UAE free zone company formation

What is a UAE free zone company?

A free zone company is registered and licensed by the authority of the free zone it sits in, not by the economic department of an emirate. The UAE Ministry of Economy and Tourism refers to more than 40 free zones that allow 100% ownership for foreign investors.

The UAE government portal states that free zone companies can import from outside the UAE, export to international markets and re-export through the UAE.

The portal lists the company types below. Names and shareholder limits differ from zone to zone, so the rules of the zone you choose are the ones that count.

• Private Limited Liability Company (LLC)
• Free Zone Company (FZ Co.)
• Free Zone Establishment (FZE)
• Public Limited Liability Company (PJSC)
• Branch of a local or international company

How do you choose a free zone in the UAE?

Start with your business activity. The UAE government portal puts choosing your sector and free zone as the first step, ahead of the legal form and the trade name.

The table shows the zones covered on this site and one point about each emirate that affects the choice. We compare zones for your activity and tell you the cost in writing before you commit.

Can a free zone company sell on the UAE mainland?

Not directly, as a rule. The UAE government portal states that to sell locally a free zone company must either work through a licensed mainland distributor or establish a mainland branch or company. Direct mainland sales are generally not permitted unless the company obtains the required mainland licenses or approvals.

Dubai has opened a narrow route. Under Dubai Executive Council Resolution No. 11 of 2025, a free zone company can apply to the Dubai Department of Economy and Tourism (DET) for a branch license or a permit to conduct specific activities within the Emirate of Dubai. The Resolution does not apply to financial establishments licensed in the DIFC.

The Free Zone Mainland Operating Permit launched on 8 October 2025. It is valid for six months, costs AED 5,000 per six month period and is open to free zone companies holding a Dubai Unified License. Its first phase covers non-regulated activities such as technology, consultancy, design, professional services and trading. The Dubai Media Office states that 9% corporate tax applies to the mainland revenue earned under it.

Good to knowThe Dubai route covers activity within the Emirate of Dubai only. We confirm which route is open for your activity before you apply.

Do UAE free zone companies pay corporate tax?

Yes, free zone companies are within the scope of UAE corporate tax. The law is Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, and it applies to financial years beginning on or after 1 June 2023. Calling a free zone company "tax free" is wrong.

The 0% rate belongs to a Qualifying Free Zone Person, and only on its Qualifying Income. These are the rules that apply.

• A Qualifying Free Zone Person pays 0% on Qualifying Income and 9% on taxable income that is not Qualifying Income (Article 3(2)).
• A Qualifying Free Zone Person does not get the 0% band on the first AED 375,000 of taxable income.
• Every Free Zone Person, qualifying or not, must register for corporate tax, file a return within 9 months of the end of the tax period and keep records for 7 years.
• To qualify, a company must, among other conditions, maintain adequate substance in the UAE, derive Qualifying Income, not elect into standard corporate tax, meet the arm's length and transfer pricing documentation rules, and prepare audited financial statements.
• A company that fails any condition loses the status from the start of that tax period and for the following four tax periods.

Good to knowThis page states what the official sources say. It is not tax advice.

Which free zone income qualifies for the 0% rate?

Only income that the law defines as Qualifying Income. Cabinet Decision No. 100 of 2023 defines it as income from transactions with another Free Zone Person, except from Excluded Activities, income from anyone else only where it comes from a Qualifying Activity, income from Qualifying Intellectual Property, and other income that stays within the de minimis limit.

Ministerial Decision No. 229 of 2025 lists the Qualifying Activities. They include manufacturing, processing, trading of Qualifying Commodities, holding shares and securities for investment, fund management, headquarter services to related parties, logistics services and distribution of goods in or from a Designated Zone.

Consultancy, marketing and IT services are not on that list, and transactions with natural persons are an Excluded Activity, with limited exceptions. A Qualifying Free Zone Person pays 9% on taxable income that is not Qualifying Income.

• De minimis limit: non-qualifying revenue must not exceed 5% of total revenue or AED 5,000,000, whichever is lower.
• Income attributable to a place of business in the UAE outside the free zone is taxable at 9%.
• The Federal Tax Authority tells companies to check with their free zone authority whether they operate in a Free Zone for corporate tax purposes.

Good to knowMinisterial Decision No. 229 of 2025 repealed Ministerial Decision No. 265 of 2023 and takes effect from 1 June 2023. Articles that cite the older decision are out of date.

How many visas can a free zone company get?

The number depends on the zone and on what you sign up for. The UAE government portal states that it depends on factors such as the package the business has signed up for. DMCC, as one example, states that the number is determined by the size of the office space and the type of license.

The free zone authority handles work permit and residence visa applications for the employees of its companies.

Free zone employees are generally governed by the zone's own employment regulations and by Federal Decree-Law No. 33 of 2021, the UAE Labour Law. DIFC and ADGM have their own separate employment frameworks.

Do free zone companies pay customs duty?

There is 0% customs duty on goods imported into a free zone, and no customs duty on goods stored in the free zone for re-export, according to the UAE government portal.

Duty applies if the goods are moved into the mainland market.