In November 2025, new rules introduced a clear system for enforcing the law, including fines and other penalties. This means e-commerce businesses need to meet their legal requirements from the start.
Businesses planning to launch an online store, dropshipping business or digital marketplace need to choose the appropriate jurisdiction and licence activity and meet the relevant tax and banking requirements.
What the Law Covers
The law applies to businesses that sell goods or services through any digital channel, including:
- Websites and online stores
- Mobile apps
- Marketplaces such as Amazon.ae and Noon
- Social media platforms such as Instagram
- Messaging apps such as WhatsApp
Businesses can only sell goods and services that are legally permitted in the UAE. Certain products, including some health-related products, may require additional approval from the relevant authority.
E-commerce businesses must also follow consumer protection rules and provide customers with a detailed digital invoice for each purchase.
Penalties for Non-Compliance
Cabinet Decision No. 200 of 2025 came into force on 28 November 2025 and introduced an enforcement system for the 2023 e-commerce law.
The system uses four levels of penalties. Fines can reach AED 100,000, and businesses that repeatedly breach the rules can face permanent closure.
For online businesses, compliance should therefore be part of the setup process from the beginning.
Mainland or Free Zone?
The right structure depends mainly on where the business plans to sell.
A free zone licence suits businesses that serve customers outside the UAE. It allows 100% foreign ownership and full repatriation of profits. If the business wants to sell directly to customers in the UAE mainland, it may need a dual licence or a local distributor.
A mainland licence suits businesses that target the UAE market. Foreign investors can own 100% of a mainland LLC for most activities. This structure also allows businesses to sell directly through local marketplaces, operate warehouses and bid for government contracts. The company must have a physical business address.
Some businesses start in a free zone to serve international customers and later add a mainland licence as their UAE operations grow.
Business Setup in the UAE
Metropolitan Consulting assists you in setting up a business in the UAE.
Choosing the Right Licence Activity
The licence activity should accurately reflect what the business does.
- Online retail or dropshipping — selling physical products online, whether the business holds stock or ships directly from suppliers.
- Digital products, SaaS or online courses — selling software, digital products or educational content online.
- Marketplace or platform — connecting third-party sellers with customers. Additional activities may apply if the platform processes payments.
- Payments, wallets or escrow — financial services such as digital wallets or escrow may require additional approval from the Central Bank of the UAE.
Choosing the right activity at the start helps avoid licensing and banking delays.
Registration Steps
The setup process usually includes:
- Choose the business activity and trade name — select the appropriate licence and company structure.
- Submit KYC documents — usually including passport copies, proof of address and UBO information.
- Receive the trade licence — many free zones issue licences digitally, sometimes within a few days.
- Open a corporate bank account — the application will usually require company and shareholder documents.
- Register for VAT and Corporate Tax — depending on the applicable requirements.
- Set up the online store and payment gateway — a UAE payment provider can make it easier to accept AED payments.
Tax Obligations
E-commerce businesses in the UAE may need to register for VAT and Corporate Tax. These are separate taxes with different rules.
VAT: A business must register for VAT when its taxable sales exceed AED 375,000 in 12 months. Registration is also possible voluntarily when taxable sales reach AED 187,500.
Corporate Tax: Companies must also register for Corporate Tax with the Federal Tax Authority. This applies to both mainland and free zone companies.
The Corporate Tax rate depends on the company's taxable income. Businesses pay 0% on taxable income up to AED 375,000 and generally 9% on the amount above AED 375,000.
For individuals running a business, Corporate Tax registration generally applies when annual business turnover exceeds AED 1 million.
Frequently Asked Questions
Does selling only through Instagram or WhatsApp require a licence?
Yes. The UAE e-commerce law applies to businesses that sell through social media, messaging apps, websites and other digital channels.
Can a free zone company sell directly to customers across the UAE?
A free zone licence does not normally allow a business to sell directly to UAE mainland customers. The business may need a dual licence or a local distributor, depending on how it operates.
Does accepting online payments require Central Bank approval?
For standard online payment processing through a licensed provider, separate Central Bank approval is generally not required. Businesses that provide services such as digital wallets or escrow may need additional approval.
Are VAT and Corporate Tax registration the same?
No. VAT registration depends on the business's taxable revenue. Corporate Tax has separate registration rules that apply to companies in both free zones and mainland.
What happens if Corporate Tax registration is late?
The Federal Tax Authority can impose a AED 10,000 penalty for late Corporate Tax registration. Since April 2025, this penalty is waived automatically for businesses that file their first Corporate Tax return within seven months of the end of their first tax period.
