Understanding the difference between commercial license and trade license is a key consideration for startups and investors in the UAE. Getting the right license helps streamline the business setup procedure and ensure compliance with regulations. Often, a “commercial license” and a “trade license” are used interchangeably; however, both terms are different. A commercial license grants permission to operate your business and sell your products and services. On the other hand, a trade license identifies business activities to ensure the business is complying with regulations, security, and health guidelines.
Among many business licenses, a commercial license is a popular choice among investors in Dubai. However, it is more specific in nature and covers a short number of products. Let us discuss each term in detail to understand its distinct characteristics.
What is the Difference Between Commercial License and Trade License?
The difference between a commercial license and a trade license lies in their purpose. While every business must obtain a legal license to operate in the UAE, choosing the right option is equally important.
What is a Commercial License?
A commercial license is a legal permit that allows businesses to trade in a specific area. Business entities and individuals involved in trading activities can apply for a commercial license. UAE offers three main types of licenses, according to the nature of the business, namely professional, commercial, and industrial licenses. Getting a commercial license is necessary for entities that give trade-related services and buy and sell goods. These trade-related services involve import/export, general trading, and commercial brokerage.
Whether a company is operating in Dubai Mainland or a Free Zone, getting the right business license ensures compliance with regulations and helps avoid any penalties and fines. Although every company must get a license to run its business legally, a commercial license is specifically issued for companies doing trade activities.
Key Benefits of a Commercial License in Dubai
Some of the key benefits of a commercial license are given below,
- Provides tax exemptions
- Free repatriation of profits
- Allows the conduct of ten different business activities under one license (primary activity included)
- License renewal without any audit.
- Allows for carrying out different international business activities.
- Trustworthy communication with the Dubai Department of Economic Development (DED).
How to Get a Commercial License in Dubai?
Mainland companies must apply to the DED to get their trade license in Dubai, while all Free Zone entities must apply to their respective free zone licensing authorities. Here are the key steps involved in getting a commercial license,
Select a Business Category
To apply for your commercial license, choose your business category from the list given by the Free Zone authority or DED.
Legalise Business Structure
This step involves selecting a jurisdiction to run your business and a list of business shareholders.
Decide on a Trade Name
Select a trade name by following the naming guidelines and get approval from the authorities. Next, get your initial approval from the relevant authorities.
Submit Documents
Submit all required documents, ensuring they are correct, to get your trade license within three days. However, you may face delays if the documents are not complete or incorrect.
Hire a Legal Advisor
To ensure license issuance in one go, hire a legal consultant, as they can make sure your documents are complete and help you overcome any legal hurdles.
Required Documents for a Commercial License
You need to submit the following documents to get a commercial license in Dubai,
- Complete the application form
- Copies of passports of each business shareholder
- Details of your business plan and activities
- NOC from your local sponsor
- Financial statement for the last two years
- Passport-sized photographs
- Attested copy of registry identification form
- Shared capital details
What is a Trade License?
A trade license is a government-issued legal permit allowing businesses to conduct business activities within a specific jurisdiction. A trade license is a mandatory requirement regardless of the size or industry in which a business operates. Moreover, a trade license is a confirmation that a business is legitimate and is complying with the UAE’s regulations.
Whether you want to launch a real estate company, e-commerce, open a restaurant, or start a digital marketing company, having the right business license is mandatory. You can either choose the UAE Mainland or the Free Zone, depending on your business type and other preferences. It is illegal to run a business without a license in the Emirates and can lead to legal action, business shutdown, and huge fines.
Benefits of a Trade License in Dubai
A trade license offers the following benefits to businesses in Dubai,
- Improves the credibility of a business among customers
- Full foreign ownership of the company ( no need for a local sponsor)
- Tax reliefs that help with business growth
- Compliance with the legal and regulatory framework of the UAE
- Providing a legal platform to conduct international trade
- Depending on the type of license, businesses can conduct a wide range of business activities
- May allow sponsorship of workers and family members
- Helps build brand reputation through marketing and networking opportunities
How to Get a Trade License in Dubai?
The main steps to get a trade license are as follows,
Finalize Business Name
Choose a unique name that follows the guidelines of DED or the relevant Free Zone authority.
Outline Your Business’s Scope
Select the legal structure of your business, for instance, a sole proprietorship, LLC, etc., and business activities.
Get Initial Approval
Obtain initial approval from DED and other relevant government authorities.
Submit Documents
Gather all required documents, ensuring they are complete and correct, to ensure the issuance of the license within a few days.
Submit your Application
Submit your license application along with documents through Invest in Dubai’s online portal or a DED services center.
Pay the Fee to Get Your License
Pay the required license and activity fee, which varies depending on your chosen business activity. After authorities approve your applications, you will get your trade license.
It is important to select a jurisdiction carefully (free zone or mainland), and license costs start around AED 12,000, and additional costs of translation and activity fee.
Required Documents for a Trade License in Dubai
To apply for a business trade license in Dubai, you’ll need the following documents,
- A completed application form.
- Passport copies of all directors and shareholders.
- Memorandum of Association (MoA) showing the business activities and legal structure of the business.
- Initial approval from the Department of Economic Development (DED) or a Free Zone Authority.
- A valid lease agreement for your office, validated by Ejari.
- A copy of the confirmed trade name of your business.
Key Difference Between Commercial License and Trade License
Here is a comparison table to understand the difference between a commercial license and a trade license in Dubai.
| Criteria | Commercial License | Trade License |
| Allowed Activities | Trading, real estate, retail | IT services, consultancy, management/legal services, education/training |
| Qualification | No requirement to provide a diploma or qualifications | Not required for most activities except for supporting your competence in certain activities. |
| Fee Requirement | Mostly the same as a professional license. | Mostly the same as a commercial license, except for certain activities where you need an office. |
What is the validity of a business license in the UAE?
A commercial license in the Dubai mainland is valid for one year and can be renewed by providing the necessary documents and additional approvals. However, certain free zones offer licenses with a validity of five years, along with many discounts.
What are other Types of Business Licenses in Dubai?
Dubai offers various types of business licenses for businesses to conduct their activities legally. The most popular are,
Professional License
Businesses that provide services-related activities can get a professional license in Dubai. For instance, management services, business consultancy, technical services, as well as educational and training providers, can apply for professional licenses.
Tourism License
A tourism-related company must obtain a tourist trade license to operate legally in Dubai. The activities include vocational homes, travel agencies, hotel apartment rentals, and outbound and inbound tour operators.
Summary
To sum up, understanding the difference between a commercial license and a trade license is necessary, as both have different meanings. Getting a comprehension of both terms is necessary if you are establishing your business in the UAE. A commercial license is a category of trade license for businesses buying and selling products. A trade license is a legal permit issued by the government to businesses operating within a specified jurisdiction.
Al Riaydy is your trusted partner in the complex landscape of licensing in the UAE, whether you are an established business or a startup unfamiliar with UAE regulations. We can help you with the licensing and documentation process so that you can focus on your business goals. We also provide Digital Marketing Services, Golden Visa Services, and more.
