Out of all the business license inquiries that we receive, questions about general trading licenses are some of the most common. Applying for a general trade license in Dubai is very straightforward. We hope to address some of the most common questions in this article.
What is a General Trading License?
A general trading license allows an entrepreneur to engage in the trade of a variety of products. If a business wants to sell a mixture of commodities such as furniture, toys, clothing, and shoes under one license, then this is the ideal solution. It allows businesses to pivot and switch the products they sell based on market demands and trends. The license tends to be more expensive than standard commercial licenses, but the flexibility it provides often compensates for it.
Certain products, such as petroleum, vehicles, alcohol, and medical products, cannot be traded through a general trading license. These products require additional approvals from UAE ministries or local authorities. Speak to one of our consultants to get more information on the rules and regulations applicable to a general trading license.
What Jurisdictions Offer General Trading Licenses?
Since general trading licenses are some of the most sought-after licenses, they are available in almost all jurisdictions. However, it’s essential to understand the distinction between local and free zone general trading licenses.
1) Local License
With a local license, you will need a local national or entity as a partner. The benefit of getting a local license is quite extensive, particularly if you intend to target the local market. A license issued by the Dubai Department of Economic Development (DED) lets you have premises nearly anywhere in Dubai. You can take advantage of the vast quantities of warehouse facilities that are available at very competitive prices. You can act as a wholesaler to other businesses or sell directly to consumers.
According to local authorities, the general rule of thumb is that 100 sq ft of office or warehouse space equates to 1 visa. However, this can be negotiated with the DED. If you intend to bring an extensive amount of business through Dubai, you can get a more favorable visa quota. This allows you to employ a higher number of people.
A general trading license via the DED can take as little as one month from beginning to end. It is a very straightforward process as you don’t need any approvals from external agencies. All you need is a local sponsor and a lease agreement.
2) Dubai Free Zone License
A free zone license is ideal if you want to use Dubai as a hub to re-export to other markets. The free zone license offers you a 0% rate on corporate income. With the presence of world-leading logistics companies, there is no shortage of providers you can turn to for help in re-exporting to any market in the world. You can get an office in a first-tier free zone with world-class infrastructure under Dubai Multi Commodities Centre (DMCC), Dubai Media City, Dubai Airport Free Zone (DAFZA), or Jebel Ali Free Zone.
The timeframe for a general trading license varies depending on the free zone. Most free zones in Dubai can take around 30 to 60 days. If you select one of the free zones in the neighboring Emirates, you could get a license in 2 to 3 days.
You can have 100% ownership with a free zone license and depending on the jurisdiction, opt for a virtual office, so your costs are minimal. If you intend to sell items in the local market, you will need to make use of a local distributor. There is a standard 5% fee on goods when they exit the free zone in addition to the fee that your distributor will charge you. These fees will have to be factored into your operating costs.
Many entrepreneurs start with a free zone license, establish local relationships and interest in their products in the local market, and then proceed to get a local license. Whichever model you choose make sure you understand the impact it will have on your margins.
If I Plan to Trade in One Product, Should I Still Get a General Trading License Dubai?
We are often asked, is it better to get a general trade license even if my business plan is to trade in one type of commodity? The answer can vary on your budget and business model. For example, if your core business is solely based on trading in office furniture, then getting a general trading license is superfluous. Instead, it would be best to get a commodity-specific commercial license. Even with a commercial trading license, you can add a limited amount of related business activities to your license.
If you are unsure about the products you intend to sell, then opting for a general trading license could be the sensible choice. Let’s suppose you want to sell children’s clothing but think there is potential in toys and electronics as well. As these are products in entirely different sectors, a general trade license might be the most sensible option.
A general trading license is also great for seasonal or online businesses. You could sell swimwear and beach sports goods in the summer and Christmas decorations in the winter. If you run an online store, you could start a dropshipping business with a catalog of thousands of distinct products under one license.
Ensuring a Smooth Process
While compared to other licenses, a general trading license is one of the easiest to get. However, we recommend that you speak to one of our consultants who can give you additional advice on the best means to launch your business. Over the years, our advice has saved people thousands of dirhams in additional fees and costs.
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