You can get a commercial license if you want to start a business, or a freelance visa if you just want to work as a freelancer.
In this article, you will be able to understand the differences between trade licenses and the freelance visa. Additionally, we will look at specific areas to help you decide which option is best for you.
- Hiring employees in the future
- Do foreign investors need a local sponsor?
- Registering your company
- What is a Free Zone?
- Running your business
- Keeping costs low
- Dependent Sponsorship
- Trade in Mainland, UAE
- How can we help you obtain a freelance visa?
1. Hiring employees in the future
Hiring is vital to any business. In this sense, giving importance to the hiring process and everything related to it will make any business prosper.
There comes a time in the life of any business when it is the right time to hire. If you have a business license, this is a simple process. For the freelancers, a few additional steps are required.
- Business license: As a business license holder, you can hire as many employees as your license allows.
You must establish a relationship between the productivity index (PI) and the desired production. In such a way, PI is divided by the available time in which the employees work effectively.
This number will depend on the size of your premises or the free zone in which you operate. If your license allows six freelance visas, then you are entitled to make six hires.
- Freelancer: However, many people opt for the freelance work permit as a starting point and then switch to a full business license setup when they are ready.
It is important that you evaluate your work like that of any company, and give it the necessary importance to achieve success.
2. Do foreign investors need a local sponsor?
If you choose to establish your company in a Free Trade Zone, then a separate local sponsor/partner is not required – the Free Trade Zone becomes your local sponsor, and all government and ownership-related matters will have to go through it.
If you wish to establish an Onshore Limited Liability Company (or a Branch or Establishment), you will need to have a national partner or a 100% Emirati company as a partner or sponsor to carry out the company registration.
Under UAE law, in an LLC structure, 51% of the shares must be owned by your local Emirati partner or UAE corporate partner, however, this does not mean that you must follow the same profit ratio.
An agreement with your local partner may provide for most of the benefits. In addition, it may help to keep management control in the hands of the foreign party that owns 49%.
3. Registering your company
If you choose to register your company as an Establishment, which by definition is a facility owned by a single person, and then a foreign individual can own 100% but must have a UAE national (or a UAE company) to act as a designated representative to receive legal notices for the Establishment.
Similarly, a Foreign Branch maybe 100% owned by a foreign company, provided that a local UAE or UAE company acts as the National Designated Agent.
In both cases, the individual or company has 100% responsibility for the Establishment or Branch and must demonstrate qualifications and experience in the relevant field.
Sponsorship and regulatory requirements differ according to license types and legal forms of business; for example, in general terms, a Branch cannot participate in the stock exchange.
4. What is a Free Zone?
A UAE Free Zone is a special economic zone usually attached to a port or linked to an industrial sector. The advantage of Free Zones is that they allow 100% foreign ownership. In other words, that means the foreign investor can own a company directly in the UAE without having a separate local sponsor.
Some other benefits include 100% repatriation of capital and profits, 100% corporate and personal income tax exemptions
There are some restrictions that you must consider:
- A Free Zone company cannot trade directly with the UAE market and must go through locally appointed distributors that are onshore, meaning that it cannot have a store unless it is located in the Free Zone itself.
- A 5% customs duty applies when a Free Zone company sells into the UAE: the Free Zone is not considered to be within the UAE.
- Employees with freelance visas issued by a company operating in a Free Trade Zone must work from the office of the company within that Free Trade Zone.
You can learn more about how to set yourself up as a freelancer in Connect Freelance.
5. Running your business
When it comes to setting up, both options are simple: if you wish to trade from the Mainland or apply directly to your chosen free trade zone; apply for your license or permit.
However, when it comes to doing business, there are a couple of differences between the setups that you should consider.
- Commercial license: This is perhaps the easiest way to do business in the UAE. Both the DED and all free zones issue business licenses, therefore setting it up is not a problem. Similarly, the vast majority of international and UAE companies are comfortable working with companies operating under a commercial license, thus you should have no problems doing business in the long term.
Your commercial license will help you reinforce your positioning and your brand message. Likewise, it will present you with a competitive advantage in the market, increasing the value of your brand.
- Freelancer: Freelancer permits are not as widely available as commercial licenses, however, many free zones in the UAE now issue them, including RAKEZ, Dubai Media City, Dubai Internet City, Dubai Design District, and Dubai Knowledge Park.
All businesses need a license to operate. You can apply as a freelancer for an occupation permit and also for a general business license. In this sense, you can obtain them through the website of your local government.
You can also obtain additional information and specialized help through our work team. Contact us and understand each aspect of these procedures.
The only thing to note in terms of doing business is that some larger companies may apply for a tax registration number (TRN), which is not available to freelancers. Also, as a freelancer, it is not possible to open a corporate bank account in the UAE.
6. Keeping costs low
When it comes to comparing business license and freelance visa options, which one is more cost-effective will largely depend on the size and nature of your business.
In both cases, it is possible to keep costs down by not hiring staff or office space.
- Commercial license: In terms of set-up costs, it is possible to establish a free zone company for around AED 25,000 to AED 28,000. This is a little higher than the stand-alone option, however, you will be able to:
Obtain a TRN number and operate with large corporations.
Hire employees quickly as your business grows
7. Dependent Sponsorship
If you are a business owner, you can apply for visa sponsorship of your dependents. However, you must have a valid UAE residency visa.
The population of the Emirates is made up of a large majority of expatriates. Additionally, recent regulations facilitate the process of obtaining a residency visa for family members through sponsorship, provided the salary of the resident is within a certain income bracket.
- Business License: As a business owner, you are eligible to sponsor dependents as long as you meet the salary criteria. If you wish to sponsor a spouse, child, maid, driver, or any other dependent for your freelance visa, the process consists of four simple steps: entry permit, adjustment of status, a medical fitness test, then UAE ID registration and visa stamp.
- Freelancers: If you wish to sponsor dependents as a freelancer, the process is the same as above. However, be aware that it may be difficult to prove your income as a self-employed That said, if you have official documents showing that you meet the salary threshold, you should have no problem applying for dependent visas.
Sponsoring your dependents can directly influence the good development of your company. In this sense, having your loved ones close to you is priceless.
On the other hand, there is no condition related to the type of profession the expatriate must-have. After some amendments are carried out in 2019, any foreign worker can bring his or her family members to UAE and have a residency visa under his or her sponsor, regardless of the profession.
If you succeed in sponsoring your dependents, you will have direct and personal family support. In addition, you will be able to count on their advice and help in any field.
8. Trade in Mainland, UAE
UAE free zone companies cannot trade directly with the local Mainland market. However, there are several ways to do this indirectly, whether you have a commercial license or are a freelancer.
- Trade license: The easiest way for a free zone company to trade with the mainland is through a locally appointed distributor who will charge a fee for their services.
- Freelancer: There is no specific legislation that prevents a freelancer from working for mainland companies. The best advice is to work with a company formation specialist who can advise you on the best setup to meet your business needs.
8.1 Branch Office
Some companies choose to establish a Branch of their existing company in the UAE. For example, a UK company may establish a Branch of that UK parent company in the UAE. A Branch is considered an extension of the foreign company, which remains legally responsible for its activities.
The main thing to consider with a Branch here is tax. As the UAE has a favorable tax environment, this may generate additional costs for the company.
9. How can we help you obtain a freelance visa?
Whether you want to start a business and opt for a trade license, or you prefer the option of a dubai freelance visa; there are several things to keep in mind. Each option offers positive and negative features that you should be aware of.
If you want to start your business and you want to know how to get started; you can count on our professional team. In addition to serving you with our knowledge, we offer you our guidance regardless of the freelance activity you carry out.
To learn more about visa processes, the freelance visa, and how to obtain one quickly, contact us through our phone number at +971 43 316 688. Also, let us reach out to you; send us an email at contact@connectfreelance.ae.
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