Difference between a trade license and a professional license

What is the difference between a trade license and a professional license?

If you are looking to start your own business or set up as a freelancer in the UAE, you first need to make sure you have a business license. A business license is a permit issued by a government that grants an individual or company permission to conduct business within a certain geographical area or free zone, provided they follow specific legal requirements and conditions.

Here in Abu Dhabi, the Law No. (2) of 2009 states that all types of business activities in Abu Dhabi require a license. The law stipulates that neither an individual nor a legal entity is permitted to engage in any economic activity, or open a new branch of a company, without obtaining a relevant license from the concerned authority and fulfilling the legal requirements for that activity.

The Abu Dhabi government issues many types of business licenses. This includes agricultural licenses to the owners of agricultural, fisheries and livestock farms, occupational licenses to intellectual professionals working at consultancies, law firms and audit offices, industrial licenses to manufacturing industries, and tourism licenses for hotels, travel offices, tourist restaurants and any business that offers tourism activities and services.

However, in this blog, we will be focusing on two of the most popular types of business licenses: trade licenses and professional licenses. Both come with their own set of distinct benefits and are intended for different types of activities. Read on to discover the main differences between a trade license and a professional license, and how you can decide which one you need.

What is a trade license?

A trade license is issued to the owners of companies or establishments that carry out commercial activities. This includes general, electronic and software trading, construction, retail, real estate, transportation, clinics, hospitals, or any company that trades or sells tangible products. It is a document that provides legitimacy to a company, and you may need to present your trade license when you are applying for credit or capital for your business, or if you want to open a business bank account.

A trade license serves as a way of regulating and protecting trading companies, and here in the UAE it is illegal for a trading company to operate without one. The Abu Dhabi Department of Economic Development (DED) is the entity responsible for issuing trade licenses in Abu Dhabi. Each license is valid for a period of one year, and every trade license must be renewed upon expiry. Failing to renew your trade license, or attempting to operate a trading business without a trade license can result in fines and penalties.

What are the benefits of a trade license?

Aside from making it legal for your business to trade and sell goods, trade licenses also come with a whole host of further advantages:

• Trade licenses act as a permit for businesses to join certain professional groups and organisations
• One trade license can include multiple activities
• Trade licenses can be quickly issued and renewed (more information about how twofour54 can help you do this can be found below)
• Getting a trade license makes it possible for you to obtain residence visas for your general manager and employees
• Getting a trade license makes it possible to secure a DED branch license
• Getting a trade license for the twofour54 free zone means you pay no taxes. Even when UAE corporate tax is introduced on June 1, 2023, free zone trade license holders can still enjoy preferential corporate tax rates of 0% on ‘qualifying income’. In order to be considered a ‘qualifying free zone person’, you must maintain adequate substance in the UAE, generate ‘qualifying income’ and comply with the Corporate Tax Law stipulations for transfer pricing.

What is a professional license?

Whilst a trade license is designed for businesses who trade or sell tangible goods, professional licenses are for artisans and craftsmen who earn a living by using their skills, and sometimes also tools and equipment. This includes those want to launch businesses related to carpentry, steel works and typing. As with trade licenses, professional licenses are also issued by The Abu Dhabi Department of Economic Development (DED).

What are the other core differences between a trade license and a professional license?

Trade licenses and professional licenses are similar in that they offer the same attractive benefit of 100% business ownership for all nationalities. However, they can be differentiated in a few different ways.

This includes:

Government license fees

Generally, trade licenses are more expensive than professional licenses. For instance, normally, getting a trade license in the Abu Dhabi media free zone would cost AED 15,000 in license fees and AED 3,500 in registration fees, while getting a professional license is the UAE costs approximately AED 11,000.

However, Abu Dhabi Media Zone Authority has currently waived all license and registration fees for new companies and freelancers for the first two years. So, if you get a new trade license or freelance license from twofour54, you will only need to pay for the admin fees and health insurance.

Liability

Trade licenses are issued for limited liability companies, which offer shareholders limited debts and liabilities. Meanwhile, professional license holders are entirely responsible for all debts and liabilities.

Activities

As mentioned above, the biggest difference between trade licenses and professional licenses is the activities they cover. Trade licenses are for commercial businesses that sell or trade, while professional licenses are for artisans and craftsmen.

Obtaining a trade license with twofour54

twofour54, the media free zone of Abu Dhabi, is proud to offer trade licenses for businesses in 57 different media, entertainment and gaming categories. Spanning everything from production to PR, marketing, creative design and gaming, the twofour54 Tawasol team make the process of applying for your trade license quick and easy.

Simply provide us with your business form or business plan, submit the regulatory documents, pay the relevant admin fees, complete the process of gaining your General Manager’s visa and finalise the process via the ICA portal.

For more information, please visit our business setup page.