Planning to start your e-commerce business in the UAE? Most entrepreneurs are drawn here for mainly two reasons. First, the UAE’s low taxes make it an excellent place for handling payments. And second, to target the UAE domestic market.
Currently, the UAE e-commerce market is booming. Sales are expected to grow from $2.6 billion in 2019 to $9.2 billion by 2026, highlighting significant potential for new businesses.
If you are an entrepreneur looking to capitalize on this opportunity, this article will walk you through the step-by-step process of starting your e-commerce business in the UAE.
Why Choose the UAE for Your E-commerce Business?
When it comes to starting an e-commerce business, few destinations offer the same level of incentives and opportunities as the United Arab Emirates (UAE). It offers multiple logistics options, ease of import/export, access to the international market, and much more.
Below are some of the benefits that make UAE an attractive destination for starting an e-commerce business.
- No paid-up capital requirements: Unlike many other jurisdictions, the UAE doesn't mandate a minimum paid-up capital requirement for e-commerce businesses. This means you can start your business with minimal initial investment.
- 100% Foreign Ownership: This eliminates the need for a local sponsor or partner and allows you to have complete control over your business.
- Low tax rates: UAE offers a favorable tax regime with no income taxes on your wages or salaries. Moreover, the 9% corporate tax and the 5% VAT are only applicable if the annual revenue is over AED 375,000 (about $100,000).
The Process of Starting an E-commerce Company in the UAE
1. Choose Your Jurisdiction within the UAE
When planning to start your e-commerce business in the UAE, the first step is to choose whether you want to register a free zone company or a mainland company.
For e-commerce businesses that are just starting, setting up a free zone company is a more suitable option in most cases. However, the ultimate choice between both depends on your business objectives and where you see yourself down the road.
Consider the following factors when choosing between the mainland and the free zone:
- Number of visas you need: Visas in the free zones are comparatively expensive and you also have a limited quota. Therefore, If you plan on having 1-4 visas, then a free zone can be a suitable option.
- Office Space: While free zones offer the convenience of flexible or shared desks, you can only have an office in the free zone where your company is registered. If you need a physical office outside the free zone, then choose a mainland company.
- Cost: Setting up an e-commerce company in a free zone is generally more cost-effective than in the mainland. The cost of an e-commerce license in the UAE starts from about AED 6,510. Moreover, you can save on expenses such as office space.
For a detailed comparison, read our article on the difference between a mainland and a free zone company in the UAE.
For this article, we will mainly focus on free zone company formation as it is a more suitable option for most people.
2. Register Your E-commerce Company
Once you know which jurisdiction is the most suitable for your business, the next step is to reserve the trade name and register your e-commerce company. Our experts at Emerhub have extensive experience in this and can help you register your business swiftly.
Emerhub submits 3 of your preferred trade names alongside shareholders' information, share capital details, and visa requirements. With our streamlined approach, you can get your business license typically within 3-5 business days.
3. Obtain the UAE Investor Visa
After establishing your e-commerce company, your next step is to come to the UAE for a medical examination and Emirates ID.
Emerhub will facilitate this by applying for your Investor’s Visa, ensuring you receive an e-visa for entry into the UAE. Once you are here, we then apply for your medical examination and Emirates ID. This process usually takes from 4 to 7 business days.
With your Emirates ID in hand, you are then eligible to open a business bank account at any preferred bank within the UAE.
4. Set up Logistics for Your E-commerce Business in the UAE
As per UAE regulations, a free zone e-commerce company in the UAE cannot directly ship its products to customers in the UAE.
However, you can do any of the following:
- Set up your website and partner with a logistics company (recommended): Your first option is to market and sell your products using your website and social channels and fulfill orders using a third-party logistics company. This approach allows you to maintain control over your branding, customer experience, and operations. In case you are importing your products to the UAE instead of local production, you can use freight forwarders who can handle everything on your behalf from customs to warehousing.
- Sell through existing marketplaces: Your second option is to sell your products on existing marketplaces such as Amazon and Noon. The process is similar to the one above as you can use freight forwarders if you are importing your products or use a logistics company to ship products to Amazon’s warehouse.
Between two of these options, setting up your website and social channels is more advisable because third-party marketplaces charge a hefty amount in terms of referral fees.
FAQ’s about the E-commerce business setup in the UAE
Frequently asked questions
What is the cost of an e-commerce license in Dubai, UAE?
An e-commerce license from a free zone in the UAE starts from AED 6,510. However, the exact cost depends on various factors including the choice of free zone, office space, visas, and more.
Can an e-commerce business in the UAE be run fully remotely?
Yes, it is possible to run your e-commerce business in the UAE remotely. However, the investor visa requires the investor to visit the UAE once every year. If they don't, they have to pay a fine. Otherwise, the investor does not have to be physically present in the UAE to effectively manage their business.
Can I set up an e-commerce company that does not sell its products in the UAE?
Yes, you can set up an e-commerce company in the UAE that does not sell its products inside the country. Investors can register a company in the UAE and benefit from low tax rates while selling their products outside the country.
Are additional licenses required to sell products in the UAE?
The need for an additional license in the UAE depends on the products you are selling. For example, if a company wants to sell cosmetic products, it may have to register with the Municipality of their chosen emirate or follow specific product labeling requirements. Emerhub can guide clients on additional license requirements as needed.
Can a business set up multiple stores online in the UAE using one trade license?
Yes. You can set up as many online stores as you want, including sub-brands as long as the activity remains under the E-commerce category.
Do companies need a physical office to run an e-commerce business in the UAE?
In the UAE, only mainland companies are required to have physical office space. If your e-commerce company is registered in a free zone, you do not need a physical office.