The UAE as a jurisdiction to start a new business project has got numerous features. One of them is connected to different types of trade licenses in Dubai. According to the local laws, going through the procedure of getting a license is obligatory for any type of companies, regardless of their place of registration, form, number of involved people or anything else. Here there are different types of licenses and main peculiarities of obtaining each of them.
Commercial type
A commercial license is required to open a trading company in the UAE. It is issued to joint-stock companies registered in the main territory of the Emirates, as well as to the ones that were opened on the territory of the FEZ. The form of such companies in the SEZ is FZC — with two or more founders, FZE — with one founder.
Here there’s a choice between 2 types of commercial license: general or specialized. The choice depends on the form and the level of business that is going to be opened. General and specialized licenses allow trading the different types of goods and also their difference lies in the different quantity of goods allowed to be traded.
Getting such a type of license requires opening an LLC. For foreign businessman in simple words it means that they can own not more than 49% of actives, while another 51% are to be controlled by local sponsor or a company with local settlement and registration, or unity of several sponsors and firms (in such a case the sum total of their share should be not less than 51%). Some may think that having in possession less than a half is not the best idea, but the thing is that with the right set of management skills and right approach, it is always possible to get a full control and a full advantage of all the financial benefits.
Industrial type
An industrial license is issued to private and corporate persons for carrying out any investment activity, the purpose of which is the extraction of natural resources or the transformation of raw materials (in terms of their structure or appearance) into fully finished products.
Professional type
A professional license is issued for a person or company representative to practice certain professions or to register a company in Dubai for the purposes of engineering consulting, other consulting services, medical and educational services, etc.
Tourism type
Dubai is obligatory included in all the popular tourist routes, attracting huge numbers of visitors every year. With the aim of regulating the tourism sector, the Dubai Economic Department has established a license for the provision of tourism services. Companies, tour operators, agents and any establishments engaged in tourism activities in the UAE must have this type of license.
Agriculture type
This one is urgent when a business project is based on any agriculture, from harvesting and crops cultivation to any other nature-based activities, which are done for commercial use. Application for such type of license should also be approved by local authorities of the region where the business is going to be based. It is done to make sure that the new business is not going to be harmful for the nature of the region.
Craftsmanship type
This type of license will be required for those who plan to provide highly specialized services:
- Hairdressing.
- Consulting.
- Craft.
- Technical services.
- Publishing.
- Carpentry services.
- Medical services.
- Any other types of highly specialized craft services.
Such a license covers any company that is engaged in the provision of services, primarily related to physical craft activities.
Step-by-step instruction to get
Here’s a guide with 6 steps to get things done. Following these steps would lead you to a desired result which is getting an official permission for your business to operate in the territory of Dubai on perfectly legal terms.
Finding a proper Free Zone
To get a license, you need a local partner who will be an intermediary between the state apparatus and you, he will not perform managerial functions. You need such a partner in order to conduct consultations at the Ministry of Labor, to open resident visas for employees, etc. The role of such partners is performed by free economic zones, which are engaged in issuing licenses.
Choose of a Free Zone to get a license and work at
Different Free Zones work with different types of license. The choice of a free economic zone is one of the key issues that an investor needs to solve when opening a company in Dubai and the UAE.
Specialized zones have become a great instrument for stimulating business activity and doing business through the UAE, and this has served as an impetus for copying this model almost throughout the country. Today, there are almost 50 free zones in the whole country.
What should an investor be guided by when choosing a free economic zone:
- Activity type
- Importance of renting an office
- Current status
Currently, free economic zones have been opened in Dubai and the UAE in a number of areas — trade, aviation, automotive, design, healthcare, IT, education, printing and printing, manufacturing and logistics, media, gold and precious stones trading, training, startups, finance.
In a number of free economic zones, it is a mandatory requirement to open an office, the cost of opening an office in the UAE Free Economic Zone starts from $25,000 per year. If an investor does not need to open an office in Dubai and the UAE, then such a free economic zone does not suit him, and you need to contact our consultants to select another free zone.
Choosing a unique name
On this step a businessman needs to choose and submit a trade name for a new firm. Firstly, DED checks to see if that name is still available (if not, there’s a need to choose another one). After confirming the presence and availability of a trade name, it is reserved for the company. Also, the commission checks the name, so it should not violate any of the following rules:
- The name must not violate public morals or the public order of the country.
- Behind the name, the legal form of the company must be indicated, for example (LLC, FZE, etc.).
- The company name must correspond to the required activity and legal status.
- The name should not contain the name of any governing body, logos of any external organizations.
Getting MOA
The next step requires getting a MOA. It is an official document that regulates the external activities. It will need to be notarized by a notary in Dubai. The MOA, along with the application for a license in Dubai, must be submitted to the Department of Economic Development (DED) along with legal documents such as a certificate of incorporation, passport copies of the founders, directors, lease agreements.
Submitting
Applying for a license requires supplying your appliance form to DED together with:
- Certified due diligence of the directors/shareholders of the company by the UAE Embassy: passports IDs, proof of addresses, bank statements for the last 3 months.
- Corporate documents certified by the Embassy of the Emirates: certificate of registration, financial statements and bank statements for the last 3 months.
- Certificate of contribution of the authorized capital when opening a bank account in the UAE.
- Signed lease/purchase agreement
- A service agreement with a UAE resident holding 51% of the company’s shares.
- Agreement with a local registered firm acting as an agent.
Final step – getting a result
As only you’re approved and everything is fine – you get your license. Usually the process takes from 1 to 2 weeks, but during COVID-19 times it can take a little longer, up to 3 weeks or a month. If the application is rejected – you would get a full written answer with reasons for rejection and step-by-step instruction to solve the problem and apply once again after dealing with an issue.
Annual renewal procedure
In most cases the license is valid for one year (while still it is given for the time from 1 to 5 years). So, mostly business owners deal with the annual procedure of renewal. And it’s not a great idea to skip passing the procedure: there is a penalty for an expired license. Usually, this is a fine, but it can also easily happen that the government may require you to close all accounts and stop all further actions on the UAE territory. To avoid this unpleasant situation one needs to apply for renewal once a year, adding to application form:
- Copies of passports and visa (for all the directors, members of the shareholding).
- Original of all the approval documents, given by local authorities.
- Tenancy contract original.
- Originals and photocopies (made in a good quality) of other documents, required by a commission (the list may slightly vary according to the state, type of activity and local laws).
Changing activity
If one has got a license of one type, it does not necessarily mean that a company is strictly stuck to one particular activity. It is perfectly legal to make a change anytime the board of directors would want: change from one to another, remove the one that is not performed anymore, or add another activity, using the same document.
Steps for changing
Process of changing activity is a procedure that can be gone through after following 4 steps:
- Submitting the application
- Supplying the application with all the required main and additional documents
- Paying the service
- Waiting for an approval and getting a renewed version of the license.
Application for change should be sent to the relevant authority branch, which deals with particular types of questions, concerning the jurisdiction of the business. For example, if the business works with financial issues, the application should be sent to the Central Bank of the UAE.
Application form should be sent together with a pack of documents attached. The full list can be different in different jurisdictions and UAE states, also some authorities may ask for additional original and copies of documents that they need to make solving the issue clearer and more evident.
The service of changing a type of activity is not free, owners of firms are obliged to pay a tax for sending an application, it’s considering and getting ready a set of final versions of renewed license with new activity options. The sum to pay as a tax can be different for various authority branches.
As only the application is approved – a businessman gets the desired document and since then can go on according to a new situation with changed options of available activities (or just removed unnecessary ones), with no worries about doing something in an illegal way.
What is required for changing an activity application?
Going back to step 2, let’s take a look at what is needed to be attached to the changing activity application form:
- The original of the written decision of the board of directors (or a single director, depending on the company structure)
- The original of the currently used permission, given earlier
- Approvals from other bodies of the government (if a new type of activity deals with different branches at the same time)
- Other documents, describing all the changes that are going to be made in the company after adding, changing or removing activities: Memorandum, Articles of Association, etc.
It should be clear that it’s not a complete and accurate list for changing activity applications for all the cases. But these documents are obliged to be attached to get a renewed permission, with some other additional originals and copies added.
So, different types of trade licenses in Dubai are related with different activities, Free Economic Zones (usually each single one deals with its own activities that are allowed to be performed within the zone), different sets of documents and authority branches to send the application. So it becomes urgent to choose the correct option.
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