Trade License or Freelance Permit in the UAE – A Comparison.

The events of early 2020 have altered many plans for most of us, many lost their jobs, began distance working, “working from home”, “teleworking”, so many variations on the ‘new normal” way to conduct your business and working day. Some of the less fortunate were left jobless, yet where stranded in UAE and had to think about possible ways of moving forward: many professionals got a chance to finally start their dream of working for themselves.

A Freelance Permit is not new a new concept in the UAE, and some of the early birds in the market were “Twofour54” and UAQ Free Zone. Since then, a number of options and opportunities have developed, and now Dubai Economic Department, and many of Dubai Free zones offer very competitive products: Dubai Media City and Dubai Design District, as well as RAKEZ in Ras Al Khaimah. Freelancing is undergoing significant growth in this new working environment. [1]

Naturally, this could be a suitable solution for people of creative professions – artists, copyrighters, designers, and similar. Many of them could have been working without any permits for years, and now have a wonderful opportunity to package their talents into an appropriate legal framework.

Now I would like to take a closer look into some of the pros and cons of having a freelance license, or a proper commercial license in UAE, and I have made a small table that summarizes some key points:

[1] https://www.vision2021.ae/en/national-agenda-2021/list/economy-circle

Table 1. Comparative features of full-fledged Trade License and Freelance Permit.

• Simplicity of setting up and running your business, credibility issues

It’s relatively easy to get a trade license or a freelance permit in the UAE but getting the freelancer permit will likely be easier and proves an ideal starting point for a UAE entrepreneur. However, if you intend to work with larger companies or cater to government contracts, a full-fledged trade license may be the only way to proceed, to be specific, most likely the license involving a local Emirati partner.

Corporate clients may request you to provide a Tax Registration Number (TRN number), issued by the Federal Tax Authority, which cannot be obtained by freelancers. That might limit you to work with medium and large-scale corporates.

• Hiring employees in the future

As a freelancer, you are offering your services as an independent contractor. You’re a one-person business and work as an individual under your own name. But the key point is – you are a sole practitioner, and If you want to remain a one-person business – and many people do – then the freelance permit may be the best option, but if you’re hoping to grow your operation and take on staff, you should probably opt for a trade license.

• Costs considerations, accounting and bookkeeping.

In the very beginning you will likely be counting every dirham you earn. It’s certainly easier to keep costs under control as a freelancer. You don’t have to pay employees, office space, utilities and many other expenses.  Free zones would also let you rent a workstation if necessary. A freelance permit doesn’t have an obligatory requirement to keep the books, accounting and submit annual financial statements. Which contributes to the costs and time considerations. However, again, lack of financial transparency can be an obstacle in being awarded certain types of jobs.

On average the total price for a freelance permit ranges from AED 10,000 to AED 20,000 with the main determining factor for it being the necessity and length of the residency visa you require (if required at all).

If you set up a fully-fledged company, with some free zones your costs may range between 20,000 AED to 60,000 AED, depending on location, number of residency visas required, bank accounts and type of activity you want to do. For some of the activities freelance permits are simply not suitable or possible to get.

• Sponsoring Dependants

If you own a business, you can apply to sponsor your dependants and arrange UAE residency visas for them, as long as you have one yourself. To sponsor dependants as a business owner, it doesn’t matter whether you have a Trade License or Freelancer Permit. Recently both have become acceptable. But it could be more difficult to prove your income as a freelancer.

• Conclusions

To start up a business in the UAE, you need either a Trade License or a Freelance Permit. An Entrepreneur will appreciate the benefits of both freelancing and trade licenses as part of a ‘journey’ into UAE entrepreneurship. Initial success will naturally find its limit in freelancing, leading to the natural progression into a trading license that will unlock true and lasting growth for your ventures. Setting up of freelance or licensed business has never been easier.

We at Affinitas aim to help you with your journey to success. You can get in touch with Anastasia on +971 52 906 0357 who can expertly & efficiently guide you through the process.