How to commence trading in the UAE

How to commence trading in the UAE

Business activities in the United Arab Emirates, particularly in Dubai, hold a pivotal role in fueling the economic growth of this region. Over a few decades, this country has transformed into a global financial and trading hub, showcasing sustainable economic development. Strategically positioned at the crossroads of Asia, Europe, and Africa, the UAE provides unique opportunities for international trade. This contributes to an influx of investments, making the UAE a crucial trading region in the Middle East.

This article explores key aspects of conducting trade in the United Arab Emirates, including an analysis of the legitimate environment, financial conditions, and logistical peculiarities. The aim of the article is to provide a comprehensive guide for business owners aspiring to expand their businesses in this dynamically growing economic center.

What is a trading company in the UAE?

A trading organization in the UAE embodies a form of commercial enterprise engaged in the buying and selling of diverse products. This business model necessitates the acquisition of a trading permit from the Department of Economic Development (DED) or the governing body of a free economic zone. This authorization serves as the fundamental document, granting the legitimate right to conduct operations involving the procurement, sale, and trade of various goods and products. Companies holding such a license can lawfully operate across different sectors, engaging in import-export operations, thereby broadening the horizons for commercial ventures.

To initiate the process of incorporating a trading company in the UAE, it is imperative to designate its registration location. Foreign investors managing businesses both in the global market and within the United Arab Emirates have the option to register their enterprise on the mainland. This allows them to directly engage with the local UAE market, including dealings with ports and customs. Conversely, if a foreign business is solely focused on the international market and is not involved in operations affecting UAE ports or customs services, the more recommended approach would be establishing the company in one of the free economic zones. These zones boast several advantages, including tax privileges and the potential for complete international ownership of the enterprise.

It is crucial to note that the effective conduct of trading activities in the UAE demands not only adherence to legal norms but also a profound understanding of the intricacies of local market conditions, the needs of the target audience, and logistical peculiarities.

Establishing a trading firm in the UAE unfolds as a multifaceted journey, intertwining not only the meticulous preparation concerning legal facets and the acquisition of requisite licensing permissions but also the crafting of business blueprints with a keen eye on strategic evolution.

Key benefits of trading in the UAE

In recent decades, the UAE has firmly solidified its position as a pivotal trade and business hub, spanning not only the Middle East but also the global stage. This federative state, uniting seven emirates, presents distinctive opportunities for international business owing to its strategic location, diversified economy, progressive trade policies, and appealing tax conditions. In this section, we will delve into how the amalgamation of these factors crafts ideal conditions for trade in the UAE.

Understanding the UAE legal environment

The legal landscape in the UAE is characterized by its specificity and intricacy, especially concerning entrepreneurship and commercial activities. The UAE legislation, encompassing federal laws and regulations from individual emirates, establishes the framework for the sustainable operation and expansion of businesses within its territory. Understanding the key aspects of these laws is crucial for the effective conduct of trade in the UAE.

• Entrepreneurial activities in Free Zones: To engage in entrepreneurial activities within one of the numerous Free Zones in the UAE, obtaining special approval from the competent authority of that zone is required.
• Foreign trade: Federal Law No. 18 of 1981 on commercial agencies outlines the norms for obtaining permission for foreign firms wishing to engage in commercial activities in the United Arab Emirates.
• Company formation: In accordance with Federal Law No. 2 of 2015 on commercial companies, every company must be registered with the Ministry of Economy of the UAE and adhere to the prescribed standards.

Awareness and compliance with these legislative norms are critical aspects of successful commercial activities in the United Arab Emirates, and potential investors must take these into account when planning their business in this jurisdiction.

Determining the appropriate organizational and legal status for an enterprise in the UAE

The application of the correct organizational-legal status stands as a paramount condition for the prosperity of a commercial enterprise in the United Arab Emirates. Various legal forms of companies offer unique privileges and limiting factors, and the decision is shaped by the nature of activities, business objectives, the scale of investments, and the desired level of control over operations.

Main forms of business in the United Arab Emirates

• Ideal for: Organizations focusing on operations within the UAE and partnering with local co-founders.
• Advantages: Convenient entry into local markets, the ability to conduct diverse activities.
• Limitations: In some sectors, a local co-owner with a controlling stake of at least 51% is required.

• Ideal for: Large and medium-sized enterprises seeking investment through share sales and expanding their business to a wider audience.
• Advantages: Ability to raise capital through public shares, limited liability for shareholders, enhanced company image and prestige.
• Limitations: Strict regulatory control, mandatory publication of financial reports, potential risks to management due to shareholder influence.

• Ideal for: Enterprises wishing to expand their international operations without creating a separate legal entity.
• Advantages: Full control by the foreign company, the opportunity to penetrate local and regional markets.
• Limitations: Activity may be restricted, a local service agent is required.

• Ideal for: Businesses focused on international trade operations and companies aiming for complete autonomy without the involvement of local co-investors.
• Advantages: 100% foreign ownership, tax exemptions, no customs duties.
• Limitations: Allowed activity within the trade zone and beyond the Emirates is restricted.

Certification of trade activities in the UAE

In the UAE, the type of permit required for entrepreneurship depends on the nature of the business activity. Various legislative acts and regulations establish these permits. Knowing and choosing the appropriate type of permit are crucial for the effective conduct of commerce in the UAE.

Key types of business permits in the UAE:

Commercial license A commercial license in the UAE is imperative for entities engaging in the purchase and sale of goods or the provision of services. This license encompasses diverse spheres of activity, spanning retail and wholesale trade, as well as intermediary trade. The issuance of commercial permits is overseen by the Department of Economic Development (DED) of the respective emirate or the managing authorities of Free Zones. Commercial licenses in the UAE undergo periodic updates, typically on an annual basis.

Professional license A professional permit in the UAE is tailored for experts, craft masters, and technical service providers, encompassing consultative, educational, and medical services. This type of permit allows foreign investors full ownership of the enterprise and mandates the verification of qualifications. Issuance is overseen by the Department of Economic Development, necessitating additional approval from professional institutions and associations.

Industrial license An industrial authorization in the UAE is requisite for enterprises engaged in manufacturing or industrial operations. This encompasses the production of food items, textile goods, metallurgical products, and output from various other sectors. To secure this authorization, companies must adhere to safety standards, environmental requirements, and quality criteria. The Department of Economic Development issues this authorization, with additional approvals from relevant governmental bodies.

Craftsman license An artisanal license in the UAE is designated for individual entrepreneurs or companies engaged in manual or artisanal production. This may encompass the crafting of handmade goods, restoration work, artisanal manufacturing, and other forms of artisanal activities. Local authorities oversee the issuance and regulation of these certificates, requiring periodic updates.

Tourism license A tourism permit is requisite for companies operating in the tourism sector, such as travel agencies, hotels, tour companies, and other services related to tourism. This license is regulated by local tourism authorities and is necessary for the lawful provision of tourism services in the UAE. Similar to other permits, the tourism license is subject to annual renewal.

Agricultural license An agricultural license in the UAE is designed for companies and private entrepreneurs engaged in agricultural activities, encompassing the cultivation of crops, animal husbandry, and aquaculture. This license is regulated by local agricultural authorities and is required for the legal conduct of activities in this field. These licenses are also subject to periodic renewal.

Free zone license Permission to function in the UAE's free economic zone is intended for enterprises conducting their activities in one of the multiple unconstrained zones in the country. The kinds and quantity of licenses are determined separately in each zone.

Documentation required for trade permit registration in the UAE:

1. Duplicate of the approved company name
2. Memorandum of Association (MOA)
3. Evidence of identity and residence for all executives and equity owners
4. Completed application form detailing the company's scope of operations with a comprehensive list of goods and services.

Certification of trading business in the UAE

Certification of trade enterprises in the UAE ensures that their products and services adhere to established quality and safety standards. This process not only aids in compliance with local legislation and regulations but also boosts customer trust, strengthens competitive advantages, and facilitates access to global markets.

In the UAE, various standards exist for different kinds of products, including food items, electronic goods, construction materials, and many others.

Table outlining key certifications for various product types in the UAE.

For many product categories, obtaining quality certificates from authorized organizations is mandatory. These can be local standards, such as ESMA (Emirates Authority for Standardization and Metrology), or international standards, like ISO.

A detailed guide to starting a trading activity in the UAE

Embarking on commercial activities in the UAE is a multifaceted process, demanding meticulous planning, and strict adherence to national legislative norms. To efficiently start and manage an enterprise, it is imperative to undertake a series of pivotal steps.

While initiating an entity on the mainland of the UAE, it is essential to remember that a national sponsor's share will constitute 51% of business ownership. In contrast, in the unconstrained economic domains of the UAE, such a requirement does not apply. In this area inviting a domestic representative is crucial for processing corporate records and safeguarding the investor's interests with governmental officials in the emirate.

Launching trading endeavors in the UAE demands a comprehensive approach and a nuanced understanding of national conditions and requirements. Diligently following these steps will streamline the business initiation process and ensure its prosperous progress in both the United Arab Emirates and beyond the country.

Initiating trading operations in the UAE embraces an integrated approach and an in-depth exploration of national norms and conditions. Meticulously applying these stages will simplify the procedure of opening a venture and contribute to its prosperity within the United Arab Emirates and on the international stage.

Customs procedures for import into the UAE

The import of products into the UAE entails a customs clearance procedure, an essential aspect of international commerce. Understanding and conforming to the UAE's customs requirements ensures a seamless import process and facilitates avoid delays with penalties.

1. Importer registration: the enterprise should undergo registration as an importer in the UAE, holding official country registration and a valid trade license.
2. Obtaining importer identification number: upon completing the enterprise registration, a unique importer code is assigned by UAE customs authorities. This code is used in all customs operations.
3. Preparation of required documents: various documents, including the exporter's invoice, packing list, license of origin source, transport documents (e.g., bill of consignment), and, if necessary, papers of compliance, are needed for customs clearance.
4. Goods declaration: imported products should be declared to the UAE customs service. This process is often done electronically through specialized customs systems, such as Mirsal 2 in Dubai.
5. Payment of customs duties: peculiar customs duties, dependent on the type and value of the goods, are established in the UAE. Importers are obligated to pay these duties for the release of goods at customs.
6. Inspection and release of goods: customs authorities may conduct a physical inspection of the cargo. After meeting all requirements and settling duties, the goods are released for entry into the country.

Prohibited goods for import into the UAE

Importers involved in importing goods into the UAE are obligated to strictly adhere to local legislation, which includes the precise observance of rules and regulations pertaining to prohibited and restricted items. This requirement is fundamental to ensure the legality and efficiency of import operations.

In the UAE, there is a list of products prohibited for import. This list includes, but is not limited to, items such as narcotics, weapons and ammunition, goods conflicting with Islamic norms and values, as well as counterfeit or fake products. Importing these goods is strictly prohibited and is punishable by law.

Some goods may be imported into the country only with special permission or a license. Such goods include, for example, certain types of medical drugs, chemical substances, agricultural products, and food items.

Compliance with these requirements plays a crucial role not only in avoiding legitimate issues and fines but also in maintaining the reputation and trust of the business. Non-compliance with laws regarding prohibited, and restricted goods can lead to serious legal consequences, including the confiscation of goods, fines, and even criminal prosecution.