Guide
Structure
Free zone company in Dubai: which zone for which activity
A free zone is not a tax status: it is an authority that issues licences and rents out floor space. The right choice depends on your business, how many visas you need and how the banks treat the authority you pick.
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Dozens of zones Each with its own activity list
- On qualifying income, subject to conditions
- 0%
- Qualifying Free Zone Person regime
- Cumulative conditions for the 0% rate
- 4
- Activities, substance, cap, audited accounts
- Horizon for sizing the visa quota
- 18 months
- On the headcount you actually expect, not an ambition
Orders of magnitude taken from the guide below. They describe a mechanism, not your project.
A free zone is a licensing authority, not a tax regime
The choice between a free zone, the mainland and offshore is covered in the guide to company formation in Dubai, which compares the three possible regimes. If you have not yet decided between them, start there: the deciding criterion is where your clients are, not the price of the licence.
Key point
There are several dozen free zones in the UAE, each with its own activity list, visa quota, office packages and reputation with the banks. Choosing “a free zone” means nothing; choosing DMCC, DIFC or a general-purpose zone commits you to three very different ways of operating.
What they all share: 100% foreign ownership, no customs duties on goods that stay within the zone, and a faster incorporation process than on the mainland. What they do not share: the list of permitted activities, the visa quota, the audit requirement, acceptance by the banks and the renewal cost.
The table
Which zone for which activity
The zones below cover most of the cases we handle. The right-hand column is the one that costs time when it is ignored.
| Free zone | Main purpose | Watch point |
|---|---|---|
| DMCC | Commodities trading, precious metals, business services | Well known to local banks; renewal and office among the most expensive in Dubai |
| DIFC | Finance, asset management, funds, law firms, family offices | Its own common-law-based legal system and a dedicated regulator; the requirements and costs of a financial centre |
| JAFZA | Import-export, industry and logistics, linked to Jebel Ali port | Only relevant if you physically handle goods |
| DAFZA and Dubai South | Air freight, aviation, fast distribution | Same customs logic as JAFZA, linked to the two airports |
| Dubai Internet City and Dubai Media City | Software publishing, technology, agencies, media | Narrow activity list: outside its scope, an application is refused rather than negotiated |
| General-purpose zones (IFZA, Meydan and others) | Consulting, services, e-commerce, small structures | Moderate entry cost, but check bank acceptance before filing, not after |
Scroll the table sideways to see every column.
A simple rule: if your business handles physical goods, the zone must be linked to customs infrastructure — a port or an airport. If it is regulated, starting with finance and insurance, it belongs in a centre with its own regulator. In every other case — that is, most services businesses — the choice comes down to the visa quota, the office package and how the banks receive the licence.
Licence
The type of licence matters less than the activity list
Free zones generally issue commercial, services or professional, industrial, e-commerce and holding licences. That category mostly sets a price. What actually defines your scope is the list of activities attached to the licence, one by one, as it appears on the document.
Three practical consequences. First, an activity missing from the list cannot be invoiced, even if it is close to those on it: adding it has to be requested and paid for. Second, the number of activities is often capped, and some combinations are refused, notably trading alongside regulated services. Third, your counterparties read the list: a client who compares your licence with the subject of the contract and cannot find the activity in question will decline to sign.
We draft the activity list from your contracts for the next three years, not from what you do today. It is the one place in the file where thinking ahead costs almost nothing.
Residence
The visa quota is paid for in floor space
Entry packages, without a dedicated office, come with a quota capped at a handful of visas. Beyond that, the zone requires an office and the quota is calculated in proportion to the space rented. This mechanism explains most of the difference in yearly cost between two companies in the same zone.
Every visa brings immigration fees, a medical test, an Emirates ID card, employer-paid health insurance, then periodic renewal. A sole director and a team of six do not fit in the same licence, and the step between the two is not linear. We size on the headcount you actually expect in eighteen months: reducing an oversized quota is harder than increasing it.
The residence process itself — residence permit, Emirates ID, an absence rule that varies by permit — is covered in the visas and residence section.
Tax
Qualifying Free Zone Person: what the 0% rate requires
Since Federal Decree-Law No. 47 of 2022, a UAE company is subject to corporate tax at 9% on taxable profit above AED 375,000, and 0% below it. A free zone company can also qualify as a Qualifying Free Zone Person: its qualifying income is then taxed at 0%, and the rest of its income at the standard rate.
The regime is not attached to the zone; it is attached to the company, and it is checked every financial year. Four conditions come up every time: the activity must be among the qualifying activities defined by Cabinet decisions, the company must have adequate substance in the UAE — staff, premises, real expenditure — its non-qualifying income must stay under a cap, and its accounts must be audited.
Watch out
The list of qualifying activities is the most volatile part of the system: it has already been clarified by ministerial decision since the law came into force. A position that holds one year will not necessarily hold the next. Have the status revalidated every year, and do not make it the central assumption of a business plan.
The detail of the calculation, the exemptions and the filing calendar is covered on the page corporate tax in the UAE, and the related accounting obligations on the page company accounting and tax.
The limits
What a free zone company cannot do
This is the most misunderstood limit of the system. A free zone licence allows you to operate from within the zone and to invoice outside the UAE. As a general rule, it does not allow you to invoice a client established on the UAE domestic market directly.
There are four routes to that market, and they all have a cost:
- sell to a mainland company that imports and resells, which adds a margin and an intermediary to your chain;
- appoint a local distributor or commercial agent, with the contractual consequences that entails;
- open a mainland branch of the free zone company, which requires a local licence and a registered lease;
- use a dual-licence arrangement, where the zone has signed one with Dubai’s economic authority.
Two lesser-known restrictions add to this: government contracts and large local buyers usually require a mainland licence, and some regulated activities — healthcare, education, passenger transport — cannot be licensed in a free zone. If any of these outlets is in your plan, read the page on the mainland company before filing anything.
Afterwards
Changing zones later costs more than choosing well
There is no transfer from one free zone authority to another. Changing means liquidating or suspending the first licence, setting up a second one, redoing the bank file from scratch, and restarting the visa cycle for every resident. For a three-person structure, the operation takes several months and far exceeds the price difference that drove the original choice.
The three mistakes that trigger this scenario are always the same: an activity list that is too narrow, an undersized visa quota, and a licensing authority that the target bank does not accept. All three are checked before filing, in a single conversation.
Frequently asked questions about free zone companies
Can a free zone company sell to a client in Dubai?
Not directly, as a general rule. It can sell to a mainland company that imports and resells, go through a distributor or agent, open a mainland branch, or use a dual-licence arrangement where its zone has signed one. Invoicing a domestic-market client directly without one of these set-ups exposes the company to a penalty from its licensing authority.
Which free zone should I choose for a consulting business?
A services licence is enough, and several general-purpose zones issue one at a moderate cost. The deciding criterion is not the price but how well banks accept the authority, then the visa quota you will need in eighteen months. A cheaper zone that delays the bank account by two months costs more than it saves.
How many visas does a free zone licence give?
The quota is set by the zone and depends on the type of licence and the space you occupy. A package without a dedicated office is capped at a handful of visas; beyond that, you need to rent an office and the quota is calculated in proportion to the floor area. The exact number is checked with the authority concerned before choosing the package.
Is the 0% rate automatic in a free zone?
No. It is the Qualifying Free Zone Person regime, which requires qualifying activities, real substance in the UAE, staying under a cap on non-qualifying income, and audited accounts. A company that stops meeting one of these conditions moves to the standard regime. In practice, the status is checked every financial year, for your situation.
Do I need a physical office in a free zone?
Every zone requires an address within its perimeter, but many accept a shared desk or a flexible office for small licences. A dedicated office becomes necessary when the visa quota you need exceeds what the shared package allows, and it is an element of substance that the bank and the tax authority look at.
Can a company move from one free zone to another?
There is no simple transfer between authorities. In practice, the first licence is liquidated or made dormant and a new entity is set up in the target zone, with a new bank account and a new visa cycle. The cost of the move almost always exceeds the price difference that motivated the first choice.
Further reading in this guide
Structure
Mainland company and local licence
Structure
Offshore company in the UAE
After set-up
Company accounting and tax
Tool
Structure comparator
Go further
Opening a bank account in Dubai
Independent advice
Have the zone and activity list checked before you file
Send us your actual business, your target clients and the number of visas you need. We will tell you which zones fit, which will cause a banking problem, and which activity list to apply for.