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

By Ananya - 23 Jul 2021 Last Updated: 02 Dec 2022
E-Trader VS E-Commerce License in UAE: Which is Most suitable for your business?

Table of Contents 

  1. 1. Definition of an E-Trader License
  2. 2. Most Significant Differences Licenses for E-commerce vs. E-trader License
  3. 3. Which License Should You Get: E-commerce VS E-trader?
  4. 4. Why should you get a Dubai e-trader or e-commerce licence?
  5. 5. What is the purpose of obtaining a trade licence?
  6. 6. Which E-commerce Trade License Should You Get?
  7. 7. Conclusion

In 2020, Dubai businesses witnessed a slew of exceptional occurrences that ushered in a new era in the industry. The rise of online business as a rising industry deserves special notice among the changes brought forth by the COVID-19 epidemic. For investors interested in the e-commerce sector, there are primarily two alternatives for establishing a business in Dubai: e-trader and e-commerce licences provided by the Department of Economic Development (DED).

Before beginning the process of business formation in Dubai, aspiring entrepreneurs must understand the distinctions between the two types of licences.

This post is a guidance from Dubai-based company setup specialists to help entrepreneurs distinguish between E-trader and E-commerce licences. Let's take a closer look at the two types of licences:

Definition of an E-Trader License

The Dubai Economic Department (DED) launched the E-trade licence in Dubai solely for UAE and GCC nationals to control their business activity on social media platforms. The E-trade licence is issued electronically by the DED and offers a legal framework for social media firms to sell their products or services. To summarise, anyone doing business activities using Facebook, Instagram, Snapchat, or any other social media site in Dubai must obtain an e-trader licence. To be eligible to start a business, licence applicants must be residents of Dubai.

Most Significant Differences 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 for e-trader and e-commerce licences in Dubai as a result of the renewed vitality in the industry. Both licences allow for internet commerce, but they are not the same.

Some of the significant distinctions between the two licences are as follows:

  • In comparison to an e-trader licence, an e-commerce licence allows for a greater number of commercial operations.
  • Only Residential Sites are granted an e-trader licence (Makani must be provided).
  • Foreign investors can apply for an e-commerce licence, however only UAE/GCC nationals can apply for an e-trader licence.
  • E-trader licences are only valid for selling on social media, whereas e-commerce enterprises can sell on both their own and other websites.
  • The sale of products outside of Dubai is not possible with an e-trader licence; however, an E-commerce licence on the Dubai mainland allows the sale of products anywhere in the UAE.
  • The legal structure of an e-trader licence is limited to a sole proprietorship; an e-commerce licence lets you to choose any legal structure you want (LLC can be set up)

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

The e-trader and e-commerce licences both reflect the e-commerce sector as a whole, but the latter has a larger reach. While the e-trader licence is designed for small-time, home-based enterprises, the e-commerce firm structure is appropriate for both small businesses and large organisations 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 licence. For a foreign investor, however, an e-commerce licence 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 licence is more tempting. Business setup specialists in Dubai advise international entrepreneurs to obtain an e-commerce licence in order to take advantage of the present e-commerce boom.

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

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

E-commerce Market is exploding

The UAE's e-commerce business is expanding at a quicker rate, and the future seems promising. In comparison to other countries, the UAE still has a lot to learn about e-commerce. The value of 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 UAE.

Increased Spending on Online Shopping

Following the COVID-19 epidemic, there was a significant shift in consumer spending behaviour, which boosted the e-commerce industry's growth potential in Dubai. A large number of customers have abandoned traditional shopping methods in favour of using e-commerce websites to purchase both needed and non-essential things. According to a Visa research, shoppers in the UAE are the Middle East's greatest 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 the use of new technologies, helped the UAE's logistics sector adapt easily to the pandemic shocks. The e-commerce sector now has a competitive advantage because to flexible supply chains. In addition, the UAE's cargo transportation dynamics are projected to be altered by new Hyperloop technology.

Read More: What is E-Commerce License in UAE?

What is the purpose of obtaining a trade licence?

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

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

Which E-commerce Trade License Should You Get?

It's important to note that the UAE has only two licencing jurisdictions: free zones and the mainland.

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

As a rule, Free Zone licensees are only allowed to trade on the mainland (within the UAE) in 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 will be able to participate in government tenders, sell in local markets, open a store, and participate in government tenders with a Mainland licence issued by the Department of Economy Development.

Conclusion

The nationality of the entrepreneur as well as the scope of his objectives play a role in determining which licence is suitable for beginning an internet business in Dubai. An e-commerce licence is recommended to reach larger aims because entrepreneurs can sell their items anywhere in the UAE. DED can provide an e-trader licence to UAE or GCC nationals resident in Dubai to conduct relatively 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 lack of 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 licence. We have experience interacting with government officials, which is beneficial to both UAE nationals and foreign investors. As a result, Dhanguard's customised help makes obtaining an e-trader or e-commerce licence in Dubai a breeze.

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.

Dhanguard provides faster and hassle-free Trade License with minimum paper work. With the guidance of our professional team of consultants you will get General trading license, Freelance license, Etrader license, Event Management License, Travel Agency license in Mainland and Freezone in UAE.

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