In a free zone your licensor is also your landlord, your immigration channel and the party that must agree before you can sell your own shares

The comparison you were given is almost certainly a price list with a sector column beside it. That is a reasonable way to shortlist and a poor way to decide, because the thing you are actually choosing is a counterparty — one organisation that will hold most of the powers over your company for as long as it exists, and will still hold them on the day you want to leave.

The concentration is the point. On the mainland, the powers that matter to a company are split across several parties who do not answer to each other: an economic department issues the licence, a private landlord owns the premises, a separate tenancy record makes the address official, a labour ministry computes how many people you may employ, an immigration authority issues the permits, a notary attests the constitution and records transfers of shares, and a court hears the disputes. That fragmentation is the thing founders complain about, and what is actually harder about a mainland company sets out what coordinating it costs.

Inside a free zone, most of those functions sit with one organisation. The same body that grants your licence also leases you the desk, runs the channel through which your visas are processed, keeps the record of who owns your shares, decides whether a buyer may acquire them, and decides when you are allowed to stop. It also sets its own fees and rules and can change them.

That is not an argument against free zones. It is the fact that most zone comparisons leave out, and it decides five things.

Seven functions, and the zone holds most of them

The last row is where DIFC and ADGM go furthest. Both operate their own civil and commercial legislation, their own corporate filing authority — the Registrar of Companies in DIFC, the ADGM Registration Authority in Abu Dhabi — and their own courts. Dubai is four jurisdictions sets out what that actually means for a company that thought it had chosen a city.

Premises: your landlord is the organisation that can suspend your licence

On the mainland a dispute with your landlord is a commercial dispute between two parties, and there is somewhere to take it. In a zone where the authority is also the lessor, the party on the other side of that dispute is the party renewing your licence. Nothing about that is improper. It simply means you have no leverage of the ordinary kind, and it is worth knowing before you need some.

Three practical consequences follow, and none of them appears in a package comparison.

The lease and the licence are welded together. You cannot relocate to cheaper premises elsewhere while keeping the licence, because the licence names an address inside the estate and the authority holds both documents. Vacating is not a property decision; it is a licensing event.

Occupancy is a licence condition, not just a rent obligation. Zones commonly require leased space to be genuinely used — operational within a stated period, and attended during working hours. A desk nobody sits at is not merely thin evidence for a bank. It is inconsistent with the agreement the authority holds, and the authority is the one reading it.

The premises class sets the ceiling on everything else. Visa capacity, the activities you may add, and whether a bank believes the company has substance all run back through the facility. Who files the address record in each case is covered in the address on your licence is filed by somebody else.

Activity scope: the zone writes its own list, and the words on it are not portable

A mainland licence is derived from a published classification directory, so the activity line on your licence exists in a vocabulary shared with other companies, other authorities and, when it comes to it, a court. A free zone licence is derived from the zone's own list of permitted activities, maintained by the zone, interpreted by the zone.

Five things follow from that, and they surface later rather than at formation.

The last row is the one that costs money years later. A zone's service classification is not the mainland professional category, so a company that eventually needs an onshore licence does not carry its scope across — the mainland authority derives its own from its own directory. How that category is derived, and what changing it sets off, is in commercial, professional or industrial. Whether a bank's compliance officer or a customer's procurement team will read your activity line the way you intended is not something any zone guarantees.

The practical instruction is narrow. Get your intended activities — including the ones you expect to add in year two — confirmed against the zone's own list in writing before you pay, and ask specifically whether they may share one licence. A verbal assurance that the zone is "flexible on activities" is not an answer to either question.

Visa allocation is a contract term, not the output of a formula

This is the difference with the sharpest practical edge, and it is usually described as though it were merely a different number.

On the mainland, employment capacity is computed by the labour ministry from the premises. It is an output. You can predict it, you can plan against it, and you are dealing with a ministry that applies the same calculation to everyone.

In a free zone, capacity is allocated by the authority under its own operating rules, and those rules commonly reserve the decision to the authority's discretion. It is therefore a term of the commercial arrangement you signed, which has two consequences pulling in opposite directions. It is negotiable before you sign, in a way a ministry calculation never is. And afterwards there is no ministry to appeal to over the authority's head, because the labour quota framework is not the instrument being applied. The two allocation models zones actually use are set out on our free zone company formation page and are not repeated here.

So the only useful action is to move the question earlier. Get the allocation in writing before the licence issues rather than after, and get it in the form of a number attached to the specific facility you are taking, not a package tier described in a brochure. Allocation is also not issuance: each individual permit still turns on an immigration decision about that person. Hiring the first person opens a second file covers what arrives with the first employee regardless of jurisdiction.

Transfer consent: you cannot sell your own shares to a buyer the authority will not accept

Of the five powers, this is the one that is almost never mentioned at formation and almost always matters at the end.

In a free zone company, the authority does not merely record a change of ownership. It ordinarily requires its own prior no-objection before shares move, and it assesses the incoming shareholder against its own admission criteria. The buyer of your company therefore has to be acceptable to your licensor, on the licensor's timetable, with conditions the licensor may attach.

Three groups of people need to know this and usually do not. A founder planning an exit should understand that the sale timetable contains a consent they cannot compel. An incoming investor's diligence has to price the risk that the authority says no, or says yes with conditions — which is part of why the structures that make a UAE company impossible to invest in is worth reading before the cap table is built rather than after. And a family should understand that the same consent sits in the path of an inheritance: when a shareholder dies the company keeps existing and stops being able to act.

There is also an evidence problem running the other way. A buyer looking at a free zone company cannot read most of what they would want to know from any public file, which makes buying into one an evidence exercise long before it is a valuation exercise — set out in what you can verify about a UAE company before you buy into it.

The exit is the authority's decision too, and it runs through its own departments

Closing a free zone company is not a matter of letting the licence run out. The authority decides when you are permitted to stop being a company, and the process runs through its own internal clearances, each of which can hold the file.

Read the first row and the last together. The immigration half has to finish before the licensing half starts, which means an exit that looks like a single administrative act is a sequence with a dependency at the front of it — and the sequence, not the fee, is what decides how long the company keeps costing you money after it stops earning any.

Two failures are worth naming because they are both common and both avoidable.

Letting the licence lapse instead of cancelling it is strictly worse than cancelling it. Obligations continue to accrue against a company that has stopped trading but has not been closed, permits attached to it become invalid, and restoring the position costs more than renewal ever did. Company liquidation sets out what a clean exit involves.

The way out is not yours to open. If the jurisdiction turns out to be wrong, federal company law now lets the company transfer to an emirate's mainland authority, keeping its legal personality, but only where both authorities' systems allow it and both approve, and a move out of ADGM or DIFC depends on controls the law leaves to the Cabinet. The same law gives no general route from one free zone to another; that turns on both zones' own rules. Where no transfer is available or approved, you close and form again — new licence, new immigration file, new bank relationship. That is not a free zone peculiarity so much as a UAE one, and the four things people actually do instead are compared in moving between free zone and mainland after you have chosen.

Renewal is the annual moment at which the terms can change

The authority sets its own fees, its own packages and its own rules, and it can revise them. Your remedy if you dislike the revision is to leave, which requires the authority's cooperation on the exit described above. That is the whole of the leverage position, and it is worth understanding without drama: zones compete for new companies and have every commercial reason to keep existing ones, but the contractual position is what it is.

Renewal is also where conditions bite that were invisible in year one. Several zones make an audited financial statement a renewal gate, which makes bookkeeping a licensing matter rather than an accounting preference. And the licence renewal date is the date most other records in the company key off — one load-bearing renewal date sets out which ones follow it and which run independently.

Two things the authority does not control

Both of these were misstated in the older version of this page, and both are worth stating plainly because they mark the edge of the zone's power.

Tax. Corporate tax is federal. No zone can grant an exemption from it, and no address confers one. Free zone companies are inside the corporate tax law: the ordinary position is 9% on taxable income above AED 375,000 and 0% at or below it, and what some zone companies hold is a conditional 0% treatment on qualifying income, tested annually against conditions including audited accounts and substance. VAT is federal at 5%, and the VAT concept the "tax free" claim usually borrows — the Designated Zone — is a separate schedule that is not a synonym for free zones generally. Which of the advertised zone benefits are actually the zone's to give is sorted in which free zone benefits survived the reforms, and whether the conditional status is worth its own compliance cost is in are UAE free zone companies still tax free.

A minimum capital figure. There is no UAE-wide minimum paid-up share capital, and any figure that applies to you is set by the authority you incorporate under rather than by federal law. Older material quoting a fixed sum with a mandatory deposit step is repeating a requirement that does not exist in that form. What the figure actually commits you to is worked through in the share capital figure is a promise, not a payment.

What the concentration is genuinely worth

The honest case for the arrangement is that a single counterparty is faster, and for many companies that is worth more than the leverage it costs. Why the four roles were put in one organisation in the first place, and which of the advantages that organisation was created to grant have since been federalised away, is the subject of two of the three advantages free zones were invented to grant.

A zone that is licensor, lessor and immigration channel can grant a licence, lease the space and open the immigration file without anything needing to be coordinated between organisations that have no reason to coordinate. Nobody is waiting on a separate tenancy record. Nobody is waiting on a ministry's calculation. When something is wrong there is one desk to take it to, and that desk has an interest in your renewal. For a founder whose company will hold one premises, a small team and a stable shareholder list, the concentration is close to pure benefit.

The financial free zones extend the same logic upwards: a company there gets a common-law companies framework and a court system built for commercial disputes, which for some businesses is the entire reason to be in the country. A free zone is a cluster before it is a price covers what else you are buying when the zone is built around a sector rather than around licence volume.

Where this is the wrong thing to be worrying about

If your customers are mainland businesses or the public, none of this is your binding constraint. The market your licence reaches is, and no amount of scrutiny of your licensor changes it. Free zone or mainland is one question about your customer is the decision to make first.

If you will hold one desk, employ nobody and never change shareholders, four of the five powers above will never be exercised against you. Choose on sector fit, cost and commute, and stop reading here.

If your activity is regulated, your licensor is not your most demanding counterparty. The sector regulator is, and its conditions will be tighter than anything the zone applies. Choosing a sector is choosing which second authority has to approve you sets out which activities carry one.

Do not read this as an argument for the mainland. A mainland licence does not remove the counterparty problem; it replaces one counterparty with several who do not coordinate, and for some founders that is worse rather than better. The right conclusion is to know which powers you have handed over, not to conclude that handing them over was a mistake.

And if you are still comparing prices, the concentration is not yet your question. It becomes your question at the moment you want to hire beyond your floor area, move premises, add an activity, take investment or sell — and all five of those arrive after the price has been paid. What being in the wrong zone costs in year three puts a price on that gap.

Questions worth asking your zone, in writing

Can I add activities later, and can they share one licence?

Ask for both answers against your specific intended activities, not in general terms. The first answer is usually yes; the second varies sharply between zones and decides whether a second entity is in your future.

What exactly is my visa allocation, and is it attached to the facility or the package?

Get the number in writing before the licence issues. Allocation is not issuance either — each permit still turns on an immigration decision about the individual.

What do you require before shares in my company can be transferred?

This is the question nobody asks at formation and everybody needs at exit. Ask what the authority assesses, what it can attach as a condition, and how long it takes.

If I want to leave, what is the sequence and who has to sign off?

Ask which internal departments issue clearances, whether permits must be cancelled first, and whether a liquidator is required. The answer tells you what an exit costs in months.

Are my accounts audited as a condition of renewal?

If the answer is yes, bookkeeping is a licensing obligation from day one rather than a decision you can defer to year two.

Can you confirm in writing that no capital is required to be deposited?

Ask it plainly. Any figure that applies comes from the authority, not from federal law, and the deposit question is separate from the figure question.

The one thing to settle before the deposit

Before you choose a zone on sector or on price, write down the five moments at which you will need your authority to say yes: a new activity, more premises, more people, a new shareholder, and the exit. Then ask the zone, in writing, what each of those five requires. A zone that answers all five clearly is a good counterparty at any price on the shortlist. A zone that answers only the first has told you something about the other four.

Frequently asked questions