The UAE’s Trading Sector: Discussing Opportunities and Challenges With Vitaliy Chiryassov

Q: Vitaliy, could you give us an overview of how trade is evolving in the UAE right now?

A: The UAE’s trade sector is in a strong position, growing at around 5% per annum — a big achievement, especially given the challenges posed by the covid pandemic. To give you some context, the pandemic had a significant impact on oil revenues, and as the UAE is still in the process of diversifying away from an oil-dependent GDP, it felt the effects in 2020, along with its trade market.

However, the UAE market has proven to be very resilient and bounced back quickly. According to the International Monetary Fund, the market grew 2.1% in 2021, followed by more than 5% in 2022 and similar figures in 2023.

Driving this growth are the UAE’s strong trade partnerships with the US, Asia and Europe. In fact, the UAE has been the top U.S. export market in the Middle East and Africa region since 2009. As the Emiraty government continues to diversify its economy away from oil, we can expect stronger growth to follow.

Q: How would you characterize the UAE’s international trade relations?

A: The UAE has strong trading relationships with the US, Asia, and Europe.

With the US, over 1,500 American companies are currently using the UAE as a base for their operations throughout the Middle East, Africa, Europe, and Asia. The country’s been the top U.S. export market in the Middle East and Africa region since 2009.

In Asia, the UAE has ongoing trade agreements with countries like China and India. For instance, they signed a Comprehensive Economic Partnership Agreement (CEPA) with India in 2022, which aims to increase bilateral trade to $100 billion in the next five years. With China, there’s a strategic partnership that covers various sectors including energy, technology, and infrastructure.

As for Europe, the UAE has been negotiating a free trade agreement with the European Union. While it’s not finalized yet, there are already strong bilateral trade agreements with several European countries. For example, a bilateral investment treaty with Germany and a double taxation agreement with the UK.

Q: What are the advantages of the UAE for starting a trading business in the Middle East?

A: There are numerous advantages, but if I had to pick the most significant ones for trading businesses, I’d say:

First, the strategic location and infrastructure. The UAE’s position allows quick access to key markets. For instance, from Dubai’s Jebel Ali Port, ships can reach Mumbai in about 3 days, Singapore in 7 days, and major European ports in 2 weeks. This port, along with others like Khalifa Port in Abu Dhabi, handles millions of TEUs annually, making it one of the busiest container ports globally.

Second, the free trade zones. For trading companies, zones like Jebel Ali Free Zone (JAFZA) offer benefits like no import or re-export duties and simplified customs procedures, often clearing shipments within hours.

Third, cost efficiency. Due to the lack of import taxes and modern logistics infrastructure, operating costs for trading companies can be significantly lower compared to other regional hubs. For example, the Dubai Logistics Corridor connects the Jebel Ali Port and Al Maktoum International Airport, allowing goods to be transferred between sea and air transport in under an hour.

Q: What are some key features or peculiarities to be mindful of when running a trading business in the UAE?

A: Regulations are often in flux, but they’re consistently evolving for the better. For instance, many trading activities that once required a local partner can now be conducted with 100% foreign ownership. But the challenge is to stay current and make the necessary changes in time.

The UAE also has strict standards for imported goods. Depending on the product, you might need specific certifications or import permits. Some items require testing or permissions to sell in the UAE — thorough research is a must.

Logistics are a key factor in the success of any trading business. While the country boasts excellent infrastructure, optimizing your supply chain is vital. This means selecting reliable suppliers and carriers, organizing efficient shipping and delivery processes, and managing warehouse costs effectively.

Lastly, cultural aspects are crucial in the UAE business environment. Building relationships is key to open the right doors, as the country values tradition and personal connections. While the business scene is highly international, understanding local customs and business etiquette is essential — but that’s a topic for another discussion.

Q: How difficult is it to open a trading company in the UAE?

A: It’s not the easiest vertical to start a business in, and that’s mostly because of the licenses and permits you need to obtain to open a trading company. You will likely need permits from multiple government agencies, depending on the type of goods you work with. Each of these may have its own set of requirements and they all take a while to process. The better prepared you are when you submit your paperwork, the faster this process will go.

And this is where many entrepreneurs choose to work with a consultant who has the experience and connections to streamline the incorporation. They can help you figure out what licenses and permits you need based on your business plan, make sure all your documentation is in order, and liaise with various government agencies on your behalf. In the end, in our experience, this helps save both time and money.

Q: What are the most popular trade areas currently in the UAE?

A: The UAE’s export market is quite diverse, with a few standout sectors. The oil and gas sector dominates, with crude petroleum making up about 26% of exports, followed by refined petroleum at roughly 14%. Gold comes in third, accounting for about 8% of exports. Other significant exports include diamonds, jewelry, and raw aluminum.

When it comes to trade partners, India leads with around 12% of the trading volume, followed by Japan at 10%, China at 8% and Saudi Arabia at 7%.

Q: What licenses do you need to obtain to start a trading business in the UAE?

A: To start a trading business in the UAE, you’ll need to obtain a Trade License. There are a couple of main routes for this:

First, you can go for a Mainland Dubai Trade License. This costs around 13,285 AED and takes about 5-7 working days to process. The process involves several steps: reserving a trade name, getting initial approval, registering a lease agreement in the Ejari system, signing a Memorandum of Association, and finally applying for the license itself.

Alternatively, you can opt for a Free Zone license. The Meydan Free Zone Trade License, for example, costs about 14,500 AED and also takes 5-7 working days. This includes a virtual office in the package. Another option is the Ajman Free Zone Trade License, which is more budget-friendly at around 5,555 AED and takes 5-6 working days. With Ajman, you get different packages like Kickstart, Starter, or Visa packages, each offering different office solutions and visa quotas.

It’s worth noting that the final cost of these licenses can vary. For instance, with the Mainland license, you’ll need to pay an additional 5% of your annual office rent. Free Zone licenses often include some form of office solution in their base price.

Q: What are some important requirements for setting up a trading company in the UAE?

A: To start, you’ll need to choose and reserve a trade name for your company. This name needs to comply with local regulations, which can be quite specific. For instance, in Dubai, using abbreviations or numbers in your company name might increase the fee by 1000 to 3000 AED.

You’ll also need to decide on your business activities. These need to be selected from a pre-approved list, which varies depending on whether you’re in a Free Zone or on the mainland. It’s crucial to choose these carefully as they define what your company can legally do.

Office space is another requirement. In Free Zones, you often have options ranging from virtual offices to physical spaces. For example, in Meydan Free Zone, a virtual office is included in the license cost, but if you need more visas, you might need to upgrade to a physical office. In Ajman Free Zone, different packages come with different office solutions, from virtual offices to executive offices.

You’ll need to provide various personal documents, including passport copies, Emirates ID (for residents), and passport-sized photos. You’ll also need a No Objection Certificate from your current employer if you’re a UAE resident. Some zones might require additional documents like police clearance certificates or medical records, especially for higher-risk activities.

You’ll also need to sign various forms and agreements, including a Memorandum of Association. Some zones now allow this to be done electronically, which is quite convenient. In Ajman Free Zone, for instance, they’ve implemented a video KYC process where you record a short video showing your passport and stating your personal details.

Q: Last but not least, how can your company, UPPERCASE, help open with incorporation?

At UPPERCASE, we specialize in helping businesses set up in the UAE. Over the 15 years we’ve been in the international market we’ve helped thousands of companies successfully set up in the different countries — including trading businesses. We offer legal, accounting, and digital business solutions for both private and corporate clients.

One of UPPERSETUP’s key features is its business dashboard, which centralizes all project information, communications, and documents. It even tracks license validity and sends reminders for renewals.

We also offer additional services crucial for trading companies, such as assistance with opening bank accounts, obtaining resident visas, and providing accounting, tax and legal support.