If you live in the UAE, you may know by now, that license is one of the most important corporate documents of the company. Regardless of the authority or a third party, you will be dealing with as a company in the future, you will be always asked to prove that your company is legitimate. And license will be that document that you will always use to provide that proof. Banks, telecom providers, and other third parties will be requesting to see this document year after year, as soon as registration renewal of your company in the UAE is completed.
While in many countries license is required for certain industries only, for example, banking, finance, insurance and some more, in the United Arab Emirates all companies, with no exception, must be licensed. So, be you a consulting firm, accounting company or an IT service provider, you will have a license as well. Good news is that license issuance is a part of the company formation process. Therefore, you do not need to worry about how to license your business. There are also no specific requirements in connection with this very document. Your company’s license will be issued along with other corporate documents upon business registration completion.
What does every license look like? Usually, it is a one-page-document, rarely two, where the following details are stated: legal name of the company, company’s address, business activities company is allowed to practice, the name of company’s manager, the date when business was registered and validity of the license. Some of the registration authorities also mention the names of shareholders on the license. Additionally, each license is assigned a specific number, which we call a License no. Each company also has a Registration no. frequently mentioned on the license.
But did you know that there are different types of licenses? Let’s see what you will need to choose from.
Say, if you need to sell something, a commercial license will be required. A commercial license will specify exactly, what kind of goods/products you will be trading with. If your plan is to trade with a broad range of goods that do not fit onto a commercial license, you can also choose a General Trading License. General Trading License will allow you to sell anything with the exception of restricted goods, such a tobacco, alcohol and a number of others. Sometimes, all restrictions you may have in connection with the license, are stated on the document itself in the field “remarks”.
In case you will be providing service, a service license would be the appropriate choice. There is nothing specific that can be added to this type of license.
And if you are planning to manufacture something, an industrial license will be required. We are often asked, whether someone who produces goods needs a commercial license to sell them. The answer will be very straightforward: if what you produce or manufacture is later sold in exactly the same shape and form, as it was initially produced, you can do both, producing and selling, under industrial or manufacturing license. However, should you wish to sell something in addition to what was initially produced, let’s call them supplementary goods or accessories, this will require a commercial license in addition to your industrial one. Let us give you an example to better understand this. You are a businessman who has an industrial license and you have rented a warehouse to conduct your business there. What you do, you import some heavy industrial equipment. This equipment does not come assembled yet. Your team still needs to assemble everything and this is why you have an industrial license. Once the equipment is assembled you sell it on to the end-customers and to do this you again use your industrial license. But this equipment requires maintenance, therefore, often clients may need to order spare parts from you and you need to be ready to provide the supply. Here you must obtain a commercial license in addition to your industrial one, because what you want to sell, spare parts, is not what you initially produce or sell.
But how does it work when you need to sell goods and provide service? Can you have a commercial and a services license for one and the same company of yours at the same time? There is no clear-cut answer to these questions and we will explain now why. There are tens of registration authorities in the UAE, those, who register companies and issue corporate documents for them. Each registration authority has its own rules and policies, according to which they license businesses. There are free zones in the UAE which do not allow one and the same company to hold a commercial and a service license at the same time. For this purpose, they require registration of two separate legal entities. At the same time, there are registration authorities that allow the combination of commercial and service license under certain conditions. How is it possible you may ask? First of all, to combine those you need to seek a special approval from the relevant department of the respective registration authority. There you will need to justify that what you plan to sell is clearly interconnected with what service you plan to provide. A good example would be the following: you are a tailor and you also want to sell fabric or another example, your company offers fit-out works and also wants to sell interior finish materials. In these examples, one can easily establish a connection between what service is provided and what products will be sold. If you, however, trade with fruits and want to offer bookkeeping services, this will definitely require two separate companies with two separate licenses.
Nevertheless, it is important to mention that there are few free zones in the UAE, which recently started allowing a combination of service and trade activities, where there is no clear connection between both. This is called a dual license. How it looks, you generally hold two licenses under one and the same company name. It is not a very common practice but the option is available out there.
What else should you know about the license? Your license is valid for one year only and you need to renew it yearly, as well as to pay respective license government fees. You need to make sure that you renew your license on time to avoid late renewal penalties. Upon license renewal, you need to provide it to your bank to ensure that your account is not suspended.
This is generally it about the license. Now you know what is a business license in the UAE, how you can get it, what types of licenses exist, if you can have several licenses for one and the same company and some important facts regarding renewal and maintaining your company’s license.
Business Boutique | UAE-Consultants.com has an expertise in company formations and all business consultancy matters within Dubai and the UAE. We would be happy to assist you with any follow-up queries within our competency. You can contact us via [email protected] or via our office phone no. +971 4 368 48 84.
Prepared by Business Boutique | Published on Oct 4, 2018
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