. Several free zones in the UAE provide a low-cost business setup environment for launching an e-commerce venture. Companies in the free zones are not permitted to trade directly with mainland consumers using an e-commerce authorization. E-commerce companies, on the other hand, can sell products from providers who are already on the market. In this blog will see that how Freezone setup an e-commerce business in the UAE.

E-commerce Business in the UAE

Due to its high digital penetration, digitally savvy population, growth in mobile wallets, and proactive government policies, the UAE is one of the best places to start an e-commerce business. However, the COVID-19 pandemic has turned out to be a boon for e-commerce platforms, as 184 countries, including the UAE, have implemented lockdown measures that limit people's ability to leave their homes except for essential purchases. The new trend, which includes e-learning and e-training, has contributed to the profitability of the UAE's e-commerce companies.

The primary goal of these e-commerce companies is to become one of the UAE's commercial hubs. It has never been easier to shop since the invention of smartphones. Any service can be accessed on the go, and the need for laptops or computers for shopping has significantly decreased. Online shopping has grown nearly 15 times since a decade ago. According to one study, more than 90% of the UAE population has access to the internet. It's good news for aspiring e-commerce businesses.

Benefits of Starting an E-commerce Business in Freezone

The beginning of Free-zones has only improved working conditions for those looking to establish an E-Commerce Company in Dubai Free-zones.

There are numerous benefits to incorporating a company in the Freezone some of them are:

  •  The freedom to repatriate all earnings and resources
  • There are no currency restrictions.
  •  One hundred percent ownership (No need for a sponsor)
  •  There is no personal or corporate tax.
  •  Service at the lowest possible cost
  •  Import duty exemption for e-commerce licenses
  •   A three-year resident visa has been issued.

The location of service is irrelevant for an e-commerce business as long as there is a strong internet connection. It implies that the initial costs of starting an e-commerce business are low because there is no tax and few fixed expenses. The demand of a sponsor is not required.

However, without any constraints, one cannot open a shop. Several protocols must be followed prior to the establishment of the organization. The first and most important step would be to obtain an e-commerce license, which is required for establishing the business without engaging in any illegal e-commerce operations.

Things You Should Know Before Starting an E-commerce Business in the UAE Freezones

In the freezone authority of the respective freezones, the governing body issues business licenses to e-commerce companies. After obtaining an e-commerce license, entrepreneurs have access to an online platform for purchasing and selling products.

Before establishing an e-commerce business in the UAE freezones, the following factors must be considered:

Product Distribution

Firms are not permitted to sell goods directly to consumers in free zones. Businesses, on the other hand, have reached an agreement with manufacturers whose interests are already on the market. Companies in the freezone will list such items for sale on their website for customers to purchase. A local distributor or agent is not required under the freezone e-commerce license because they sell the goods of suppliers.

Storage Requirements

The e-commerce license is obtained in the freezones through the Flexi desk facility, so a warehouse or office room is not required. If the company is in the business of selling consumer goods, the manufacturers with whom it has an agreement will store them. Because there is no need for a warehouse, the operating costs for the e-commerce license would be lower.

Customs Duty & Product Registration

Municipalities and health authorities, for example, are not liable for commodities reported to the relevant local authorities. Companies must deal with already licensed products, and product registration is handled by the retailer. Similarly, the producer pays the customs duty, and the e-commerce business is exempt from paying a 5% customs duty.

Read more: Everything You Need to Know About Starting a Business in Freezone

Procedure to Start an E-commerce Business

  • The first step is to decide on the structural structure of the company. There are only two types of frameworks that can be built.
  •  Freezone Business  (FZ Co.) or Freezone LLC (Limited Liability Company).
  •  Freezone Establishment (FZE)
  • Some Freezones restrict all types of registration while others allow either.
  • The differences are determined by the number of shareholders and whether they are natural or legal entities. Each Freezone has an authority that serves as the apex body for the Free Zone.
  • The next step is to choose a location for the business to be established. There are over 24 free zones in Dubai, and it is best to choose one with a solid infrastructure that is well connected to the rest of the UAE. A list of pros and cons will greatly aid in the selection of a venue.
  •  The next step is to come up with a trading name. It would be ideal to have a groovy and simple phrase, but keep in mind that the same name must be associated with a failing domain name, which would redirect traffic elsewhere due to a mismatch between the trade name and the domain name.
  • The next step is to apply for an E-commerce License. There was an increase in the issuance of these licenses as the business boomed. For Freezone support, an application must be submitted to the Freezone Authority.
  •  The next step is to apply for initial approval, which will necessitate the submission of paperwork such as documents.
  • Any additional documentation can be requested by authorities

Virtual offices are prohibited in Dubai, and it is also required to have a physical office with a valid address for registration purposes.

After all formalities and documentation procedures are completed, an e-Commerce license is issued, and business operations can begin immediately.

Conclusion

If you want to start an e-commerce business and need help with all processes such as paperwork, office space, tax, legal, or any other such formality or practice. Our experts at Dhanguard have excellent knowledge in the field of business enterprise incorporation of any kind. Please contact us at any time, and we will gladly like to assist you in every manner.

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

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