Free zones in the United Arab Emirates are separate territories within the State that provide the most favourable conditions for business setup and development.
Free zone company formation in Dubai and other Emirates is becoming increasingly popular among foreign investors due to the unique regulatory and tax conditions.
Popular free zones in Dubai
Dubai leads in the number of free zones home to thousands of companies, from start-ups to large international groups, and their number is constantly growing. Here are some of Dubai’s most popular free zones to consider when choosing where to register your business:
- Dubai Airport Free Zone (DAFZ)
- Dubai CommerCity
- Dubai International Financial Centre (DIFC)
- Dubai Internet City
- Dubai Multi Commodities Centre (DMCC)
- Dubai Silicon Oasis (DSO)
- International Free Zone Authority (IFZA)
- Jebel Ali Free Zone (JAFZA)
- Meydan Free Zone
Free zones in other Emirates
The choice of free zones is not limited to Dubai. Free zones of other UAE Emirates are competing for companies and becoming centres of international trade, investment and innovation-driven growth.
- Abu-Dhabi Global Market (ADGM)
- Ajman Free Zone (AFZ)
- Ajman Media City Free Zone
- Creative City (Fujairah)
- Fujairah Free Zone (FFZ)
- Ras Al Khaimah Economic Zone (RAKEZ)
- Sharjah Airport International Free Zone (SAIF)
- Sharjah Media City (SHAMS)
- Sharjah Publishing City Free Zone (SPC)
- Sharjah Research, Technology and Innovation Park (SRTIP)
- Twofour54 (Abu-Dhabi)
- Umm Al Quwain Free Trade Zone (UAQFTZ)
Benefits of free zone company formation in the UAE
Wide choice |
Today, there are more than 40 free zones in various Emirates. They compete with each other for new companies, which helps improve the quality of services. Hence, choosing a free zone with acceptable license fees for the intended activities and other favourable conditions is possible. |
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100% foreign ownership |
A free zone company can be entirely (100%) owned by foreign shareholders. There are no citizenship or residency requirements for shareholders or directors, and there is also no need for a local “sponsor.” There are no restrictions for foreign investors on the repatriation of capital and profits. |
Running business worldwide |
Free zone companies can operate within the relevant free zone or outside the UAE. They cannot operate in the UAE mainland, i.e., in territories other than free zones. A company may operate in the UAE mainland only through a local agent or by obtaining a separate license from the Emirate’s authorities, provided a relevant agreement exists between the free zone and the Emirate (known as “dual licensing”). |
No exchange controls |
The UAE has no foreign exchange controls or similar financial restrictions. |
Opportunity to enjoy a zero-tax rate |
In 2023, the UAE introduced a corporate tax imposed on the profits of both UAE mainland and free zone companies. Free zone companies, however, retained the opportunity to enjoy a zero-tax rate, provided that such companies are “qualifying free zone persons”. Otherwise, a company’s profits will be taxed under general rules that also provide lower tax rates (0% on income up to AED 375,000 and 9% on income exceeding the threshold). |
Simple and fast incorporation process |
In contrast to a mainland company, a free zone company formation is relatively simple and does not require the shareholder’s attendance in the UAE. Most procedures are carried out online. A personal visit to the country is only required when obtaining a residence visa. Setting up a free zone company in the UAE (from submitting documents to completing registration and visa procedures) takes around one month. |
Getting the UAE residency |
The formation of a free zone company gives its shareholders, directors, and employees the right to obtain UAE residence visas. A residence visa entitles a person to reside in the UAE for two years or more and can be extended. Family members can also get residence visas together with the principal applicant. |
Access to the UAE banks |
A free zone company may open a bank account in the UAE. However, the chance of opening an account depends on many circumstances, including whether the client (beneficial owner) belongs to any sanctions lists or is in any way connected with sanctioned countries. |
Re-domiciliation |
Many free zones (for example, ADGM, JAFZA, DMCC, RAKEZ) allow foreign companies to re-domiciliate, i.e., to transfer an existing company’s corporate seat from abroad to a free zone in the UAE. Some free zones provide only “inward” re-domiciliation (a company’s transfer from a foreign jurisdiction to a free zone). Other free zones also allow “outward” re-domiciliation, which means a company’s transfer from a free zone to another jurisdiction. |
Highlights of free zones in Dubai and the UAE
- The Federal Decree-Law No. 32 of 2021 On Commercial Companies does not apply to companies incorporated in free zones. UAE free zones have their own company regulations based on global best practices.
- The most common types of companies in free zones are FZCO (Free Zone Company) with two or more shareholders and FZE (Free Zone Establishment) with a sole shareholder. Both types are companies with limited liability. Opening a foreign company’s branch in a free zone is also possible.
- Each free zone has its own governing body authorised to register and license companies. Some free zones have a common authority. For example, DAFZ, DSO and Dubai CommerCity are free zones under the authority of DIEZA (Dubai Integrated Economic Zones Authority). A group of creative, technological, and media zones is united under the jurisdiction of DDA (Dubai Development Authority).
- Some free zones (JAFZA, DAFZ, SAIF, FFZ, and others) are “designated zones” for the purposes of VAT in the UAE. The supply of goods within the designated zone is not subject to VAT since its place of supply is considered to be outside the UAE for VAT purposes. Goods imported into such zones are not considered imported in the UAE, and VAT does not apply. VAT will also not apply when goods are supplied from one designated zone to another.
Key requirements for free zone companies
- A company must specify any activity it plans to carry out in its license. There are several types of licenses – trading, industrial, service, professional and others. One license may include several activities corresponding to the type of the license. Licenses are issued for one year or more and are subject to renewal upon expiration.
- As a rule, a free zone company must have a physical office within the free zone. In some cases, a dedicated workplace will be enough, and in others, a fully functional office will be needed. The office requirements depend on the nature and volume of the business. When opening a local bank account, the company must confirm the presence of its rented office in the UAE.
- Almost all free zones currently require companies to prepare and submit annual financial statements. Preparing audited financial statements is a condition for recognizing a company as a “qualified free zone person” (QFZP) and applying a zero corporate tax rate.
- Free zone companies in the UAE must comply not only with free zone regulations but also with the federal laws of the UAE, including:
- economic substance regulations;
- legislation on ultimate beneficial ownership;
- anti-money laundering legislation;
- tax laws (registration with the Federal Tax Authority, filing tax returns and payment of tax or using corporate tax exemption, reporting on VAT);
- labour legislation;
- migration legislation.
How to choose a free zone in the UAE
Given the large number of free zones in the UAE, choosing an optimal free zone for setting up a company can be challenging. Since many free zones are very similar, we recommend considering the following points.
Specialisation |
Most free zones are universal (multi-purpose) and aimed at companies in almost any industry. Among such zones are DMCC, IFZA, JAFZA, Meydan, RAKEZ, UAQFTZ, and others. They are equally suitable for trade, service, holding, and other business activities. There are also themed free zones concentrating on companies in the IT, innovation, creative industries, medicine, science, and education sectors (for example, Dubai Science Park, Dubai Silicon Oasis, Creative City, SHAMS). Free zones like ADGM or DIFC, being international financial centers, also provide for a wide range of non-financial activities. When choosing a free zone, it is important to check the availability of the required license type. In each case, the desired activities are selected from the general list of business activities offered by the given free zone. |
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Infrastructure |
The infrastructure should meet the company’s needs. Free zones provide various offices, retail outlets, warehousing and manufacturing facilities to accommodate a business. Office spaces can range from coworking or dedicated workspaces to full-fledged offices of varying sizes and costs. When choosing a location, you should pay attention to:
From this point of view, free zones with an established ecosystem of business and lifestyle services are on the winning side. |
Credibility and reputation |
A free zone company in the UAE is a prestigious corporate vehicle with a good reputation in international trade. Free zones, as well as the UAE as a whole, are not considered offshore jurisdictions. The most reliable options are the leading free zones in Dubai and Abu Dhabi, which have been on the market for a long time. |
License fees and other costs |
The cost of a free zone company formation in the UAE usually includes:
Subsequent expenses of a free zone company consist of:
Ajman Free Zone, IFZA, SRTIP, and UAQFTZ currently offer the friendliest prices for company formation. |
How to open a free zone company in the UAE
Procedures for setting up a company in UAE free zones may vary, but in most cases, you will need to:
- Apply to a local corporate service provider.
- Choose a free zone and a legal form of the company.
- Create, check and reserve the company name.
- Select the type of license and proposed activities.
- Determine the ownership and management structure of the company (shareholders, director, manager).
- Prepare documents (passport copies of shareholders, director and manager, Articles of Association, application forms and other documents as the free zone requires).
- Apply for a business license, submit all necessary documents and pay registration and license fees.
- Register the company and obtain the license.
- Select and rent an office or a workplace.
- Obtain the company’s establishment card and residence visas for shareholders and employees.
To avoid issues at any step of company formation, we recommend contacting only a licensed corporate services provider in the UAE who is familiar with all the requirements of the relevant free zone.
If you want to open a company in the UAE or need advice on choosing a suitable free zone in Dubai or other Emirates, please do not hesitate to contact the Uniwide team.