What it actually costs
Choosing where to incorporate in Dubai is choosing a registrar, and the registrar settles more than the price
The mainland, free zone and offshore choice every setup guide opens with is a map of ownership and market access.
A trade licence issued in Dubai does not say "Dubai" at the top. It carries the name of the body that issued it, and that body is one of many operating inside the same emirate — the Department of Economy and Tourism for the onshore record, and separately each free zone authority, each running its own record under its own rules.
Which means the first decision in a Dubai formation is not what the guides say it is. It is not the licence category, not the office, not the package. It is which of those records you are asking to hold your company, and that choice carries consequences nobody puts on a quotation because none of them is priced.
The three-way choice you were shown answers a different question
Mainland, free zone, offshore is the opening move of every setup article written in this market, and it is a real distinction. It answers two questions well: who may own the shares, and who you may sell to without an intermediary. Both matter, and our free zone company and mainland company pages take them apart properly.
What the trichotomy does not tell you is that "free zone" is not one thing. It is a category containing records that differ from each other more than some of them differ from the mainland. Two founders who both describe themselves as having set up a free zone company in Dubai can be operating under two different bodies of company law, answerable to two different regulators, with disputes heard in two different courts in two different languages.
That is not a nuance for lawyers. It is the part of the decision that is hardest to change afterwards, and it is settled on day one by a choice most people make on price and visa allocation. Counted properly, Dubai is four jurisdictions and the licence names one — which is the same point arrived at from the map rather than from the record.
What a record actually settles
Strip out the marketing and a licensing authority is doing four things at once, and only the first is what you thought you were buying.
None of those four rows appears in a package comparison, because a package comparison is priced per visa and per square foot. All four of them appear the first time something goes wrong.
The financial free zone case is the clearest, because there the company law is not the country's
Dubai Law No. 5 of 2021 established three separate bodies at the Dubai International Financial Centre: the DIFC Authority, the Dubai Financial Services Authority and the DIFC Courts. The Centre writes its own legal and regulatory framework for civil and commercial matters, built on common law principles, and the DIFC Courts describe themselves as an independent English-language common law judiciary sitting alongside — not inside — the UAE's Arabic-language civil law system. Dubai Law No. 2 of 2025 concerns those courts specifically.
Read that as a formation decision rather than as a legal curiosity. If your shareholders' arrangements were drafted by a lawyer trained in a common law system, and your investors expect concepts that common law supplies and codified civil law handles differently, then the record you choose decides whether those arrangements are being read by a court fluent in them. That is worth a great deal to some companies and nothing at all to most.
It also costs. A financial free zone charges what its supervision is worth, and the price of that supervision does not fall because your company is small. Our DIFC profile sets out who it suits and says plainly who should not attempt it.
one record's terms, set against its price
What it gives youWhat it costs you
- Arrangements drafted in a common law systemA court fluent in the concepts they were drafted inWorth a great deal to some companies and nothing at all to most
- The company lawA framework the Centre writes itself, built on common law principlesIt is not the country's own law and not its language
- The courtAn independent English-language common law judiciaryIt sits alongside the federal system, not inside it
- SupervisionSupervision at the level a financial free zone setsA price that does not fall because your company is small
An arbitration clause is part of this decision, and clauses written before 2021 may name a centre that no longer exists
Founders who think about dispute resolution at all usually think about it once, when a contract template asks for a seat and an institution. In Dubai that answer moved. Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre consolidated Dubai's arbitration institutions into DIAC, and the centres it replaced were named in a great many contracts drafted before it.
The practical point for a new company is narrow and worth acting on: if you are about to sign a template contract inherited from an adviser, a landlord or a supplier, check what institution the arbitration clause names before you sign it, not after a dispute makes it matter. The full treatment of what the decree did to existing clauses belongs to a litigator; the formation-stage version is that a clause is a live choice and not boilerplate.
The record decides almost everything, and it does not decide your tax
This is the single most common error in the material this article replaces, and it survives because it used to be true.
Corporate tax is federal. Article 3 of Federal Decree-Law No. 47 of 2022 applies 0 per cent to the portion of taxable income up to the amount the Cabinet sets and 9 per cent above it, and Cabinet Decision No. 116 of 2022 fixes that amount at AED 375,000. A free zone address does not remove a company from that law. What a free zone company may hold is a status — Qualifying Free Zone Person — which applies 0 per cent to qualifying income and 9 per cent to everything else, and the status carries conditions that are tested every year rather than granted at licensing.
- 0 – 3750000%The portion up to the amount the Cabinet sets
- Above 3750009%Everything above it, free zone address or not
The conditions are specific enough to be worth knowing before you choose a record on the strength of them. Cabinet Decision No. 100 of 2023 sets a de minimis limit: non-qualifying revenue must not exceed 5 per cent of total revenue or AED 5,000,000, whichever is the lower figure. Ministerial Decision No. 229 of 2025 governs which activities qualify and which are excluded. Audited financial statements are part of the test. A company that drifts across the de minimis line loses the status, and it loses it for the period rather than from the date of the drift.
VAT is federal too, at 5 per cent, and the VAT concept that free zone marketing borrows — the Designated Zone — is a schedule fixed by Cabinet Decision. It is not a synonym for "free zone", and being inside a free zone does not by itself put a supply inside a Designated Zone. Our UAE corporate tax and VAT and corporate tax compliance pages carry the mechanics.
So: the record decides your company law, your court, your regulator, your amendment route and your exit. It does not decide your tax rate. Anyone selling a record on the tax line is selling you the one thing it cannot deliver on its own.
what the record settles, and what it does not
The body holding your record
- Your company lawAt incorporation, and hardest to change afterwards
- Your court, for corporate questionsBefore there is anything to dispute
- Your regulatorFor the whole relationship
- Your amendment routeEvery time the file changes
- Your exitThe question nobody asks first
Federal law
- Your corporate tax rateNot granted or withheld in the emirate
- The VAT you charge, at 5 per centOn every supply
The contract's own clause
- The institution that hears a contract disputeBefore you sign, not after
Leaving is a record question, and it is the one nobody asks about
Every record you can join has an exit procedure it wrote itself, and those procedures are not comparable. Moving a company from one Dubai record to another is not a change of address; depending on the pair involved it can mean continuation, or a fresh incorporation with the old entity wound up, and each route has its own consents, its own creditor treatment and its own cost. We have set out what that actually involves in moving between free zone and mainland after you have chosen and what closing properly costs in closing a UAE company properly.
The question to put to any authority before you join it is short and it is rarely asked: what does it take to leave you, what does it cost, and is there any circumstance in which you will refuse. An authority that answers that clearly is telling you something about how it will behave for the whole relationship.
Where this frame is the wrong one to use
If you are a single consultant taking a package licence, this is not your decision to agonise over. You will almost certainly be on a free zone record with a template constitution, your disputes will be commercial rather than corporate, and the hours are better spent on the activity list, which decides what you may invoice. Read commercial, professional or industrial instead.
If your activity is licensed by a sector regulator, the record is downstream of the regulator. Health, education, financial services, virtual assets and several others are approved by a body that is not your licensing authority, and that body's rules will eliminate most of the records before you compare them. The activities a second authority has to approve covers the pattern.
If you are choosing a record to escape a tax outcome, stop. The status is conditional and it is tested annually. Structuring a company around a relief you may not hold in year two is the most expensive kind of cheap decision.
What to settle before anyone quotes you a price
Four things, and none of them is a number. The activity, in the words an authority uses, because it will eliminate records you were still comparing. Whether any part of your business needs a court or a regulator that thinks in common law. Who your first ten customers are and where they sit, because that decides whether the domestic market access you are being sold is something you need. And what the exit looks like from each record still standing.
Bring those four and a quotation becomes comparable. Bring only a budget and a visa count, and you will be shown the records that are easiest to sell.
the four things to settle before a price is quoted
- Fix the activity, in the words an authority usesIt eliminates records you were still comparing
- Decide whether any part of the business needs a court or regulator that thinks in common lawWorth a great deal to some companies and nothing at all to most
- Name your first ten customers and where they sitIt decides whether the domestic market access you are sold is something you need
- Ask what the exit looks like from each record still standingWhat it takes to leave, what it costs, and whether you can be refused
- What you put on the table when the quoting starts
- All four of theseA quotation becomes comparable
- A budget and a visa countYou will be shown the records that are easiest to sell
Frequently asked questions
Is a free zone company a UAE company?
Yes. It is incorporated in the UAE, it holds a UAE licence, and it is within the scope of the federal corporate tax law. What differs is the body of company law it was incorporated under and the authority that holds its record.
Can I change record later?
Sometimes, at a cost, and never as a simple transfer between every pair. Depending on which two bodies are involved it can mean continuation, or a fresh incorporation with the old entity wound up, and each route carries its own consents, its own creditor treatment and its own price. Treat it as a transaction rather than an amendment, and establish the route while you are still choosing, not when you need it.
Does the record decide which court hears a dispute with a customer?
Not on its own. A contract's own jurisdiction or arbitration clause usually governs that, which is why the court that reads your contract is chosen before the dispute rather than after it. The record decides where corporate questions — the constitution, the shareholders, the company's own file — are answered.
If the record does not decide my tax, does it matter for tax at all?
It matters for what you have to prove rather than for what you owe. Corporate tax is federal and no authority in the emirate grants or withholds it. A free zone company claiming the 0 per cent status carries an annual evidential job an onshore company does not, the status is conditional and tested every year, and that job has a cost you should price before you choose the record for it.
Begin with a clear conversation
Tell us what you intend to build.
A consultant will map the structure, jurisdiction, approvals and likely cost against what you actually described — not against a package.
