Trade License Vs. Freelance Permit. Which One Is A Better Option and Why?KWSME
In our previous articles, we discussed how to start business in Dubai and for that purpose how to obtain trade license and become self-employed. However, what is the best option for you? Trade License or freelance permit? In order to make an informed decision, you may find useful few facts about trade license and freelance permit in this article which will help you in choosing the right legal structure for your business.
For company formation in Dubai, you will need a valid trade license or you can become a freelancer if you apply for a free zone work permit and residence visa (if not sponsored by spouse or father) from a UAE free zone. Freelance permit gives you as a sole practitioner & permits you to start your business by your name as opposed to brand name. Free zones generally also provide shared office space and a shared P.O.Box.
The free zones that currently offer a freelance permit include Dubai Media City, Dubai Studio City, Dubai Production City, Dubai Knowledge Park, Dubai Design District, Abu Dhabi’s twofour54 and Fujairah Creative City. Note that your occupation would have to be correlated to the activity of the free zone.
Here is the advice of our top experts at KWSME,
- If you want to stay as one-person business, then freelance permit is the optimum choice for you. But if you want to grow your business and hire more employees in future to carry out business operations, you must go for trade license. When a freelancer wants to grow his/her business, then he/she will have to de-register freelance permit and upgrade it to trade license. But, then it will be easier to go for trade license from start.
- If you want to work with big companies or on government contracts, trade license is the right choice for you as it will give you more credibility. Moreover, if you have corporate clients, they may ask you to provide TRN Number (Tax registration number) issued by FTA Federal Tax Authority. TRN is not issued to freelancers. So, freelancer’s work may be limited to small and medium scale companies.
- If you want to keep your costs low, work as freelancer. You don’t have to pay salaries to employees and also no need to rent office space as Dubai free zones let you rent a work station that you may use for your business.
“According to latest update by Khaleej times, there are some very attractive freelance permit packages available such as by Dubai Internet City where freelancers in technology sector can get freelance permit for an annual fee of Dh7500.”
- In case of free zone business setup, you cannot trade directly with mainland UAE unless the company appoints a local service agent. Free zone company having a trade license can also open up a branch outside of the free zone after getting approval and license from DED. It is quite complicated for a freelancer to go outside of free zone. Because free zones tend to be sector specific. Freelance permits are available for a limited list of professions, which are related to Media, Education and Fashion. Some free zones such as in Dubai Design District, you are restricted to work in certain free zones only.
- While going for freelance permit, you should bear in mind that running a freelance business can be very difficult especially during initial phases. It takes time to build new contacts, clients and revenue. Earnings are also variable in freelance business. You can sponsor your dependents whether you have a trade license or freelancer permit. However, a freelancer may face difficulties in proving his/her minimum salary.
There are benefits of freelancing too. As mentioned before, you can curb your costs and secure your initial growth. You will also be not required to submit formal accounts or being subject to audit. After you have established and started to gain profits, you can proceed to obtain trade license Dubai to ensure growth is not halted by limits of freelancing.