Trading
For importing, exporting, distributing or selling goods. DMCC describes its trading licence in these terms.
Business setup · Free zone
Free zone company setup in Dubai, planned around tax and compliance
How a free zone company works, who it suits and what it needs after the licence.
Who a free zone company suits
A free zone is a good answer to a specific question: where will the business really operate, and who will pay it?
A free zone company is licensed and regulated by a free zone authority, not by the emirate's economic department. Each authority writes its own rules, so two free zones can treat the same business very differently. The UAE government portal reminds investors that not every free zone registers every type of company, which is why the zone should be chosen after the activity, not before.
- Consultancies, agencies and other service businesses whose clients are abroad or in other free zones.
- Trading and distribution businesses that work through a distributor or ship directly to customers outside the UAE.
- Holding companies and regional headquarters that want full foreign ownership.
- Founders who want a light, contained setup in the first year and are happy to add a mainland presence later.
It is a weaker fit when most of your revenue will come from UAE customers who expect to be invoiced by a mainland company. That can still be done, but it adds a permit, a branch or a distributor, and the extra cost belongs in the comparison from the start.
The free zones we work with
We work with five free zones: SHAMS in Sharjah, and IFZA, Meydan, the DWTC Free Zone and DAFZA in Dubai. Each has its own page. This table compares what each zone's own pages and the tax authorities confirm.
| Topic | SHAMS | IFZA | Meydan | DWTC Free Zone | DAFZA |
|---|---|---|---|---|---|
| Emirate and location | Sharjah. Sharjah Media City. | Dubai. Dubai Silicon Oasis. | Dubai. Al Meydan Road. | Dubai. The central business district, at the Dubai World Trade Centre. | Dubai. The Dubai Airport Free Zone. |
| Typical business types | Media and creative businesses, startups, SMEs and freelancers. Any five business activities on the Standard Package. | Foreign investors and SMEs. Commercial and professional licences and a branch route. | Foreign entrepreneurs, remote founders, startups and SMEs. | Entrepreneurs, startups and multinationals. Seven licence types, including events, family offices and virtual assets. | Goods businesses benefit most from its VAT Designated Zone status. Confirm licence terms with the authority. |
| Legal forms | LLC and branch, with one to 50 shareholders. | FZCO and branch. | LLC and branch. | FZE (one shareholder), FZCO (up to 10) and branches. | Confirm with the authority. |
| Office requirement | A flexi desk and lease agreement come with the packages. | Not mandatory on basic packages. Registered office space is needed with 4 or more visa allocations. | A registered address is required, and a flexi desk meets it. | Flexi desks, executive offices, co-working and larger offices. Lease renewal is not required for flexi desk or business address holders. | Confirm with the authority. |
| Visa approach | Up to 50 per licence by activity and office space. Above 10 needs a business plan and bank statements. | By the allocation in the package. Typically valid for 2 years: confirm with IFZA. | Investor visa with share capital of AED 50,000 or more, and a partner visa for companies with several shareholders. | On-demand licensing runs from no visas up to 6. | Confirm with the authority. |
| Audit requirement set by the zone | Accounts examined and reported on by an auditor the Authority approves. | Financial statements at every renewal, audited unless turnover is at or below AED 3,000,000 and there are 9 employees or fewer. | Audited statements within 30 days of the Authority's request. | Confirm with the authority. | Confirm with the authority. |
| Access to the mainland | Hold the other permits the activity needs. Dubai's permit does not apply in Sharjah. | Dubai licence or permit from the Department of Economy and Tourism. The Free Zone Mainland Operating Permit costs AED 5,000 per six months for eligible companies. | Dubai licence or permit from the Department of Economy and Tourism. The Free Zone Mainland Operating Permit costs AED 5,000 per six months for eligible companies. | Dubai licence or permit from the Department of Economy and Tourism. The Free Zone Mainland Operating Permit costs AED 5,000 per six months for eligible companies. | Dubai licence or permit from the Department of Economy and Tourism. The Free Zone Mainland Operating Permit costs AED 5,000 per six months for eligible companies. |
| VAT Designated Zone | No. | No. | No. | Not on the published list. | Yes. |
In every zone, free zone status does not give the 0% corporate tax rate automatically. The company must meet every Qualifying Free Zone Person condition, and each of these zones tells its companies to register for corporate tax.
How to choose between them
- Choose SHAMS for a creative or media business based in Sharjah, remembering that Dubai's permit does not follow you there.
- Choose IFZA when you want to start with few visas and no office, and are ready to submit financial statements at every renewal.
- Choose Meydan when you are a remote or non-resident founder who wants an LLC and a flexi desk.
- Choose the DWTC Free Zone when a central Dubai address, events or a family office licence is part of the plan.
- Choose DAFZA when you trade goods and the VAT Designated Zone treatment is worth the record keeping it needs.
SHAMS
Sharjah
A media and creative free zone that is open to other businesses.
Read moreIFZA
Dubai Silicon Oasis
Visa-linked packages, and statements due at every renewal.
Read moreMeydan Free Zone
Dubai
LLCs with regular, instant and non-resident routes.
Read moreDWTC Free Zone
Dubai World Trade Centre
A central address with seven licence types.
Read moreDAFZA
Dubai Airport Free Zone
A VAT Designated Zone, which matters most for goods.
Read moreOwnership and control
The UAE government portal describes free zones as offering up to 100% foreign ownership, with full repatriation of profits and capital. The words up to matter: the ownership you can hold depends on the zone and on the legal form you choose.
The legal forms the portal lists for free zones are the private limited liability company, the free zone company (FZ Co.), the free zone establishment (FZE), the public limited company and a branch of a local or international company. Individual zones use their own names and limits. Meydan Free Zone, for example, offers an FZ-LLC. Check the form against the number of owners and managers you need.
Decide control before you file. Who signs, who can borrow, how profits are shared and what happens if an owner leaves should be written into the constitutional documents, because changing them later means new filings with the authority and sometimes new fees.
Want to talk this through?
Tell us about your business and we will point you to the right person. We reply straight away during office hours.
Licence types
Names and categories differ, but most zones offer variations of the same four.
Service
For professional or consultancy services. DMCC and other zones issue it for businesses that sell expertise, not goods.
Commercial and industrial
Commercial licences cover mixed business activity, and industrial licences cover manufacturing and production, usually with a larger facility.
E-commerce and other packages
Some zones, such as Ajman Free Zone, also list e-commerce, freelancer and offshore licences. Always read the activity list on the licence, not just its name.
Regulated activities such as financial services, healthcare and education usually need approval from their own regulator on top of the zone licence. Ask for the full activity wording early, because a licence that is almost right can block a contract later.
Visas and office rules
Visas and premises are linked in a free zone. The number of residence visas a company can hold depends on the package and the facility it takes. IFZA, for example, requires registered office space with 4 or more visa allocations, and SHAMS says up to 50 per licence depending on activity and office space. Other zones set different allowances, so a figure from one zone should never be assumed for another.
Office rules also vary. Some zones include a flexi-desk with the licence, some waive office space for small visa counts, and larger teams need a lease. Do not choose the cheapest facility until you have checked it against the substance test described below, because a desk alone may not show real activity in the zone.
Tax and VAT treatment
A free zone licence does not remove a company from tax. It changes which rules apply.
A company incorporated in a free zone is a resident person for corporate tax. It must register with the Federal Tax Authority within 3 months of incorporation, file a return and pay within 9 months of the end of its tax period, and keep records for 7 years.
The 0% rate is a status, not a default
A Qualifying Free Zone Person pays 0% on qualifying income and 9% on its other taxable income. To qualify, it keeps adequate substance in the free zone, earns qualifying income, has not elected to be taxed normally, follows transfer pricing rules, prepares audited financial statements and keeps non-qualifying revenue within the lower of 5% of total revenue or AED 5,000,000.
Income from other free zone persons can qualify, with exceptions for excluded activities. Income from customers outside the free zones qualifies only where the activity is on the Ministry of Finance's qualifying list. Selling excluded or unlisted activities to mainland customers produces non-qualifying income, and that income counts against the de minimis limit. If the company fails a condition, it loses the status for that period and the next four.
When the standard rules are better
A Qualifying Free Zone Person cannot use Small Business Relief or join a tax group. A small free zone company that does not meet the conditions may therefore be better placed under the standard rules, where taxable income up to AED 375,000 is taxed at 0% and Small Business Relief is open to revenue up to AED 3,000,000. We run both outcomes before recommending a path.
VAT
A free zone is not VAT-free. Only free zones listed as Designated Zones are treated as outside the UAE for certain supplies of goods, under conditions, and services are generally taxed as normal. A free zone that is not a Designated Zone is treated like the rest of the UAE. Register when your taxable supplies pass AED 375,000, or earlier if it helps you reclaim VAT.
Banking
UAE banks must identify the company, its legal form and constitutional documents, its address and senior managers, and every individual who owns or controls 25% or more. They rely on government-issued or certified documents, so your licence and notarised incorporation papers matter.
Banks also want to understand the business and the reason for the account, and they can decline or close an account when the picture does not make sense. A clear business plan, contracts or letters of intent, and consistent owner documents make the file stronger. We do not promise a result or a timeline, because opening an account is the bank's decision.
Costs
Free zone fees are set by each authority and change from time to time, so we quote from the current schedule.
- The licence, which depends on the zone, the activity and the number of activities.
- The facility: flexi-desk, shared office or private office.
- Each visa, plus medicals, Emirates ID and the establishment card.
- Annual renewal of the licence, facility and visas.
- Audit, which is required for a Qualifying Free Zone Person and set by some zones for every company.
- Corporate tax registration and filing, and VAT where it applies.
Free zone licence
Get a quote
Each zone sets its own fees.
Corporate tax registration
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Our fee, quoted per case.
Monthly bookkeeping
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Our fee, quoted per case.
What you must keep doing
- Renew the licence, facility and visas each year.
- Keep accounting records, and give the authority an updated audit report where the zone requires one. JAFZA, for example, asks FZE and FZCO companies for one every year.
- File corporate tax returns on time, and prepare audited statements if you are a Qualifying Free Zone Person.
- Keep your beneficial owner register up to date, and record changes within 15 days.
- File VAT returns within 28 days of each period once registered.
- Keep substance in the zone if you rely on the 0% rate.
Common mistakes
Choosing on licence price alone
A cheap licence can sit beside high renewal costs, tight visa limits or an audit duty that costs more than the saving.
Assuming 0% is automatic
The rate depends on income type, substance and the de minimis limit. One mainland contract can change the result.
Selling onshore without permission
A free zone licence does not by itself cover trading with the mainland. Use a distributor, a branch, a dual licence or the Dubai permit.
Forgetting registration deadlines
Corporate tax registration is due within 3 months, and the late penalty is AED 10,000.
A worked example
Illustrative example, not a client
A two-partner consultancy serving clients in the Gulf and Europe
Two partners set up a service business in a free zone. Most clients are companies abroad, and a few are UAE businesses on the mainland. Revenue in the first year is expected to stay below AED 3,000,000.
We test the income first. Work for clients abroad may qualify if the activity is on the qualifying list. The mainland work probably does not, and it counts against the de minimis limit. If it would breach the limit, the company would lose Qualifying Free Zone Person status for five periods. We compare that result with the standard rules and Small Business Relief, and with a mainland licence.
The partners choose the free zone because most revenue is foreign, take a flexi-desk that fits their visa needs, register for corporate tax within the deadline, and set up bookkeeping from the first month. They revisit the structure when mainland work grows.
Frequently asked questions
Is a free zone company exempt from corporate tax?
No. A free zone company is inside the corporate tax regime. It can reach a 0% rate on qualifying income if it meets every Qualifying Free Zone Person condition, and it pays 9% on other taxable income.
Can a free zone company trade with customers on the mainland?
Not by default. It needs a licensed mainland distributor, a mainland branch or company, or in Dubai a permit from the Department of Economy and Tourism. Dubai's Free Zone Mainland Operating Permit for non-regulated activities costs AED 5,000 for each six months.
How many visas can a free zone company get?
It depends on the zone and the facility. IFZA requires registered office space with 4 or more visa allocations, and SHAMS says up to 50 per licence depending on activity and office space. Other zones publish their own allowances.
Do I need an office in a free zone?
It depends on the zone and the number of visas. Some zones include a flexi-desk with the licence, and larger teams take an office. If you want the 0% rate, make sure the facility supports the substance test.
Does a free zone company need an audit?
A Qualifying Free Zone Person must prepare audited financial statements, and many zones ask for an audit report from every company. JAFZA, for example, requires FZE and FZCO companies to provide an updated audit report every year.
Is a free zone company free of VAT?
No. Only free zones listed as Designated Zones are treated as outside the UAE for certain supplies of goods, under conditions, and services are generally taxed as normal. A free zone that is not a Designated Zone is treated like the rest of the UAE.
What happens if my company stops being a Qualifying Free Zone Person?
The status is lost for that tax period and for the next four, and the standard rates apply in those periods. That is why we check substance, income and the de minimis limit before you rely on the 0% rate.
General information based on UAE rules at the time of writing. It is not tax or legal advice for your situation. Speak to us before you decide.
Talk to us about your business.
Tell us what you need and we will point you to the right person. We reply straight away during office hours.