The future of the e-commerce business in Dubai is bright. From 2019 to 2022, global online shopping revenues are expected to nearly double to US$6.54 trillion. The UAE was boasting one of the largest B2C e-commerce markets in the rapidly growing Middle East and North African (MENA) region.
In this article, you will learn everything about how to start an e-commerce business in Dubai and the UAE. If you want to start in this type of business, here are some key factors you should know about the country’s e-commerce market. Let us observe:
1. Why should you start an e-commerce business in the Emirates?
2. How to get started selling online in the UAE?
3. What type of licenses are available to do e-commerce in the country?
4. Establishing an e-commerce business in a UAE free zone
5. Requirements for office space and logistics
6. How can Connect Group help you?
1. Why should you start an e-commerce business in the Emirates?
1.1. The Middle East’s fastest-growing e-commerce market
Despite having only one-third the population of Saudi Arabia, the UAE outperformed it with an e-commerce market value of more than US$10 billion. According to research, Dubai accounts for 60% of all online buyers; with a whopping 81 percent of its 3.2 million adult population making product purchases online.
Hence, the Dubai government recently launched the Dubai E-Commerce Strategy. Its goal is to cement the city’s position as a global logistics hub for the Middle East. Also, it looks for increasing its contribution to the local economy to AED12 billion (approximately US$3.2 billion) by 2023.
The strategy includes initiatives such as attracting more foreign direct investments and reducing the cost of e-commerce activities by 20%. This includes storage, customs fees, VAT, and transportation.
1.2. Infrastructure of the highest caliber
The UAE also has one of the world’s best transportation infrastructures. Not only is it ranked third in the Global Competitiveness Report 2018 for “airport infrastructure and means of air transport quality” and fourth in “quality of infrastructure”; but it also connects you to 80 percent of the world’s GDP in 8 hours or less.
Also, the air transport industry contributes an estimated US$20 billion to the UAE’s GDP. This is why the government makes significant efforts to maintain the competitiveness of its air transport.
According to the Government, there have been great investments in airports. Hence, investments in airport infrastructure and development projects have totaled around AED 1 trillion (approximately US$272 billion) to date. This is just for airport infrastructure.
In addition, the UAE’s Infrastructure and Vision 2021 (which aims to ensure sustainable development while protecting the environment) details the country’s plans to:
- Build roads.
- Bridges.
- Seaports.
1.3. Extensive assistance for new businesses
In the World Bank’s ‘Doing Business 2020’ report, the UAE ranked 16th in Ease of Doing Business, overcoming Thailand, Germany, and Canada in terms of overall business regulation and practices. As part of its Vision 2021 economic diversification efforts, the UAE has encouraged the growth of Free Trade Zones (FTZs).
Plus, these businesses can benefit from lower operating costs, lower tax rates, and professional networking opportunities. For example, FTZs such as DMCC in Dubai can provide:
- Repatriation is complete.
- There is no corporate income tax.
- Personal Income Tax is 0%.
Furthermore, FTZs can house business incubators such as the Google-certified Astrolabs, which offer professional training programs for tech ventures. If you want to learn more about Dubai’s FTZ landscape, check out our Dubai FZ company setup guide.
1.4. With DMCC, you can gain a competitive advantage
With DMCC’s investments in creating the ideal incubator for your e-commerce business, it comes with a slew of ecosystem services to help your business thrive. Its advantages are:
- Improved infrastructure.
- Simplified business setup.
- Connectivity.
- Unprecedented business support.
- Favorable government incentives.
2. How to get started selling online in the UAE?
We highly recommend establishing an e-commerce business in Dubai if you want to start one in the UAE. As previously stated, Dubai not only has 60% of the UAE’s online shoppers, but it is also actively encouraging foreign investment in its e-commerce sector.
In terms of the legal environment, Dubai makes it relatively easy for e-commerce businesses to obtain a license to operate. However, it should be noted that, while it is a simple process, operating an e-commerce business without proper licensing is illegal. Plus, the procedures must be followed carefully to comply with the law.
2.1. How to start an e-commerce business in Dubai
Setting up a business in Dubai can be done in person while visiting the country or online. Thus, the following are the typical steps you must take to get started:
2.1.1. Decide on the type of license you want and what you want to do with it
The majority of SMEs register as a Limited Liability Company (LLC). However, the type of legal entity you choose will be determined by your specific circumstances. You must wonder to yourself what the best business structure for you is. What types of business activities do you intend to engage in? And what is your current status as a resident?
So, these are some questions to think about before making a decision. Finally, this will determine which documents and licenses you will need to obtain to legally operate your e-commerce business in Dubai.
2.1.2. Choose a location for your company
As an e-commerce business in Dubai, you must have a physical location in addition to a business address. FTZs typically offer a variety of affordable options for any business size, as well as office promotions for new business establishments.
2.1.3. Submit your application
Fill out all of the necessary forms, pay any application fees, sign the necessary documents, and send them to the appropriate offices.
2.1.4. Create a bank account
Once your company is fully operational, you should open a bank account for your operations. This will make managing your company’s finances and tax filing easier in the future.
2.1.5. Promote your goods or services
When your company is ready to enter the market and has everything in place, it all comes down to your marketing strategy. The best way to accomplish this is to target the appropriate market for your products and services. As a result, develop an effective marketing strategy that aligns your products and services with the needs and desires of your target consumers.
These are just a few of the steps you should take before launching an e-commerce business in Dubai. Hence, depending on the nature of your business, you may or may not require additional steps beyond those listed above.
Finally, doing it correctly with the assistance of experts will ensure the success of your e-commerce venture. As a result, it is best to seek professional advice from a reputable business setup firm. So, the company formation specialists will advise you on your licensing options in the UAE and guide you through the entire process.
3. What type of licenses are available to do e-commerce in the country?
You may want to think about establishing your business in the Mainland or in a Free Zone. Before deciding which will work best for your company, you should consider the following factors.
3.1. Mainland versus free zone
Establishing a Mainland entity will give you more flexibility and will allow you to distribute goods and services directly to the UAE market. A Mainland license is a good option; this is because it allows you to access all areas and has fewer restrictions than a Free zone license. There are also fewer restrictions on visa eligibility and office location with a mainland company.
Hence, the most common Mainland structure is an LLC (which requires a 51 percent Local Partner) or Foreign Branch (which requires a National Service Agent).
3.2. Mainland alternatives
3.2.1.Limited Liability Company (LLC) – 51 percent local partner, 49 percent foreign investor
An LLC must have a majority (51 percent) shareholder who is a UAE National (individual or corporate). This means that the Foreign Investor(s) may own no more than 49 percent of the Company’s stock.
- The structure is ideal for product trading and provides a full range of activities.
- Allows your company to conduct business anywhere on the UAE mainland.
- Capable of importing, storing, and distributing goods.
- Taxed as if it were a local UAE company.
- A 51 percent local shareholder
- A sponsor is required, but risks can be mitigated by using a Corporate Nominee.
It should be noted that under the new UAE FDI Law, some LLC companies can apply for 100 percent ownership.
3.2.2. Foreign Branch – Foreign Investor / National Service Agent
Requirement: The Foreign Parent Company owns 100 percent of its shares, and this Branch is an extension of that foreign company; a UAE National UAE Company is appointed as a National Service Agent (NSA).
- 100 percent ownership – complete operational control and profit guarantee
- Governments and large organizations recognize the onshore presence.
- Activities are restricted to those of the parent company. The Foreign Branch, in particular, is not permitted to ‘Trade-in products or import goods. As a result, this structure can only be used for the delivery of services, software, and other virtual commodities.
- A branch of a parent company – taxes in the home country may apply 50,000 AED bank deposit with the Ministry of Economy required for the life of the branch.
- Government fees are marginally higher.
4. Establishing an e-commerce business in a UAE free zone
A Free Zone License is a cost-effective option, at least in the early stages, and allows for full 100 percent ownership with no local shareholder required. The Free zone Authority acts as your local sponsor. Goods imported from outside the free zone are exempt from customs duty, but they must remain in the free zone.
The main limitation of a free zone is that you can only operate within the free zone. Hence, you can only import and trade within that zone. So, if you want to sell products or services to companies or individuals on the mainland of the UAE, you must use an onshore agent; that agent has a mainland trading license.
Therefore, this agent or local distributor will then be able to distribute your goods or services on the mainland. Thus, many free zone authorities in the UAE are now offering e-commerce activity licenses with attractive packages.
5. Requirements for office space and logistics
Mainland licenses will necessitate a physical presence, with minimum office space requirements varying according to the activities of the License. Minimum office requirements for a mainland License in Abu Dhabi begin at 14sqm and 200sqft in Dubai.
There are a few options, such as the Instant License in Dubai; and the Tajer License in Abu Dhabi, that eliminate the early stage requirements for a physical office space. Additionally, most Free zones allow you to use a Flexi desk or virtual office arrangement in the early stages; at least if physical space is not required and you only need a limited number of staff visas.
You will almost certainly need to consider how your product delivery and stock will be managed. Will you need a warehouse to store your products? Such logistic management facilities can be provided by both the Mainland and certain Free Zone Authorities.
In addition, Connect Group offers outstanding real estate services. Hence, we can advise you on how to lease an office in Dubai.
6. How can Connect Group help you?
By establishing your new e-commerce business in Dubai, you can take advantage of the vast opportunities available in the Middle East. Dubai has a large, well-connected population and numerous government-led initiatives that will encourage e-commerce growth over the next decade.
Therefore, there are numerous factors to consider before establishing an e-commerce business. Hence, if you require additional assistance, we have an experienced team to offer you the best assistance. Therefore, we can support you to find the best solution to your business’s needs.
Would you like to contact us to obtain more information about how to start an e-commerce business in Dubai? For questions and inquiries, call us on +971 43 316 688. You can also email us at contact@connectgroup.co. We are your best partners!
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