The Difference Between an E-trader License and an E-commerce License

The onset of the pandemic has brought about a host of changes, including an inclining trend towards switching the mode of business to online platforms. The internet has proved to be an effective medium through which sales of products and services can be conducted with ease.

As time has passed, more individuals and businesses prefer online modes of transactions and sales rather than a face-to-face interaction that can get awkward and requires more effort. This major change in the market has caused many to start an online business with e-trader or e-commerce license. These licenses are a crucial and mandatory requirement for those who wish to conduct online business activities legally within the borders of the UAE. In this article, we look into what exactly these licenses are, their distinctions, and what may apply to your business.

What is an E-commerce license?

An e-commerce license is a license provided by the UAE government that allows its holders to conduct business activities relating to the purchase and maintenance of product inventories, as well as a legal permission that enables the business to deliver said inventory as well. All of this must be done through the means of an online platform like websites or social media channels for this license to be applicable to the business.

Obtaining the license is a simple process, and can be done either by applying through the relevant authorities within your emirate. If you plan on setting up your business in a free zone, then you can obtain the license through free zone authorities such as SPC Free Zone.

What is an E-trader license?

An e-trader license is a relatively new form of license introduced by the government, where its holders are allowed to carry out online transactions. This license was introduced to enable UAE and GCC nationals to regulate the business activities they conduct on online social media platforms.

Though both seem similar at first, there exist certain characteristics that differentiate them from each other. The notable differences are as follows:

1. E-trader licenses are only applicable to UAE/GCC nationals, whereas e-commerce licenses are applicable to foreign individuals as well.
2. E-trader licenses are only issued for residential sites, meaning that Makani documents must be provided.
3. E-trader licenses enable holders to conduct their business activities on social media platforms, whereas e-commerce licenses allow for other online websites as well.
4. E-trader licenses don’t provide as many business activities as compared to e-commerce licenses.
5. An e-trader license limits the scope of business to be within the borders of the UAE and only allows a sole proprietorship based legal structure, which is a stark difference to e-commerce licenses which give its holders an international reach allowing the sale and purchase of products outside the country, as well as allowing them flexibility in the choice of legal structure.

What applies to you?

Based on the distinctions alone, it’s easy to tell what is applicable to your online business. Nationality, size of the operations, scope of activities, legal structure as well as free zone accessibility all differ when it comes to choosing between an e-trader or e-commerce license.

If you are a foreign investor, it is better for you to obtain an e-commerce license, since e-trader licenses do not apply to those who are not UAE or GCC nationals. If you want to start a large-scale business, e-trader licenses are yet again, not the most apt due to the fact that they cater towards more small scale, run-from-home businesses. Additionally, the business activity you plan to engage in may or may not be covered under the scope of an e-trader license. Analyzing what you want your online business to have can help you decide which license is more apt for your business.

To understand more about which license is best suited for your business and how you can apply, contact our expert consultants at 800 SPC FZ today.

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