E-commerce is a lucrative business in the UAE which is the fastest-growing e-commerce market in the MENA region. A number of free zones in the UAE offer a cost-efficient business setup environment to start an e-commerce business. With an e-commerce license in the free zones, the companies are not allowed to trade directly with the consumers in the mainland. However, e-commerce companies can sell the products of suppliers already available in the market.
High digital penetration, a digital-savvy population, a rise in mobile wallets and pro-active government policies makes the UAE one of the best places to start an e-commerce business. However, the recent COVID-19 pandemic has turned out to be a blessing in disguise for e-commerce platforms because 184 countries including the UAE have enforced lockdown measures where the people are allowed only to go out to buy essentials.
The restrictions to mitigate the coronavirus spread have resulted in a major shift in consumer behaviour in the UAE, where people have started buying through e-commerce platforms and most of the offices are working from home and schools have started online classes. There has been a rise in the number of online orders and the number of new users has also increased. The new trend has added to the profitability of the e-commerce companies in the UAE including e-Learning and e-training.
The UAE has a vibrant e-commerce market which is forecast to reach USD 27.1 bn by 2022, as per a recent report in Gulf Today. In terms of size, the UAE’s e-commerce market ranks 33 in the world. More than 80% of the UAE population is also estimated to make active online shopping. The growth of e-commerce platforms like Namshi, Noon and Amazon.ae (previously Souq.com), Careem Cab indicate the increasing importance of e-commerce firms and the rise of competition in the market. The uncertainty over COVID 19 also brightens the business prospects of e-commerce platforms.
Key Things to Consider Before Starting an E-commerce Business in the UAE Free Zones
The free zone authority of the respective free zones is the competent authority that issues business licenses for e-commerce companies. After obtaining an e-commerce license, the entrepreneurs are provided with an online platform for the purchase and sale of products. The following things should be considered before setting up an e-commerce firm in the UAE free zones:
a) Selling of Products
In the free zones, the companies are not allowed to sell products directly with the clients. However, the companies reach an agreement with the suppliers whose products are already available in the market. The free zone companies can list such products for sale on their shopping website. The need for a local distributor or agent is not required under the free zone e-commerce license because the companies are selling the products of suppliers.
b) Warehouse Requirements
The e-commerce license can be obtained with the Flexi desk facility in the free zones and therefore the requirement of warehouse or office space is not mandatory. The suppliers with whom the company has an agreement will store the goods if the company is dealing with consumer products. Since there is no warehouse requirement, the operational cost for the e-commerce license will be less.
c) Product Registration & Customs Duty
E-commerce companies are not responsible for the products registered with the concerned local authorities such as Municipalities and health authorities. This is because the companies will be dealing with the products that are already registered and the supplier performs the registration of the products. Similarly, the supplier already pays the customs duty and the e-commerce firm doesn’t need to pay 5% customs duty.
Benefits of Setting up an E-Commerce Firm in the UAE Free Zones:
- Ability to repatriate profits and capital
- No warehouse requirements
- Not responsible for Product Registration (Supplier will take care of it)
- Zero currency restrictions
- No requirement of sponsorship and 100% ownership benefits
- Zero corporate tax
- Operating costs are minimal
- Import duty exemption on e-commerce license
- The benefit of a resident visa for 3 years
Free Zones for E-Commerce License in Dubai
Other Free Zones for E-Commerce in the Northern Emirates in the UAE
- Ras Al Khaimah Media City
- Sharjah Media City
- Ajman Media City
- Fujairah Creative City Free Zone
- International Free Zone Authority (IFZA)
- Umm-Al-Quwain Free Trade Zone
Business Setup Consultants in UAE Free Zones
Entrepreneurs who wish to set up a business in one of the 40 UAE free zones are required to be aware of the different regulations. Each free zones are governed by different authorities with a comparatively different set of regulations designed for the companies that operate within the free zones. The mainland business setup requires an entirely different set of requirements, especially the UAE local sponsor who is mandatorily required to hold at least 51% of shares in the company. The pace of the company formation depends upon how efficiently the entrepreneurs can execute the business setup processes. However, it is almost impossible for foreign entrepreneurs to grasp all the laws and regulations, especially if it is their first business venture. An efficient way to execute the process is to hand over the UAE company formation responsibilities to the best business setup consultants in Dubai, UAE.
Jitendra Business Consultants (JBC) is one of the most leading company formation specialists in the UAE. JBC’s well-qualified business setup consultants have helped a number of e-commerce entrepreneurs to achieve their dream of opening a company in the UAE. JBC’s company formation specialists are well versed in local laws and regulations and the clients get full-fledged guidance and support in all the stages of business setup in Dubai, right from the registration to incorporation.