Company Registration in the UAE: Which Should You Choose — Mainland or Free Zone?

100% foreign ownership

Following the 2021 reform of UAE corporate law, both Mainland and Free Zone companies may be owned by individuals and legal entities from any country.

Exceptions remain for certain strategic sectors where a specified percentage of UAE‑resident ownership is required. These sectors include, for example:

• telecommunications;
• banking and financial services;
• defence and national security; and
• other regulated sectors.

Licensing system

Across the UAE, business activity is regulated through company licensing. Obtaining a business licence is one of the steps in incorporating a company on the Mainland and in Free Zones. However, the issuing procedures and authorities differ.

Financial statements and audit

Preparing and filing financial statements, as well as undergoing a mandatory audit (upon a company reaching a set income threshold), are currently required on the UAE Mainland and in almost all Free Zones.

Obtaining UAE residency

Incorporating a company on the Mainland or in a Free Zone allows founders, officers and employees to obtain a UAE residence visa.

Opening a bank account in the UAE

Subject to other factors (for example, sanctions applicable to beneficial owners), both Free Zone and Mainland companies can open bank accounts in the UAE.

General federal legislation

Although Free Zones have their own regulatory frameworks, they are not entirely outside the UAE federal legal system. In particular, Free Zone companies, like Mainland companies, must comply with:

• legislation on identifying ultimate beneficial owners of companies;
• anti‑money laundering legislation;
• tax legislation (subject to the features outlined below);
• labour legislation;
• immigration legislation.

The incorporation of a Mainland company is carried out through the Department of Economic Development of the relevant Emirate. For example, in Dubai this is the Department of Economy and Tourism.

Registering a local company requires prior clearance with the registering authority and obtaining its initial approval.

At the initial approval stage, and when obtaining a residence visa, the physical presence of the company’s founder is required.

In Free Zones, company registration is handled by the relevant Free Zone authority.

The process is usually simpler and faster than on the Mainland, as Free Zones offer ready-made business set‑up packages at fixed prices, which typically include:

• issuance of a licence (usually for one year);
• rental of a workspace;
• issuance of one residence visa.

If any of these parameters change, the package price increases.

Most registration steps can be completed online without the founder being in the country. Travel is required only at the residence visa stage.

Mainland companies are subject to UAE corporate tax at the following rates:

• 0% – on taxable income not exceeding AED 375,000;
• 9% – on taxable income above AED 375,000 (on the excess).

Certain reliefs are available, for example:

• exemption for specified types of income; and
• a small business relief regime.

In addition, Mainland companies are within the scope of UAE VAT. VAT registration is required once the taxable supplies threshold is met. Voluntary registration is also possible.

Free Zone companies are also subject to corporate tax. However, legislation provides the possibility of a 0% corporate tax rate for qualifying Free Zone persons. 

To benefit from the 0% rate, companies must meet several conditions, including being a qualifying Free Zone resident.

For VAT purposes, some Free Zones have the status of «designated zones» and are treated as being outside the UAE. In practice, this means VAT does not apply to:

• supplies of goods within the same designated zone;
• imports of goods into designated zones from abroad; and
• supplies of goods between designated zones.

Examples of designated zones include:

• JAFZA, Dubai;
• DAFZ, Dubai; 
• SAIF, Sharjah;
• FFZ, Fujairah, and others.

UAE Mainland companies may be incorporated in the following legal forms:

• general partnership;
• limited partnership;
• limited liability company;
• private joint stock company;
• public joint stock company.

There is no statutory minimum share capital for a limited liability company; however, the capital must be sufficient for the company’s purposes.

For private and public joint stock companies, minimum share capital requirements apply, namely AED 5 million and AED 30 million respectively.

The most common company forms in Free Zones are:

• Free Zone Establishment (with a single shareholder);
• Free Zone Company (with multiple shareholders);
• limited liability companies;
• private and public joint stock companies.

In addition, some Free Zones allow the incorporation of SPV companies and UAE funds.

Minimum share capital requirements also vary by Free Zone. In most cases, no fixed minimum is set. There are exceptions, for example:

• in the RAKEZ Free Zone, Ras Al Khaimah, the minimum share capital for limited liability companies is AED 10,000, and may be higher for certain activities;
• in DMCC, Dubai, there is no statutory minimum, but in practice the authority typically requires share capital from AED 50,000, and payment of the share capital must be evidenced.

A physical office in the relevant Emirate is mandatory to register a Mainland company.

The office size must be proportionate to the company’s stated activities and headcount. Note that the number of UAE work visas a company can obtain depends, among other things, on the size of the physical office (typically one employee per 9 m²).

The office is evidenced at incorporation (and then annually on business licence renewal) to the registering authority and the bank by way of a valid lease agreement.

In addition, Mainland employers with staff are subject to the automated Wage Protection System (WPS), which monitors full and timely salary payments and applies sanctions for breaches.

Free Zones offer more flexible office solutions. Free Zone companies can use a “virtual” office, for example:

• a workspace (desk and chair) located in a business centre within the Free Zone (Flexi Desk); or
• a registered address used for incorporation and shown on the licence.

In most cases, a “virtual office” comes with a limited visa quota (for example, a Flexi Desk may allow up to three work visas).

Accordingly, the office choice also depends on how many work visas the company requires.

In addition to federal labour law, Free Zones may set their own employment rules, including use of the WPS. At present, WPS applies, for example, in:

• DMCC,
• JAFZA,
• DAFZ.

Some Free Zones operate their own wage protection systems.

Legislation provides that a company must be formally dissolved on the statutory grounds set out in law.

There is also an established procedure for the voluntary liquidation of a company in the UAE.

In addition, in certain circumstances a Mainland company may be wound up compulsorily by court order or struck off the register at the initiative of the registering authority.

In Free Zones, there are generally two types of procedures for ceasing a company’s activities:

• liquidation, which is largely the same as for a Mainland company; and
• striking off the company from the register (striking off).

The latter is more typical of offshore jurisdictions, but in practice it is often used in Free Zones.