UAE Free Zone Companies in 2026: Licences, Tax and Bank Accounts

Free zones in the UAE attract international entrepreneurs with straightforward incorporation and a favourable tax regime, yet the actual conditions vary widely depending on the zone, the business activity and the company structure. This guide explains how free zone companies differ from mainland and offshore companies, what licences and legal forms are available, how corporate tax and VAT work, and what it takes to open a bank account. It is written for anyone setting up a company in a UAE free zone who wants to understand the logic of the choice and the obligations involved before committing.

Three company types in the UAE: mainland, free zone and offshore

The UAE is a federation of seven emirates: Abu Dhabi (the capital), Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah. A business can be structured in one of three ways: as a mainland company, a free zone company or an offshore company. The word “mainland” is a matter of legal regime rather than geography, since free zones and offshore companies sit on the same national territory.

Free zones are spread unevenly across the emirates, and there are now more than forty of them. Dubai has by far the largest number; Abu Dhabi has around seven, including the financial centre Abu Dhabi Global Market. Sharjah runs roughly eight zones, Ras Al Khaimah around five, and Ajman and Fujairah a couple each, with a further free trade zone in Umm Al Quwain.

Offshore companies can be formed in the UAE in about three jurisdictions. This is a distinct format with its own limitations, which we cover below.

Free zone companies versus mainland companies

A free zone is a defined area within the UAE that offers favourable conditions for company formation. The main difference from the mainland is the restriction on where a company may trade: a free zone company operates inside its own zone or abroad, but not directly on the domestic UAE market.

This restriction works differently for goods and for services. To sell physical goods on the local market, they must physically leave the zone, so a trading company cannot open shops or warehouses outside it, although it can supply local distributors that hold a mainland licence. For companies that sell services, the restriction has little practical effect: a service is treated as supplied within the zone even if staff occasionally visit clients, so services can be sold inside the country as well.

Several features make free zones popular. Foreign shareholders may own a free zone company outright, with no local sponsor and no restriction on the repatriation of capital or profits, and the UAE applies no foreign exchange controls. Incorporation is quick and paperwork is standard: shareholders’ passports, proof of address, the ownership structure and the amount of share capital. A company is often registered in about a week and remotely. Many zones allow a “flexi-desk” – a virtual office that serves as the registered address. Some zones also permit a simplified “strike-off”, removing a company from the register without a full liquidation, provided it has no outstanding liabilities or assets. Where a company needs to reach the mainland, it can do so through a local agent or through “dual licensing”.

Mainland companies are chosen mainly for trading on the domestic UAE market. They require the founder to attend in person to sign the memorandum, need a genuine physical office, and are closed only through an appointed liquidator.

Offshore companies and their tax status

An offshore company in the UAE is registered in a dedicated jurisdiction and, strictly, cannot trade on the domestic market. It does not need a separate office, as the registered agent’s address serves as its legal address.

It might seem logical that an offshore company would pay no corporate tax. However, a 2024 Cabinet decision required offshore companies to register for corporate tax, and the same conditions apply to them as to free zone companies. There is no automatic tax exemption for local offshore structures.

Financial statements must be prepared by every company without exception, and accounting records must be kept for five years. An audit is not required for an offshore company by default, but it becomes necessary in certain cases, for example when applying for a corporate tax exemption. There is more detail on the structure on the page covering UAE offshore companies.

Types of free zone in the UAE

The choice of zone starts from the intended business activity. Some zones offer a broad, general range of activities, while others are built around a specific industry.

Universal free zones

Universal zones are usually the best option for value: they cover a wide range of activities, spanning trade, services and other categories. In Dubai, one such zone is IFZA – a popular choice with flexible terms and a virtual office. Working in the same price bracket is the Dubai-based Meydan. A more budget-friendly option is RAKEZ in Ras Al Khaimah: the company’s registered address will be in that emirate rather than in Dubai or Abu Dhabi, so banks treat such companies with slightly more caution, although opening an account remains entirely feasible.

Financial centres: DIFC and ADGM

The financial centres are specialised zones with their own legal system based on English common law, which makes managing and registering companies more flexible. The first is DIFC in Dubai, deservedly the most expensive zone in the UAE. The second is ADGM in Abu Dhabi. Both centres have their own financial regulators, and both allow the registration of investment, private and family foundations and SPV companies, as well as banking and insurance licences.

Trade and logistics free zones

Some zones are geared towards trade and logistics. JAFZA in the Jebel Ali area is one of the country’s first free zones and has its own port; it is chosen by companies in logistics, import and export that need warehousing. Close to the airport sits DAFZ (Dubai Airport Free Zone), which suits air freight and trade in high-value goods such as electronics and jewellery. DMCC (Dubai Multi Commodities Centre) is one of the largest zones, next to Dubai Marina; it is historically linked to commodities trading, including gold, but offers many other activities too, and its prestigious location matters to those who want a flagship office. Another well-known site is DWTC (Dubai World Trade Centre), traditionally associated with exhibitions and business events.

Technology and media free zones

Certain zones are designed for particular industries. For IT and technology companies, Dubai offers Dubai Internet City – a cluster for software developers and telecoms and internet businesses. In Sharjah, research and innovation projects are hosted by SRTIP (Sharjah Research, Technology and Innovation Park). Publishing, printing and media have a dedicated home in SPC (Sharjah Publishing City), one of the world’s first free zones of this kind.

Budget options: Sharjah and Ajman

The emirates neighbouring Dubai offer more affordable solutions. Sharjah runs around eight zones; one of them, SHAMS, is a cost-effective choice for media and publishing with a wide range of other activities as well. In the adjacent emirate, the Ajman free zone appeals through its low cost and long list of permitted activities.

Legal forms for free zone companies

The most common format is the limited liability company. In a free zone it carries a distinctive suffix in its name: FZE, FZCO or FZC. It is generally understood that an FZE (Free Zone Establishment) has a single shareholder, while an FZCO or FZC has two or more. In substance this is the same fully-fledged limited company rather than a sole trader, and today most zones assign the FZCO suffix even with a single shareholder.

In addition, a free zone allows you to register:

• Branches of local or foreign companies.
• Joint-stock companies – private or public.
• SPV companies (Special Purpose Vehicles) – set up for a single purpose, usually to hold assets such as property or a stake in another company and to ring-fence them from legal and financial risk. This format appeared, among others, in DMCC.
• Foundations – private and family foundations for asset protection and succession planning, registered, for example, in DIFC and in the offshore jurisdiction RAK ICC. There is more on this format on the page about private foundations.
• Partnerships – liabilities and profits are shared between the partners, and taxation applies at the level of the partners.

The minimum share capital in most universal zones is around AED 10,000, and it usually does not need to be paid into the company’s account, existing only on paper. There are exceptions: DMCC sets a higher minimum, around AED 50,000, and it is paid up in practice. Several zones, including ADGM, JAFZA, DMCC and RAKEZ, also allow foreign companies to re-domicile, transferring an existing company’s seat from abroad into the UAE.

Trade licences and business activities

The range of licences differs from zone to zone. The most common categories are commercial (trading), financial, industrial and service. Financial licences are issued only by DIFC and ADGM, and are needed by companies involved in banking, asset management and insurance. An industrial licence is intended for manufacturing, and a service licence for selling services.

This grading exists on the mainland, but most universal zones (IFZA, Meydan, RAKEZ) do not separate the categories: they issue a single licence to which you can add activities from different categories. One company can sell both goods and services. That said, universal zones generally lack manufacturing and warehousing facilities, so industrial activities are rare there.

Many zones also offer specialised activities: e-commerce, logistics, education, healthcare, event management and work with virtual assets. Crypto-related activities usually require the regulator’s approval – in Dubai this is VARA (the Virtual Assets Regulatory Authority). Approval can be difficult to obtain, especially where a company manages third-party funds; it is easier when the company invests its own funds in crypto-assets.

A single licence can list several activities, and in some zones even activities from different categories. There are exceptions: ADGM, like the mainland, usually allows activities within one category, and unrelated activities must be justified by a business plan showing that they form part of a single business concept.

Cost of setting up and running a free zone company

The set-up budget can be split into two parts: official fees (the zone’s government charges) and professional support. The latter covers advice on choosing the zone, preparing and submitting the documents, and dealing with the registration authority. Many universal zones offer packages: one package might include the licence and a flexi-desk, and sometimes a residence visa, though the visa is more often charged separately.

A company must be maintained each year. Ongoing costs typically include:

• Licence renewal – usually annual, together with document preparation and the zone’s fee.
• Visa renewal – a residence visa is usually issued for two years, so it is renewed every two years (with attendance, a medical test and biometrics).
• Bookkeeping and the preparation of financial statements based on it.
• Audit – required only in some zones (see below).

Indicative prices and the scope of services are easy to review on the page covering the cost of company formation, and ongoing bookkeeping is covered under accounting in the UAE.

Residence visas: investor and employee

A company’s founder can obtain one of two types of visa. The investor visa is issued to company founders. The employee visa is issued to staff, but a founder can hold one too, in which case the visa states a position, usually general manager. Both visas allow the holder to live in the UAE indefinitely, but they differ in how often the holder must visit the country.

The process itself is quick. If the applicant is abroad, an entry permit is issued first. After arrival there are two steps: a medical test (a blood test for infections such as hepatitis and HIV, plus a chest X-ray for tuberculosis) and biometrics (fingerprints). In total, an employee visa takes about one to one and a half weeks.

Each zone has a visa quota – how many visas a company may obtain – which often depends on the size of the office. With a flexi-desk, for example, IFZA allows up to three visas and Meydan up to six. If more visas are needed but a full office is not wanted, SHAMS in Sharjah can be a good fit, as it offers a higher quota with a virtual office. Company formation gives shareholders, directors and employees the right to apply for UAE residence visas, which can also be extended to family members.

Corporate tax and VAT in the UAE

Tax rates and thresholds in the UAE change from time to time. The figures below reflect the position in 2026; check the current rules with the UAE Federal Tax Authority (FTA) before making decisions.

The standard rate of corporate tax is 9%. It applies to both free zone and mainland companies. Tax is charged on net profit (revenue less expenses): the first AED 375,000 of profit (about USD 100,000) is taxed at 0%, and everything above that at 9%. Small businesses benefit from a transitional relief, Small Business Relief: a company with revenue of up to AED 3 million in the current and previous periods can elect to be treated as having no taxable income, without an audit; the relief is available until the end of 2026 and is claimed in the tax return. A broader overview of the rates is set out on the page covering UAE company taxes.

The standard rate of VAT is 5%. Registration is mandatory once taxable supplies and imports over the previous 12 months exceed AED 375,000 (or are expected to exceed that figure within the next 30 days). Voluntary registration is available from a threshold of AED 187,500. Exports of goods and services are zero-rated, but a business must still register once it crosses the threshold. The registration procedure is published on the FTA portal.

Separately, excise tax applies to goods considered harmful to health. Tobacco products, electronic cigarettes and their liquids, and energy drinks are taxed at 100%. Since 1 January 2026, sweetened drinks have been taxed on a sliding scale by sugar content: less than 5 g per 100 ml is charged at AED 0 per litre, from 5 to 8 g at AED 0.79, and 8 g or more at AED 1.09. The separate category for carbonated drinks has been abolished. The current rules are published by the FTA.

The Qualifying Free Zone Person regime

Free zone companies benefit from a special regime: a 0% rate on qualifying income. Not every company is eligible – it must obtain the status of a Qualifying Free Zone Person (QFZP) by meeting a set of conditions.

Holding a licence in a free zone does not grant an automatic tax exemption. QFZP status is tested every year, and losing any one condition removes the zero rate.

The core conditions, which every applicant for the status must satisfy, are:

• Adequate economic substance. The core income-generating activity is carried out in the free zone, and the company has adequate assets, qualified staff and operating expenditure. There are no fixed figures: the substance must match the scale and nature of the activity. If turnover is large and there are many transactions, but the office is a flexi-desk with one employee, the status is likely to be refused.
• Qualifying income – covered in the next section.
• No election for the standard regime. When filing the return, the company must choose the QFZP regime rather than the ordinary basis.
• Transfer pricing rules. Transactions with related parties must be at arm’s length; where such transactions exist, transfer pricing analysis is required, and if prices depart from the market, additional tax is charged.
• Audited financial statements. For QFZP status, an audit under IFRS is mandatory.

The tax authority may request other documents as well. If a company stops meeting even one condition, it is taxed at 9% on all its income for the current year and the following four years; it can reapply for the status only in the sixth year. The detailed conditions for the zero rate are set out in our guide to the 0% corporate tax rate, and the official position is covered in the FTA free zone guide.

Qualifying income and qualifying activities

Qualifying income is defined on an either/or basis, and it arises in three situations.

The first is transactions with other free zone persons. If your counterparties and clients are also companies in free zones, the income counts as qualifying regardless of the activity. There is an important exception: the buyer must be the beneficial recipient of the goods or service. If another free zone company resells your goods as an intermediary or distributor, that income does not benefit from the exemption.

The second is transactions with other parties (foreign or local companies, individuals, or mainland companies). Such income qualifies only if it falls within specific activities:

1. Manufacturing of goods and materials.
2. Processing of goods and materials.
3. Trading of qualifying commodities.
4. Holding shares and securities for investment purposes.
5. Ownership, management and operation of ships.
6. Reinsurance services.
7. Fund management services.
8. Wealth and investment management services.
9. Headquarters services to related parties.
10. Treasury and financing services to related parties.
11. Financing and leasing of aircraft.
12. Distribution of goods in or from a designated zone.
13. Logistics services.
14. Activities that are ancillary to those listed above.

The third case is the ownership and use of qualifying intellectual property. What is exempt is the income from selling it – royalties or licence-fee payments. If the intellectual property is embedded in a product and you sell the product itself, that income does not qualify. The size of the exemption depends on how much the company spent on development: the higher its own development costs, the greater the share of income that is exempt.

There are some nuances. When trading securities, a holding-period test applies: at the moment of sale the asset must have been held for at least 12 months, otherwise income from active trading is not exempt. Distribution gives an exemption only in so-called designated zones (usually port zones) and only where goods are resold to another distributor or wholesaler, not to the end consumer.

A de minimis rule applies: non-qualifying income must not exceed the lower of 5% of total revenue or AED 5 million. In other words, at least 95% of income must be qualifying. This also covers dealings with mainland companies: income from mainland transactions above the limit removes the exemption.

VAT for free zone companies and designated zones

VAT rules for free zone companies are broadly the same as for everyone else, with some specific points. The standard 5% rate applies to local sales within the UAE and the Gulf states. Exports of goods and services abroad are not subject to VAT.

When services are imported from abroad, the reverse charge applies at 5%: the supplier is a foreign person not registered with the FTA, so the recipient of the service calculates and pays the tax. In practice this tax is recoverable, so in most cases the effective rate on services imported by a local company is nil.

Some transactions are outside VAT. Financial services are only partly exempt. A separate regime applies in designated zones – usually port zones where logistics and import companies operate. The supply of goods within such a zone, the import of goods into it, and the supply from one designated zone to another are not subject to VAT. Nor is VAT charged on government services, such as a zone’s own fees for registering a company.

Opening a corporate bank account in the UAE

An account can be opened once the company has been registered and the incorporation documents are in hand. These are provided to the bank.

The standard set of company documents includes:

• The licence and the memorandum of association.
• The lease for the office or address.
• In some zones, the share register and other documents.

From the founders, the bank requests a standard set of KYC materials: a passport, proof of address (for example, a utility bill), evidence of income and source of funds, and bank statements. For particular transactions or types of income, further documents may be requested from the statements. Where turnover is significant, the bank often wants to see audited financial statements.

The account signatory – a founder or director – must hold a residence visa. So, once the company is registered, the person needs to fly in, take the medical test and biometrics, wait for the visa to be issued, meet the bank, sign the application, and can then leave. Opening an account takes at least a month, sometimes longer. The outcome depends heavily on the applicant’s profile: banks apply sanctions screening and check whether the beneficial owner is connected with any sanctioned countries, alongside the source of funds and the nature and geography of the business. It is also worth bearing in mind that banks are cautious about certain activities: a “General Trading” licence, for instance, can be harder to bank. There is more detail on the page about how to open a bank account in the UAE.

Frequently asked questions

How to choose a free zone for your business

The choice begins with the business activity. Most service and trading projects will suit a universal zone with a flexible office; financial structures and foundations point to DIFC or ADGM; logistics, warehousing and commodities trading point to the port and trade zones. The tax side comes next: whether the company can meet the Qualifying Free Zone Person conditions and secure 0% on qualifying income, whether the small-business relief fits, or whether it is simpler to operate on the standard basis at 9%. Finally, it is worth thinking about banking in advance – the signatory’s residence visa, a realistic turnover profile and clear evidence of the source of funds.

These decisions are closely linked: a poorly chosen zone can complicate visas, account opening and the tax regime alike. In practice, the Uniwide team maps the zone, licence and tax regime to the specific business model before incorporation, so that the structure works as a whole. Getting that combination right from the outset is usually far cheaper than restructuring a company later.