The UAE is an excellent location to start a business because of its creative community and vibrant economy. However, you’ll need a proper warrant, and you have two options: a trade license or a freelance permit. If you wish to start a company, you can apply for a professional license, or a freelancer license if you just want to practice as a solo practitioner.
We’ll go through some of the benefits and disadvantages of each license in this blog post to help you decide which option is best for you.
What is a Freelance Permit?
A freelancer is a self-employed person who provides a specific service. He or she is a single practitioner who sets up a business under their own name.
Steps Involved in Obtaining a Freelance License
- Apply with one of the above-mentioned free zones
- Submit the application along with your passport copy
- Pay the requisite fees
- Collect the certificate for a freelancer visa approved by the UAE free zone
- The freelance license will be issued in 7-10 days
Jurisdictions in the UAE that Offer Freelancer Permits
Almost all free zones in the UAE offer freelancer permits. Some free zones which are popular amongst the freelancers are mentioned below:
- Twofour54 (Abu Dhabi)
- Dubai Media City
- Dubai Knowledge Park
- Dubai Internet City
- Dubai Studio City
- Dubai Production City
- Dubai Design District
- Dubai Creative Cluster Authority
- D-TEC at Dubai Silicon Oasis
- Dubai Development Authority
- Ras Al Khaimah Economic Free Zone Authority
- Fujairah Creative City
- Ajman Free Zone
What is a Trade License?
This is a general license that permits you to engage in various trade practices in the UAE, whether they’re in the same or separate sectors. Imports, exports, commodity selling, and service trading are among the operations. A trade license is required for everyone who wants to do wholesale business. A trade license will assist you in performing your company both domestically and abroad.
Steps Involved in Obtaining a Trade License
- Select the legal structure and trade name for the company
- Determine the business activities to be carried out
- Apply for initial approval
- Draft the Memorandum of Association (MOA) and other documents from the necessary authorities
- Choose the location for your business
- Submit the application to the Department for Economic Development (DED)
Freelancer Permit vs. Trade License
We’ve collected and mentioned a few reasons to compare the two forms of licenses. This comparison will help determine which option is best for your business.
Situation 1 – Hiring Employees in the Future
Freelancer Permit: As a freelancer, you are an independent contractor that offers your expertise. You’re a one-person operation that operates in its own label. The important thing to remember is that you are a single practitioner, and the freelancer permit only enables you (the appointed person) to operate in the company. Employees are not permitted. The freelance permit might be the best option if you choose to keep your company as a one-person operation, which several people do.
Trade License: If you want to expand your business and hire employees, you should probably get a trade license. You might, of course, de-register your freelance permit or convert it to a trade license after you’ve been in business for a while but having a trade license from the outset will be more convenient.
Situation 2 – Ease of Setting Up and Running Your Business
Freelancer Permit: In the UAE, obtaining a trade license or a freelancer permit is reasonably simple, but getting a freelancer permit is likely to be better and is an excellent place to start for a UAE entrepreneur. In free zones such as RAKEZ, Dubai Media City, and Dubai Design District, a freelance permit is valid.
The procedure is straightforward because your company name is actually your own name. After securing initial expansion, several companies invest in obtaining a complete trading license to ensure that growth is not stifled by the limitations of freelancing alone. In the UAE, freelancers are not often subject to audits or expected to file structured reports, like they are elsewhere in the world.
Freelance licenses are also valid for a select group of professions in the media, education, and fashion industries.
Trade License: Any major companies may be unable to partner with freelancers due to a lack of financial accountability. They might think you’re too short for them. A trade authorization might be essential if you want to partner with bigger corporations or on government contracts. It can increase your reputation. If you work with a company, you will be required to provide a Tax Registration Number (TRN) provided by the Federal Tax Authority, which freelancers cannot receive. You can be limited to working for micro and large-scale corporations as a result of this.
Situation 3 – Low Costs
Freelancer Permit: As a freelancer, it is unquestionably easier to keep prices under check. You won’t have to train any workers or rent for office rooms. You may hire a workstation in a free zone to use for your activity. There are still several rather appealing freelance permit deals on the market. For an annual fee of AED 7,500, UAE residents who want to freelance in the media and education sectors may get freelance permit packages. This is not, though, the entire amount you would accept, since it excludes the payment of a citizenship permit, an identification pass, benefits, and other expenditures.
The overall cost of a freelance permit ranges from AED 10,000 to AED 20,000 on average, depending on factors such as:
- You need a 1-year permit, or you wish to opt 3 years straight away
- You need a residency visa, or you are a stay-at-home mom who simply needs an operational permit for yourself to conduct your commercial activity legally in the UAE
Trade License: If you set up a fully-fledged company, with some free zones your costs might not exceed AED 25,000 to AED 28,000, however, you will be able:
- To get a TRN number and trade with corporates
- In the future to hire employees, when your business grows
- You will have greater credibility in the market, building your brand, where corporates still prefer to work with legal entities, rather than freelancers
- You will be able to open a corporate bank account which also adds credibility, whereas a freelancer you can operate only through your personal bank account
- Easier to sponsor dependents
Situation 4 – Sponsoring Dependents
You may apply to sponsor your dependents for a visa if you own a company. You must, however, have a current UAE residence visa.
It makes no difference whether you have a trade license or a freelancer permit to sponsor dependents as a company owner. Both are suitable alternatives. However, proving the minimum wage as a freelancer can be more challenging. Running a freelance company can be demanding, and creating connections, customers, and sales can take time. Even if you’re developed, your earnings will fluctuate. For certain freelancer permit packets, though, an approximation of your estimated salary should suffice to sponsor your dependents.
Situation 5 – Trading with the UAE Mainland
Freelancer Permit: Trading directly with the UAE mainland is illegal if you set up shop in a free zone, but there are avenues around this. Depending on the free region, it could be more difficult for a freelancer. In Dubai Media City, for example, you are limited to only operating in those free zones. However, since free zones are mostly sector-specific, this might not be a problem.
Trade License: You can open a branch outside the free zone if you have a trade licence, which includes a DED license. Alternatively, you should partner with a nearby distributor.
Do you want to start up your own business? The UAE is certainly a great place to do that. You do though need an appropriate license, and for that, you’ve two options. You can go for a trade license if you want to start up a company, or a freelancer permit if you just want to work as a sole practitioner. Our business setup advisors at Riz and Mona Consultancy can help you in deciding which license to opt for. Contact us today to book an appointment.