Free Zone Company Formation in the UAE

The Ministry of Economy and Tourism lists more than forty free zones across the seven emirates. Every one of them markets the same four promises: full foreign ownership, tax efficiency, fast setup, and infrastructure they all describe in the same words.

All four are broadly true almost everywhere, which makes them worthless as a basis for choosing. What separates one zone from another is narrower, duller and far more consequential — which activities it may license, what premises it can physically offer, how visa allocation is calculated, whether it sits on the Federal Tax Authority's Designated Zones schedule, and how a bank's compliance officer reacts to seeing that name on a licence.

This page is the decision framework, not a brochure, and it ends with the situations where a free zone is the wrong structure and we would tell you so.

What a free zone company is

A company incorporated under the authority of an economic zone rather than under the emirate's Department of Economy. The zone acts as incorporating authority and licensor, and in the two financial free zones — DIFC and ADGM — as legislator, court system and financial regulator as well.

What the licence confers:

• Full foreign ownership, with no local partner or service agent
• Repatriation of capital and profits without exchange controls
• The right to trade internationally, and with companies inside free zones
• Residence visa entitlement scaled to premises or, in some zones, to the package tier
• Customs treatment for goods held inside a Designated Zone, where the zone appears on the Federal Tax Authority's schedule under Cabinet Decision No. 59 of 2017

What it does not confer:

• The right to invoice a UAE mainland customer directly for work delivered onshore
• Eligibility for most federal and emirate government tenders
• Retail premises or walk-in trade outside the zone's own estate
• Any presumption of 0% corporate tax — the most expensive misunderstanding in UAE business setup, and the subject of its own section below

The mainland restriction, and the four routes through it

A free zone licence is a licence to operate in that zone. It does not permit onshore supply. This constraint is real, it is enforced, and it is the single fact most often glossed over at the point of sale.

The commercial workaround has always been a mainland distributor. Dubai then changed the architecture. Executive Council Resolution No. (11) of 2025, published in the Official Gazette on 3 March 2025 and effective immediately, permits free zone establishments — other than firms licensed in DIFC — to operate inside the emirate through three further routes. Establishments already trading onshore were given a one-year grace period to regularise, extendable once. That gives four options in total:

Weighed against each other rather than listed, the four separate on what they buy and converge on what they cost — which is the part a package comparison never reaches.

All four reach the same tax answer — onshore revenue is not qualifying income. The distributor costs margin rather than a licence, both branch routes cost a second licence and a second renewal, and the activity permit runs six months.

all four reach the same tax answer — onshore revenue is not qualifying income

What it buysWhat it costs

1. Mainland distributorOnshore sales through an unrelated party, with no second licenceMargin rather than a licence
2. A DET-licensed branchOperating inside the emirate, licensed by the Department of EconomyA second licence and a second renewal
3. A branch operating out of the zoneOperating inside the emirate, run from the zoneA second licence and a second renewal
4. A permit for specified activitiesNamed activities onshore, for up to six monthsSix months, and only codes that have actually been approved

Three conditions apply to every licensed route and are routinely skipped in summaries. You need prior approval from your own free zone authority and from the competent authority for the activity. Not every activity code has been approved. And Article 3(b)(2) requires separate financial records for activity conducted outside the zone.

The consequence founders miss is not the licence fee. Mainland-derived income is not qualifying income for corporate tax, and enough of it does not merely tax that slice at 9% — it can cost you the 0% on everything.

Outside Dubai the position varies by emirate and by zone. DMCC has long run a dual licensing arrangement with the Department of Economic Development; other zones have their own or none. Verify availability for your activity in writing rather than assuming it.

Narrowing forty zones to three

Nobody should read forty brochures. Six questions eliminate most of the list before cost is considered at all, and cost should be the last filter rather than the first. It is also why Dubai's zones cannot honestly be ranked: most of them will not license your activity, so the field sorts itself by what admits you long before price is worth reading.

Fix the activity before the zone. Choosing a jurisdiction and then discovering it cannot license what you do is the most expensive sequencing error in UAE formation, because company law gives no general route from one free zone to another. Unless both zones' own regulations provide for a move, you would liquidate and incorporate again. The one statutory route that does exist runs to the mainland rather than sideways, and what a move between a free zone and the mainland requires is both authorities' systems allowing it and both approving — not something to plan on.

Count headcount before buying a package. The advertised licence in most low-cost zones is a zero-visa product. Founders who buy on the headline and hire in month eight pay twice.

Take the banking question seriously. A DMCC, DIFC or ADGM licence opens a conversation that a lesser-known zone does not. That is unfair to the smaller zones and entirely real. If you are a solo consultant invoicing overseas clients it is also irrelevant, and paying for it is waste.

Check the Designated Zone schedule if goods are involved. Designated status is a VAT concept covering the movement and storage of goods, not services, and it does not follow from the words "free zone" on a licence. Jebel Ali, Sharjah Airport International Free Zone, Hamriyah, Dubai Aviation City and Ajman Free Zone are on the schedule. DMCC, Dubai Silicon Oasis and Meydan are not. The list has been amended since 2017 and entries removed — check it current when you rely on it.

Ask what the licence can become, not only what it is. The zone is chosen for the business you will be running in three years, and two questions test that before anything is signed. Can it license the activities you expect to add? Adding one to a live licence is usually an amendment, while an activity the zone cannot license at all can mean a liquidation and a second incorporation. And can the people you are relocating bring their families? That turns on the zone less than founders assume: a spouse and children are sponsored by the resident, on that person's own income and housing, as the visa section below sets out.

Every zone was built around a sector, and that decides more than price does

A free zone is not a cheaper licence counter with the same product behind it. It is an estate assembled around one industry — an activity list, premises, and neighbours to match — and the sector came first. The Dubai Development Authority describes TECOM Group's twelve business communities as sitting across six non-oil sectors, each district admitting on what you do rather than on what you are willing to pay: technology at Dubai Internet City, media at Dubai Media City, and design, fashion, architecture and art at Dubai Design District. Dubai Healthcare City Authority governs and regulates a healthcare and wellness zone established in 2002. Jebel Ali was built at a port, and KEZAD alongside Khalifa Port. None of that is positioning; it is what the zones were for.

Which is why question one above eliminates more zones than question six ever will. Activity rules zones out; price only ranks the ones still standing. Read the mapping the way an authority reads an application — find the row that describes the revenue, not the row that describes the ambition.

A cluster address changes nothing about your tax position. It buys an activity list written for your industry, a tenant base, and a sector regulator that already knows the vocabulary. It does not make income qualifying, and it does not reach a mainland customer any more easily than the cheapest zone on the list. Founders routinely pay a cluster premium expecting one of those two things.

Where the sector has its own regulator, the zone is the second decision rather than the first. Clinical, educational, financial and virtual-asset activities are approved by a body sitting outside the zone entirely, and that body's timetable, not the zone's, is the one that governs when you can trade. Fix the regulator's answer before you pay a licence fee anywhere.

And where a district's activity list does not cover what you do, the answer is a different district, not a more persuasive application. The clusters are gated deliberately. An application arguing that your business is really media, or really design, is a slow way of being told to go next door.

The zone tiers, compared

Zones cluster into six tiers that behave differently on cost, premises, visas and credibility. Every figure is an indicative first-year planning range read on 1 September 2026, not a quotation. Authority fees change without notice and several of these zones publish no public tariff at all, so treat the ranges as a shape to plan against rather than as today's price.

Set on the same five rows rather than described one tier at a time, the six stop reading as a price ladder. What separates them is what each can physically offer, how the visa ceiling is arrived at, and whether the customs treatment comes with the address — and only one of those four is a number.

Across the six: entry tier AED 6,000 – 14,000 on a flexi-desk or a coworking seat, Dubai package zones AED 12,500 – 26,000 with the package tier setting the visa ceiling at commonly up to six, premium commercial AED 45,000 – 90,000 and above, financial free zones AED 150,000 – 350,000 and above before any regulatory authorisation is priced, and logistics and industrial from AED 10,000 desk-only to AED 200,000 and above once a unit is taken — while the Dubai sector clusters publish no comparable tariff and quote against activity and premises instead.

The cluster row is the one that does not price like the others, and that is the point. DAFZA prices with the premium commercial tier rather than with the package zones, and is the only one of the five on the Designated Zones schedule — which is why an air-freight trader reads that row entirely differently from a design studio. For the remaining four — Dubai Internet City, Dubai Media City, Dubai Design District and Dubai Healthcare City — we publish no figure here, because none is published in a form you could hold beside an IFZA package and compare: admission is settled on the activity list first and quoted against premises afterwards. Each profile carries its own numbers. This page will not guess at them, and neither should an agent quoting you one.

The tiers are not a quality ranking. A container business in DIFC and a fund manager in SHAMS are both mistakes, in opposite directions.

Licence types and legal forms

Licence categories vary in name between zones but map onto the same six functions.

Most zones let one licence carry several activities, and adding one later is an amendment rather than a second company — inside limits each zone sets for itself. RAKEZ's licence amendment service covers adding, removing and replacing licensed activities. Meydan allows up to three activity groups on a single licence and lets them span unrelated industries. Other zones are stricter about mixing, and where a trading line cannot sit beside a service line, a consultancy that starts selling goods is looking at a second entity rather than an amendment. Three things travel with any addition: an external approval if the new activity attracts one; a possible change of licence category or premises, which is why RAKEZ's own service card asks for further clearances where the company holds land or a warehouse; and a bank that onboarded one activity profile and will notice another. Load the licence with what you will actually do, not with everything the zone lists. Every surplus activity is one more thing a compliance officer can ask you to explain.

Legal form is a separate decision affecting liability, share transfers and how easily you add investors.

Share capital requirements differ sharply and stale figures circulate widely. Jafza prescribes no minimum for an FZE or FZCO — only capital sufficient for the licensed activities; the old AED 1,000,000 and AED 500,000 figures were dropped in 2017 and some bank onboarding staff still quote them. DMCC commonly expects AED 50,000 per company and AED 10,000 per shareholder. Confirm yours with the zone, not with an agent.

Put on one scale, the figures that circulate and the figures a zone actually asks for stop looking like the same kind of number — which is how a rule dropped almost a decade ago keeps surviving in onboarding conversations.

The two figures Jafza dropped in 2017 — AED 1,000,000 and AED 500,000 — are still quoted by some bank onboarding staff, while Jafza itself now prescribes no minimum at all, and DMCC commonly expects AED 50,000 per company with AED 10,000 per shareholder on top.

Both the FZE and the FZCO are limited liability companies, and the limit is narrower than it sounds. Jafza describes the FZE as having a legal personality distinct from its shareholder, and puts the liabilities of both forms at the company's paid-up capital. In the ordinary case a creditor of the company pursues the company, and your own assets sit outside the claim. What sits inside it is anything you sign personally. Banks and landlords commonly ask the founder of a new company for a personal guarantee, and a guarantee puts you back in front of that creditor however the company is constituted.

A branch has no share capital to set, because it has no shares. It is the parent company itself, licensed in the zone, so the capital question moves up a level. DMCC puts full liability for a branch on the parent, and what a zone reads in place of a capital figure is the parent's own paperwork: Hamriyah's published list for a branch asks for the parent's licence, its certificate of incorporation, its memorandum and articles of association, and a board resolution opening the branch and naming the director, manager and authorised signatory. That makes a branch the simplest vehicle to capitalise and the one that puts the whole group behind whatever happens here. Opening a UAE branch of your existing company sets out when that trade is worth making.

A freelance permit licenses a person, and only a company can grow past one

Before any of the forms above, a solo professional meets a fork most comparisons skip: a freelance permit instead of a company. The TECOM districts offer one as GoFreelance, through Dubai Media City, Dubai Internet City, Dubai Design District and Dubai Knowledge Park, for technology, media, education and design work. Creative City Fujairah sells freelancer packages built for solo professionals. The appeal is genuine — fewer documents, a lower fixed cost than a company, and a route to residence for the holder.

The limits are the product. GoFreelance is issued only in your own name as it appears on your passport, and it does not allow you to hire or sponsor staff. There is no company behind the permit, so there is no limited liability either: the permit does not sign the contract, you do, and a claim reaches your own assets. The activity list is short, and adding to it is often a new permit rather than an amendment.

A company answers the same question the other way. It can hire, carry several activities, trade under a brand and one day be sold — and it is a taxable person from the day it is incorporated, enrolled and filing whether or not it owes anything. A natural person comes into corporate tax only once business turnover passes the threshold the Federal Tax Authority publishes, so the cheaper structure can also be the one with less to file. Package zones such as Meydan and IFZA meet the solo professional with a single-shareholder company rather than a permit: dearer to hold, heavier to file, and able to hire. Choose on year two, not year one. If a first hire, a fixed-price contract or a brand is in the plan, the permit is a detour. One person, three legal shapes sets the permit, the sole establishment and the single-shareholder company side by side on liability, visas, corporate tax and VAT.

Set on the same rows rather than described one after the other, the two shapes part company on six answers — and five of the six run the same way.

The permit cannot hire or sponsor staff, carries no limited liability, is issued only in the holder's own name and keeps a short activity list to which additions are often a new permit; the company answers yes to all four, and pays for it by being a taxable person from the day it is incorporated, while the permit holder meets corporate tax only once turnover passes the Federal Tax Authority's threshold.

The formation sequence

Each step gates the next. The order is not negotiable, and compressing it is how files stall. The same authority licenses the activity, provides the premises and runs the immigration file, so a free zone setup is not six counters like the mainland — which is why a refusal at one step is so often caused two steps earlier.

1. Fix the activity codes. Licence type, cost, premises, bankability and tax treatment all follow from this one decision.
2. Select the zone as a consequence of what permits those codes and what premises you need.
3. Choose the legal form. Corporate shareholders need attested constitutional documents from the home jurisdiction — routinely the longest lead item in the file.
4. Reserve the trade name. Names implying regulated activity or governmental association are refused.
5. Obtain initial approval. The authority confirms in principle that it will license the activity, and clears the shareholders.
6. Take premises, or select the package tier. This fixes your visa ceiling, so it must follow a headcount decision rather than precede one.
7. Submit the file — passports, photographs, proof of address, board resolution where a corporate shareholder is involved, and any external approvals the activity attracts.
8. Pay and sign. Licence issue runs from same-day in the fastest zones to two or three weeks where external clearances arise. An advertised instant licence describes the counter, not fit-out, customs codes or visas.
9. Establishment card and immigration file, then entry permit, medical, Emirates ID and stamping, per person.
10. Corporate bank account, then enrolment with the Federal Tax Authority. Budget four to twelve weeks for the bank.

Three of those ten steps carry a published elapsed time, and set end to end on one scale they do not make the calendar founders expect. The counter is the short part of a formation, and the bank is the long one.

Licence issue runs from same-day to two or three weeks, a residence visa one to three weeks per person, and the account four to twelve weeks on top — which is why banking, not licensing, decides when you can actually trade.

The trade name is refused on rules, not on taste

Step four fails more often than founders expect, and always on one of a short list of grounds. The UAE Government's own guidance for free zone formation sets the floor. The name must not offend public morals or public order; must carry the legal form — FZE, FZCO, DMCC and so on — as part of itself; must not already be taken; must be compatible with the activity and the legal status of the company; and must not contain the name of any religion or governing authority, or the name or logo of an outside body, which is the ground on which religious and political names fail. Zones then add conditions of their own, and the one founders meet most is the personal name: several zones accept a person's name in a trade name only where that person is a shareholder, and some insist on the full name rather than a surname or initials. A name promising one business on a licence for another is refused for the mismatch alone, however well it reads on a website. Have alternates ready before the first one is filed.

Uniqueness is tested against one authority's own list, not against the country, and that is also the limit of what a reservation gives you. A reserved trade name stops another company taking the same name with the same authority. It is not a trademark, and it does nothing against somebody trading under your brand elsewhere. Trademarks, patents, industrial designs and copyright are federal rights — created by Federal Law No. 36 of 2021 on Trademarks, Federal Law No. 11 of 2021 on industrial property rights and Federal Decree-Law No. 38 of 2021 on copyright — and trademark applications go to the Ministry of Economy and Tourism, not to any zone. File the mark while the name is being reserved rather than after the signage is printed. Your intellectual property sits outside the licence file sets out which right covers what and the order to file in, and a free zone cannot protect what your company made draws the same boundary from the zone's side.

The company's own constitution arrives as a template, and it is worth reading before you sign

Step seven lists what you supply about the people. Two further documents concern the company itself. The first is the authority's application form: Jafza's pack for an individual shareholder is its own application form with an environment, health and safety undertaking, KYC and ultimate beneficial owner forms, an appointment letter for the director or manager, a one-page project summary, a business profile and a passport valid for at least six months. The second is the memorandum and articles of association that constitute the company. In many zones that is the authority's standard text, completed with your shareholders, share split, capital and manager — Meydan lists it among the documents it issues on formation, beside the certificate of formation and the record of its shareholders.

Read that text before step eight rather than after it. It fixes how shares may be transferred, what the manager may sign alone and what needs a shareholders' resolution, and changing it later is an amendment with a resolution and a fee of its own. A corporate shareholder's memorandum and articles are a different document again: its own, from its home jurisdiction, attested — the long lead item step three warns about.

Three documents sit outside the pack, and each one has a different reader

Passports, photographs and proof of address appear on every checklist and cause nobody any trouble. Three other items are asked for inconsistently, arrive late, and stall files — and because each is demanded by a different party applying a different test, treating them as one bundle of paperwork is how founders end up writing the wrong version of all three.

The business plan, of which there are three. RAKEZ's Operating Rules require one with the licence application and set out what belongs in it: the proposed business, the investment required, evidence of shareholder liquidity or access to funding, headcount with job descriptions and salaries, anticipated consumption of services, the premises needed, and waste disposal measures. Sharjah Airport International Free Zone asks a branch of a foreign company for a Project Summary. DIFC and ADGM want a regulatory business plan, which is not a description of the business at all but evidence that it can be run under supervision. Your bank then wants a third version, written for a compliance reader: who pays you, in what currency, from which country. One document filed three times fails at least twice, and the failures arrive weeks apart.

The bank reference letter, which fewer incorporating authorities ask for than agents claim. RAKEZ names the test rather than the document — evidence of shareholder liquidity or access to funding — and a reference letter is one of several ways to satisfy it. Hamriyah Free Zone Authority's published document list for a Free Zone Establishment or Free Zone Company carries no bank reference at all. Where the letter reliably earns its place is at the other end of the process, at account opening, where the bank is testing source of funds rather than capacity to pay a licence fee. SAIF Zone reserves the right to obtain additional documents, so no published list is ever the final list — but "the free zone requires it" should still be a claim someone can point at on an authority page, and often it is not.

The employer NOC, which is a counter requirement and not an immigration one. This is the item most consistently misdescribed, in both directions. Hamriyah's published list requires a copy of the shareholder's and manager's visit or tourist visa or an attested no-objection letter from a current sponsor — so at that zone the letter is a genuine gate on anyone already resident under somebody else's sponsorship. Shams takes the opposite position and asks for none from a holder of a UAE residence visa under another sponsor. The immigration authorities ask for neither: GDRFA Dubai's green residence permit for a partner or investor lists a photograph, a passport valid for not less than six months, the partnership or memorandum or investment contract, and the trade licence, and ICP's residency permit service carries no no-objection condition either. The constraint that is real is not a form — an existing permit has to be released before a new one can attach to the passport, and only the sponsor holding it can release it. Our visa services page sets out the narrow cases where the letter genuinely survives.

Assemble the pack against the zone's own published list, and sequence it by who controls the delay. Attestation of foreign corporate documents goes first, because it is the only item with a queue outside your control. The business plan goes next, because it has to survive both the incorporating authority and the bank and you want the second reader's objections before the first reader has approved anything. The sponsor question goes last, because its answer is a negotiation with a counterparty rather than a document you collect.

Set in that order, with the party who can actually hold each item up named beside it, the pack stops being a checklist and becomes four handoffs — and three of the four are somebody else's decision.

Attestation of the foreign corporate documents goes first because its queue sits outside the deal entirely; the bank's version of the business plan goes next so its objections arrive before the incorporating authority has approved the version written for the zone; and the sponsor question goes last because it is settled by a counterparty rather than collected from a file.

What it costs

Package prices are quoted as one number covering a licence and a desk. What that number excludes is the part that moves your budget: visa processing per head, establishment card, premises beyond the included desk, external approvals, attestation of foreign corporate documents, share capital where it must be deposited, audit, and renewal — not always priced the way year one was.

Six profiles carry the whole spread, and drawn as bands rather than as midpoints they show what a single quoted number hides: the floor and the ceiling of the same brief are often a factor apart, and one of the six has no published ceiling at all.

A solo consultant plans against AED 12,000 – 20,000 at entry tier and AED 20,000 – 30,000 in a Dubai package zone; two founders and two staff in a shared office AED 45,000 – 60,000; a small trader in a premium zone AED 90,000 – 150,000; a DIFC or ADGM professional firm AED 150,000 – 350,000; and a warehouse operation from AED 200,000, with no ceiling anyone publishes.

The briefAED, indicative first-year planning range read on 1 September 2026

1. Solo consultant, entry tier12,000 – 20,000
2. Solo consultant, Dubai package zone20,000 – 30,000
3. Two founders and two staff, shared office45,000 – 60,000
4. Small trader, premium zone90,000 – 150,000
5. DIFC or ADGM professional firm150,000 – 350,000
6. Warehouse operation200,000 and up

0200k400kAED, indicative first-year planning range read on 1 September 2026

Two recurring line items belong in the model from the start. Per-visa processing runs roughly AED 4,000 – 7,000 per person once entry permit, medical, Emirates ID and stamping are counted. An annual audit runs roughly AED 6,000 – 15,000 for a small company — a renewal gate in several zones, and mandatory federally for any company claiming free zone tax status.

Where a zone is sold through an agent network rather than direct — IFZA is the clearest example — the identical authority product is quoted at materially different prices by different agents. Insist on authority fees itemised separately from advisory fees. We quote that way as a matter of course.

Visas: what the allocation actually follows

Two models are in use — allocation by leased area, and allocation by package tier — and confusing them is expensive. By footprint, the conventions run like this:

Most zones scale entitlement to leased square metres. A minority — IFZA and Meydan most visibly — scale it to the package tier, which is the honest reason for their popularity with small teams: you can hold four or five people without leasing an office you do not need.

Drawn as one line rather than as two conventions, the difference is a headcount and not a preference: below it the package carries the team, above it the floor area does, and the office is bought before the visa is issued.

A flexi-desk or coworking package carries 0 – 3 people and occasionally up to six; past about six the convention switches to floor area at roughly one visa per 9 sqm, which is why fifteen people means an office lease rather than a larger package.

Two cautions. Allocation is not issuance — RAKEZ's own Operating Rules put the number of visas issued at the absolute discretion of the Authority, and every allocation is subject to an immigration decision per person. And a leased desk carries an obligation: RAKEZ requires a leased office to be operational within sixty days and attended by employees during normal office hours. A desk nobody sits at is not merely thin evidence for a bank — it is inconsistent with the lease you signed.

A virtual office is the name of a product, not a kind of premises. Some zones sell one — Creative City Fujairah lists virtual offices among its office solutions — and what a founder buys under that name is one of two things on the record: a real, minimal desk agreement in a real business centre, or an address with no agreement behind it. Ask which document the authority will hold. The first supports a licence and a visa allocation at the bottom of the range above, often none; the second supports neither. Running the company from abroad through one has consequences beyond the zone. It is thin evidence for a bank, it cannot carry the substance a Qualifying Free Zone Person must show, and it moves the question of where the company is managed — and so taxed — towards wherever you are sitting. The address on your licence is filed by somebody else sets out who holds the pen on each kind of address.

Family is sponsored by the person, not by the package. A spouse and children are sponsored by the resident — the investor, partner or employee — once that person's own permit is issued. The government portal states that employers and employees holding valid residence can both sponsor their families, subject to a minimum salary or a lower one with accommodation, and dependants' permits hang on the sponsor's and fall with it. So the test a relocating founder should run is the income each person can evidence and the housing behind it, not only the package tier. Whether a zone counts dependants against the company's own allocation is a question to put to that zone directly. Visa services sets out the conditions and the order in which permits come down.

Long-term residence is a second decision, and the licence does not make it for you. The company sponsors the ordinary permit. Two self-sponsored routes sit beside it. The Green Visa is a five-year residence for skilled workers, for freelancers and self-employed people, and for investors and business partners; GDRFA Dubai's green residence permit for a partner or investor, discussed under the NOC above, is the version a company owner applies for. The Golden Visa runs for five or ten years depending on the category — investors, entrepreneurs and exceptional talent among them — and is decided on evidence the licence does not contain: an entrepreneur needs proof of an innovative or technical project, documents showing its value, and a letter from a business incubator or the relevant authority in the emirate. Both let the holder sponsor family with no employer or company standing behind the permit. A trade licence does not come with a Golden Visa explains why the two keep being sold as one.

Corporate tax and the Qualifying Free Zone Person test

Free zone companies are not exempt from UAE corporate tax. Federal Decree-Law No. 47 of 2022 applies to them in full, no free zone authority has power to exempt anyone from it, and a zone's founding decree promising a fifty-year tax holiday predates the federal regime and does not override it.

What Article 18 creates is a status. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on everything else — and a QFZP does not get the AED 375,000 nil band on its non-qualifying income. The 9% starts at the first dirham.

Five conditions must all hold, every year:

1. Adequate substance in the zone — real premises, qualified staff, core income-generating activity actually conducted there, and local operating expenditure. Outsourcing is permitted with supervision. A flexi-desk nobody visits is a thin story to defend.
2. Qualifying income, as defined by Cabinet Decision No. 100 of 2023.
3. No election into the standard regime — a free zone company may choose ordinary taxation, and sometimes should.
4. Arm's length pricing and transfer pricing documentation.
5. Audited financial statements. Under Ministerial Decision No. 84 of 2025 every QFZP must prepare them regardless of revenue, where ordinary taxable persons only cross that threshold above AED 50 million.

Qualifying and excluded activities were rewritten by Ministerial Decision No. 229 of 2025, which repealed Decision No. 265 of 2023 retroactively to 1 June 2023 — so any analysis performed before September 2025 was done against a repealed list. Qualifying activities include manufacturing and processing of goods, trading of qualifying commodities, logistics services, holding shares and securities, headquarter and treasury services to related parties, fund and wealth management, ship operation, reinsurance, and distribution of goods in or from a Designated Zone.

Read that list against your revenue mix rather than against your licence category. What most founders find when they do is uncomfortable: a free zone consultancy, agency, IT services firm or trading company selling to mainland or overseas customers is earning non-qualifying income. General consultancy to a non-free-zone client is not on the list.

The de minimis is a cliff, not a slope. Non-qualifying revenue is tolerated only up to the lower of 5% of total revenue or AED 5,000,000. Cross it and QFZP status is lost from the start of that tax period and for the four following tax periods. A company with AED 4 million of revenue has an allowance of AED 200,000. One unplanned mainland contract can end the regime for five years.

If you distribute goods, one 2026 change applies. FTA Decision No. 6 of 2026, issued 2 June 2026 for tax periods beginning on or after 1 January 2026, requires a QFZP relying on Designated Zone distribution to obtain an agreed-upon procedures report from an independent UAE-licensed auditor — an annual cost line, not a formality. Our UAE corporate tax page sets out the whole regime, including when Small Business Relief is worth more to you than QFZP status.

The one tax that genuinely is nil has nothing to do with the zone. The UAE levies no income tax on individuals. That is a national position, not a free zone concession — it applies to a mainland owner, and to a resident who owns no company at all, exactly as it applies to you. For a founder it means two things. A salary the company pays you, and a dividend paid out of profit that has already been through the company's corporate tax computation, are not taxed again in your hands in the UAE: the Federal Tax Authority treats wages and personal investment income as outside the corporate tax that reaches natural persons. And the salary is still a corporate tax question at the company's end, because a payment to an owner or director is a payment to a connected person, deductible only to the extent it reflects market value. None of it changes how your home country sees you, which is why the home-country caution below matters more than the headline.

The rest of the compliance calendar

Grouped under the body that actually holds each one rather than listed by name, the calendar answers the question a list cannot: who you are filing with, and how often the same counter comes round.

Three of the seven sit with the Federal Tax Authority: corporate tax enrolment within three months of incorporation for companies formed on or after 1 March 2024, the corporate tax return and payment within nine months of the financial year end, and VAT enrolment on crossing AED 375,000 of taxable supplies. Two sit with the zone as incorporating authority — the beneficial ownership record, maintained with changes filed within 15 days under Cabinet Decision No. 109 of 2023, and the annual licence and lease renewal. The audited financial statement answers to both, annually, for every QFZP and as a renewal gate in several zones. And goAML enrolment, for Designated Non-Financial Businesses and Professions, is filed with the Ministry of Economy and Tourism before trading.

who you file with, and how often the same counter comes round

1. Federal Tax Authority3Corporate tax enrolment, the return and payment, and VAT enrolment
2. The zone, as incorporating authority2The beneficial ownership record, and the annual licence and lease renewal
3. Both, annually1The audited financial statement — every QFZP, and a renewal gate in several zones
4. Ministry of Economy and Tourism1goAML enrolment, before trading, for DNFBPs

seven filings on the calendar7

Two corrections worth money. Economic Substance filings have stopped — Cabinet Decision No. 98 of 2024 confined the regime to financial years ending on or before 31 December 2022 and cancelled related penalties for later periods. Anyone still invoicing you for a current-year ESR notification is invoicing for work that no longer exists; only FY2019–FY2022 exposure survives. And Designated Zone VAT treatment covers goods, not services — goods moving from a Designated Zone into the mainland are an import, with duty and VAT at entry.

Set on a real date axis rather than in a list, the instruments behind that calendar show their own shape: one rule in 2017, one in 2022, and then a four-year run in which almost everything a free zone company now files was written, amended or switched off.

Designated Zone treatment dates from Cabinet Decision No. 59 of 2017 and corporate tax from Federal Decree-Law No. 47 of 2022; qualifying income and the beneficial ownership record were settled in 2023, economic substance filings were confined in 2024 to years ending on or before 31 December 2022, Dubai opened its onshore routes on 3 March 2025, the qualifying activity list and the audit rule were rewritten later that year, and the newest line — an agreed-upon procedures report under FTA Decision No. 6 of 2026, issued 2 June 2026 — applies to tax periods beginning on or after 1 January 2026.

Where a free zone is the wrong choice

We would rather lose the file than place you incorrectly, so here is the honest list.

Your customers are UAE mainland businesses and the work is delivered onshore. The most common bad fit by a wide margin. You will need a distributor, a branch or a permit, each with a second cost and a tax consequence. Model those routes before concluding a free zone is cheaper than a mainland company. Frequently it is not, and mainland formation is simply the correct structure.

You need retail premises or walk-in trade. Free zone retail is confined to the zone's own estate. A shop, a clinic reception, a restaurant, a showroom serving the public: mainland.

You sell online to UAE households. A free zone licence lets you sell to customers abroad. On its own it does not let you deliver to a household in Dubai: that takes an onshore permission — one of the routes under Executive Council Resolution No. (11) of 2025, where the activity is on the published lists — or an onshore party in the middle. The tax position is worse than the licensing one. Transactions with natural persons are an excluded activity for a Qualifying Free Zone Person under Ministerial Decision No. 229 of 2025, wherever the customer lives, so a direct-to-consumer seller cannot hold the 0% on that revenue. The zones built for digital commerce are real — Dubai CommerCity, a joint venture of Dubai Integrated Economic Zones Authority and Wasl Properties near Dubai International Airport, organised in business, logistics and social clusters, and EZDubai in the Logistics District at Dubai South, near Al Maktoum International Airport — and they fit the models the rules reward: fulfilment across borders, and selling to businesses. Three licences let you sell online compares the free zone, mainland and home-based e-trader routes.

You intend to bid for government contracts. Most federal and emirate tenders require a mainland licence and often local ownership. A free zone entity is not eligible.

Your activity is regulated. Financial services require DIFC or ADGM authorisation, virtual assets require VARA in Dubai, and healthcare, education, recruitment and transport carry sector regulators regardless of jurisdiction. A free zone licence naming the activity is not permission to conduct it.

You bought the licence for the 0% and your revenue is non-qualifying. If your customers are mainland or overseas and your work is consultancy, agency or services, QFZP status can deliver nothing while imposing an audit, a transfer pricing file and substance costs. On a company turning over AED 800,000 those costs can exceed the tax the status was meant to save. Ordinary taxation with Small Business Relief is often worth more.

You need to sponsor a large team on a small footprint. In most zones visas follow square metres. If you need fifteen, you are leasing an office. Package-tier zones stretch this usefully to about six and no further.

Your team lives in the wrong place. RAKEZ is roughly an hour from Dubai. KEZAD and ADGM are in Abu Dhabi. Jebel Ali and Dubai South sit at the far edge of Dubai. Dubai Silicon Oasis is on the Al Ain corridor. These are permanent daily costs, and they quietly shape who will accept a job with you.

You are moving goods and assumed free zone means duty-free storage. It does not. Only Designated Zones on the FTA schedule get that treatment, and several of the best-known Dubai zones are not on it. For an import, store and re-export model this is disqualifying, and it is the most consequential fact on this page for a trader.

The company is really a visa vehicle. A legitimate reason to incorporate, and it should be priced honestly as one: cheapest compliant zone, smallest package, and full awareness that corporate tax enrolment, bookkeeping, audit where applicable and annual renewal follow you whether or not the company ever trades.

Your home country will tax you anyway. A UAE company controlled and managed from London, Berlin, Mumbai or Toronto can be treated as tax resident there, or caught by controlled foreign company rules, whatever the UAE charges. Get advice in both jurisdictions before building a structure around a headline rate.

Grouped by where each one actually sends you rather than listed as separate warnings, that list stops being a catalogue of objections and becomes a short set of answers — and the mainland holds most of them.

Half of those eight end at the same answer, a mainland licence. The other four end at a sector regulator's decision, at a Designated Zone on the FTA schedule, at ordinary taxation with Small Business Relief, and at a lease large enough for the team.

eight situations, five destinations

• Mainland customers, work delivered onshoreThe most common bad fit by a wide margin
• Retail premises or walk-in tradeFree zone retail is confined to the zone's own estate
• Selling online to UAE householdsOn its own the licence does not reach a household in Dubai
• Bidding for government contractsA free zone entity is not eligible for most tenders

A mainland licence

• A regulated activityA licence naming the activity is not permission to conduct it

A sector regulator's decision

• Moving goods, expecting duty-free storageOnly Designated Zones get that treatment

A Designated Zone on the FTA schedule

• Bought for the 0%, revenue non-qualifyingThe status can cost more than the tax it saves

Ordinary taxation with Small Business Relief

• Fifteen people on a small footprintIn most zones visas follow square metres

A lease large enough for the team

Renewal, exit, and the move you cannot count on

Renewal is annual for licence, lease, establishment card and visas, and it is rarely priced as year one was. Several zones make the audited financial statement a renewal gate: no audit, no licence. All four of those renewals sit with one body, which is the concentration worth understanding before you choose: in a free zone your licensor is also your landlord and your immigration channel, so a single authority's decision reaches every part of the company at once.

Company law gives no general route from one UAE free zone to another. Whether a move is possible depends on both zones' own regulations. The Commercial Companies Law does now let a company transfer between a free zone and the mainland authority and keep its legal personality, but only where both authorities' systems allow it and both approve, and a move into or out of DIFC or ADGM depends on controls the law leaves to the Cabinet. Where no move is available or approved and the jurisdiction turns out wrong, you liquidate and incorporate again — new licence, new immigration file, new visas, new bank account, and the bank relationship is the part that hurts. Letting a licence lapse instead of cancelling it properly is worse: attached visas become invalid, fines accrue, and reinstatement costs more than renewal ever did. Our company liquidation page covers a clean exit.

Drawn as a decision rather than as a paragraph, the exit has one question in it and both answers stay on the page — because the branch you were not planning for is the one that costs a bank relationship.

A move from one free zone to another has no general route in company law; a move between a free zone and the mainland authority keeps the company's legal personality only where both authorities' systems allow it and both approve, with DIFC and ADGM left to the Cabinet's controls; and where neither is available the answer is to liquidate and incorporate again — new licence, new immigration file, new visas, new bank account.

Start with the activity, not the package

Tell us what the business does, who it invoices, how many people you expect to sponsor in year two, and whether goods move. We will tell you which zones can license it, which suit it, what it costs across three years rather than one, and — where it applies — that a free zone is not the structure you need.

We are an authorized channel partner for free zones across the UAE, and those authorities pay us when a licence is placed with them. We profile every zone on this site the same way — honestly, including where it fails — whether or not it pays us.

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