Commercial License vs Industrial License in Dubai: What's the Difference?

The authority to issue a business license differs by jurisdiction. If you are planning to start a business in Dubai Mainland, the Department of Economy and Tourism (DET) will issue the trade license. The complete business setup regulations are monitored and regulated by the DET in the Mainland jurisdiction. You can trade in the UAE markets and internationally with the mainland license.

The respective Free Zone Authority will issue a trade license for a free zone company. Meydan, International Free Zone Authority (IFZA), Dubai Internet City (DIC), Dubai Silicon Oasis (DSO), and Dubai Science Park (DSP) are some of the prominent free zones. A free zone company’s business operations are limited to the free zone jurisdiction and global markets. It can operate in the mainland jurisdiction by opening a branch office, by obtaining additional permits, or through a local distributor.

Understanding the jurisdictions, the suitability of the jurisdiction for the planned business activities, the advantages offered by the location, and productive support from the authority are essential for establishing a successful business.

Get professional support from Kiltons for a transparent, efficient, cost-effective, and budget-friendly business setup.

Trading activities such as buying, selling, importing, exporting, distribution, and trading of products are covered under a commercial license. A commercial license is one of the most commonly chosen license types in Dubai. Choose a commercial license if you are planning trading, wholesale, retail, or e-commerce operations.

The business activities authorized under a commercial license in Dubai are:

• Retail business
• Trading
• Import and export
• E-commerce trading
• Product distribution company

Production, manufacturing, processing, and professional services cannot be done with the commercial license. Stick to the business activities indicated in the commercial license to avoid legal and administrative complications.

Production and industrial activities such as manufacturing, assembling, moulding, processing, and packaging of components, spares, machinery, and other items are authorized under an Industrial License in Dubai. Investors with a passion, professional skill, or business plans in the industrial sector can go for an industrial license. The industrial unit will operate in the designated industrial or manufacturing zones only.

Choose an industrial license in case you are planning to set up any of the following:

• Workshops
• Industrial units
• Factories
• Food processing unit
• Production firm

An industrial license mandatorily requires physical space for a production centre, machinery, raw material handling sections, approvals (as required) from external agencies, and environmental permits. A food processing unit will additionally require approval from the food safety department.

Let’s look at the differences in basic requirements of commercial and industrial licenses.

Commercial License: Commercial activities including trading, import, export, and distribution are approved under a commercial license in Dubai. The requirements to obtain a commercial trade license include:

• A detailed business plan that outlines trading activities, key areas, and objectives.
• A commercial business in the Dubai Mainland would need a physical office space or a warehouse. Lease adequate space, adhering to the specified specifications for a mainland commercial business set up.
• Businesses conducting international trade should obtain an appropriate code relevant to the business activity.
• Import and export businesses should mandatorily register with the customs department.
• Additional approvals, as necessary, depending on the business sector.

Industrial License: Manufacturing-based businesses require an industrial license to operate in Dubai. It must undergo stricter regulations than a commercial license. Production and assembly processes must comply with environmental and safety regulations to obtain the industrial license. The requirements for an industrial license are:

• Industrial unit with facilities adhering to the specifications.
• Environmental and safety approvals. The facility should have systems that ensure conditions stipulated by the environment and safety department are implemented.
• Pre-installation and post-installation inspections by the Dubai Municipality and other relevant authorities.
• Dubai Civil Defence (DCD) clearance.
• Approvals issued by the Health and Safety Department.
• Additional approvals specific to the business sector.
• Installation of machinery and systems according to the specifications issued by the authority.
• Approved technical drawings and facility plans.

The selection of jurisdiction for business setup is of paramount importance. It affects not only the initial process but also the business possibilities. With the options of Dubai Mainland and many free zones, it is an arduous task to identify the right one for your business.

Let’s look into the differences between a mainland and free zone license:

Mainland Trade License

• The Department of Economy and Tourism (DET) issues a mainland trade license.
• Mainland companies can trade anywhere in the UAE and internationally.
• A physical office space is required for the mainland business setup in Dubai.
• A mainland company can bid for public and semi-public contracts.
• Flexible business operations.

Free Zone License

• The relevant Free Zone Authority issues the license.
• Cannot trade in the mainland jurisdiction directly.
• Flexible business packages.
• Trade internationally as well as in the free zone jurisdiction.
• Tax exemptions available
• 100% repatriation of profits and capital is allowed in most free zones
• Industry-specific zones add a boost to growth.

This is one of the common questions that we come across! You can convert from one license type to another. However, you must comply with the official procedure for the license change. The said procedure is nothing less than a new business setup process, in terms of formalities.

Licence conversion typically requires:

• Application for closure of the present license.
• Company formation with the new license
• Transfer of assets and existing contracts to the new company.
• Official intimation to all the stakeholders, contracts, and banks.

Another common doubt is on addition/deletion of business activities after company formation. The business license will specify the authorized business activities. You can amend the business activities by undertaking the amendment procedure.

The typical process for business activity amendment is:

• Preparing the documents required for the amendment approval/
• Submitting the amendment request and the documents to the authority, i.e., DET in the case of a mainland company and the relevant free zone authority in the free zone jurisdiction.
• Pay the amendment fee, which depends on the type of amendment.
• Some specific business activities require external approvals for amendment.
• Receive the amendment approval.
• Include the amendment in the company documents and inform all the concerned agencies, including the bank.

The trade license, whether commercial or industrial, is valid for one year. You must renew the license meticulously. Delays or non-renewal can lead to serious consequences, including penalties, business disruption, or blacklisting. It is normal to miss a company renewal due to busy business schedules. Hiring Kiltons for trade license renewal would be the ideal way to avoid such issues. Our team will handle the business license process and associated requirements every year for you.

The trade license renewal process is:

• Initiate the license renewal at least 30 days in advance.
• Prepare the documents required for the license renewal.
• Renew the lease agreement and Ejari.
• Apply for license renewal and pay the fee.
• Regulated business activities require additional approvals.
• Visa renewal of the investors and employees, as applicable.
• Receive the renewed trade license and update the documents accordingly.

A clear understanding of the regulatory framework and legal formalities, strategic approach, meticulous planning, and knowledge about the business jurisdictions are the foundation to start a business in Dubai. For over 25 years, Kiltons has helped hundreds of entrepreneurs establish their businesses and turn their entrepreneurial dreams into reality.

Our expert team studies your business objectives and provides tailored guidance. Every stage of the business setup process is undertaken responsibly by a dedicated team at Kiltons, keeping you informed. We deliver comprehensive services from the right jurisdiction selection to trade licence issuance, along with banking and immigration assistance. We know that every business is unique, and that’s why we customise our services according to our clients.

If you are planning to start a business in Dubai and need trusted professionals to support you, Kiltons is here to help. Contact us today for expert assistance and take the first step towards establishing a business in Dubai, one of the most vibrant commercial hubs across the globe.