Choosing a Free Zone
Six questions to ask
| Question | Why it matters |
|---|---|
| Does the zone license my activity? | Each zone licenses its own list of activities, and some focus on sectors such as media, commodities or technology. Check the exact activity before you apply. |
| How many visas will I need? | The visa quota follows the office. At RAKEZ, for example, a flexi desk allows one visa. |
| Will I sell on the mainland? | A free zone company generally operates inside its zone and abroad. In Dubai it can trade on the mainland with a DET permit of AED 5,000 for six months. |
| Will I qualify for 0% corporate tax? | Only on qualifying income, and only if the company meets every condition below. Mainland revenue is generally taxed at 9%. |
| Which legal system applies? | ADGM in Abu Dhabi applies English common law directly through its own courts, and requires a physical presence in the zone. |
| What will it really cost? | Compare the licence, the office and every visa allocation, not just the headline package. |
Source: RAKEZ: FAQs; Dubai Department of Economy and Tourism: Free zone companies can operate on the mainland; Federal Tax Authority: Basic tax information bulletin, Free Zone Person; ADGM Courts: The English common law system; ADGM: Setting up in ADGM3,4,2,5,6
The 0% corporate tax conditions
- Maintain adequate substance in a free zone.
- Derive qualifying income.
- Not elect to be taxed at the standard rate.
- Follow the arm's length principle with related parties and keep transfer pricing documentation.
- Keep audited financial statements.
- Keep non-qualifying revenue below AED 5 million or 5% of total revenue, whichever is lower.
Source: Federal Tax Authority: Basic tax information bulletin, Free Zone Person2
A Qualifying Free Zone Person does not get the 0% band on the first AED 375,000 of taxable income: income that is not qualifying is taxed at 9% from the first dirham.2
Comparing the cost
Package prices are not like for like. At Meydan Free Zone, for example, a licence starts from AED 12,500 and each visa allocation costs AED 1,850. IFZA basic packages need no physical office and come with 0 to 3 visas.7,8
Ask each zone for a written quote that lists the licence, registration, office, establishment card and visa costs for the first year and for renewal.
In a free zone you can set up a free zone company (FZ Co.), a free zone establishment (FZE), a limited liability company, a public company or a branch of a local or foreign company.1
Frequently Asked Questions
Do all free zone companies pay 0% corporate tax?
No. Only a Qualifying Free Zone Person pays 0%, and only on qualifying income. It must keep substance in the zone, audited accounts and transfer pricing records, and keep non-qualifying revenue below AED 5 million or 5% of revenue.
Sources
- UAE Government Portal: Starting a business in a free zone
- Federal Tax Authority: Basic tax information bulletin, Free Zone Person (PDF)
- RAKEZ: FAQs
- Dubai Department of Economy and Tourism: Free zone companies can operate on the mainland
- ADGM Courts: The English common law system
- ADGM: Setting up in ADGM
- Meydan Free Zone: Company setup cost breakdown
- IFZA: Support for startups
Figures checked 21 October 2026. Prepared by Invest-Emirates.ae for general information. It is not investment, tax or legal advice; please confirm details with a qualified adviser before acting.