In Dubai’s competitive business environment, many companies face fluctuations that may require them to pause their operations temporarily without permanently shutting down. Freezing a trade license is a practical solution for businesses seeking a hiatus while maintaining the option to reactivate at a later date. Dubai’s Department of Economic Development (DED) offers companies the opportunity to freeze their trade license for up to three years. However, this option is subject to specific terms and conditions.
What is a Trade License Freeze?
A trade license freeze allows businesses in Dubai to temporarily suspend their operations without losing their business license entirely. During the freezing period, the company is considered inactive, and it is exempt from many operational obligations such as visa renewals, sponsorships, and office leasing.
The key advantage of freezing a trade license rather than terminating it is that the company retains the ability to revive the license at any time during the freeze period, thus avoiding the cost and hassle of applying for a new trade license later.
Key Conditions for Freezing a Trade License in Dubai
To freeze a trade license in Dubai, businesses need to meet several specific conditions and provide the necessary documentation. The following steps outline the process:
Request a Temporary Suspension
The business must submit a formal request to the DED. This is done through a written letter from the company, requesting that the trade license be temporarily suspended. This letter should clearly state the reasons for freezing the license and the intended period of suspension.
No Sponsored Employees
Before the trade license can be frozen, the company must ensure that there are no employees or individuals sponsored under the license. A letter from the Ministry of Human Resources and Emiratisation (MOHRE) must be obtained, confirming that the business has no sponsored employees at the time of the request. Without this clearance, the freezing process cannot proceed.
Inspection Report from DED
The Dubai Department of Economic Development (DED) requires an inspection report from their inspection division. This report serves as confirmation that the business is currently inactive and is not engaged in any commercial activity. It ensures the company has fulfilled all relevant obligations before freezing the license.
What Happens During the Freeze?
Once the trade license is frozen, the company is officially marked as inactive by the DED. Businesses are not required to pay trade license renewal fees or renew visas for employees during this period. However, they must still comply with any other legal requirements, such as submitting updated documents as requested by authorities.
Important Note:
The freezing period cannot exceed three years. Once the period expires, the company must either reactivate the license or cancel it altogether. There is no provision to extend the freeze beyond three years, and failure to take action could result in penalties.
Freezing Fees
There is a fee associated with freezing a trade license, which businesses must pay to the DED. This fee varies depending on the company’s activity, size, and other factors. It’s advisable to consult with the DED or a professional business consultancy in Dubai for accurate cost estimates.
Why Businesses Opt to Freeze Trade Licenses
There are several reasons a company may choose to freeze its trade license instead of closing down:
Financial Struggles: Businesses experiencing temporary financial difficulties may opt to pause operations until conditions improve.
Restructuring: Companies undergoing internal restructuring or leadership changes may benefit from freezing their license while they reorganize.
Market Fluctuations: Companies that rely on seasonal or fluctuating market demands may choose to freeze their licenses during periods of low demand.
Conclusion
Freezing a trade license in Dubai offers a lifeline for businesses facing temporary challenges, allowing them to pause operations without permanently closing. By following the necessary steps—submitting a formal request, obtaining clearance from the MOHRE, and securing an inspection report from the DED—companies can freeze their licenses for up to three years. It’s essential to understand that freezing the license is not a permanent solution and requires timely action when the freeze period ends.
Need help navigating the process of freezing your trade license? Contact us today for professional assistance.