Dubai Free Zone: A Guide to Setup, Locations and Licences in 2026

A Dubai free zone is a designated economic area with its own administration, its own licensing system and targeted incentives for international companies. More than 40 such zones are active in the UAE, over 20 of them in Dubai alone. They contribute a considerable share of the city's economic output and handle a large part of its foreign trade.

What defines a free zone

• 100% foreign ownership without a local partner
• 0% Corporate Tax on qualifying income, subject to conditions
• Setup often within two to seven working days
• No restrictions on capital transfers, full repatriation of profits
• No customs duties on goods within the zone and on re-export

Each zone has its own authority that issues licences and serves as a one-stop shop. The first free zone in the Emirates was the Jebel Ali Free Zone, founded in 1985.

The tax framework

Since Federal Decree-Law No. 47 of 2022, a federal Corporate Tax applies. It applies to financial years starting on or after 1 June 2023: 0% on profits up to AED 375,000, and 9% on the portion above that.

Free zone companies can claim the 0% rate on qualifying income as a Qualifying Free Zone Person. This is not automatic but tied to six conditions, all of which must be met at the same time:

• Adequate economic substance in the zone: office, staff and core functions on site
• Qualifying income within the meaning of the relevant Cabinet and Ministerial Decisions
• De minimis threshold: non-qualifying income of no more than 5% of total revenue or AED 5 million, whichever is lower
• Audited financial statements for every tax period
• No election to be subject to the regular Corporate Tax regime
• Compliance with transfer pricing rules (arm's length principle), including documentation

If even one condition is not met, the company loses its QFZP status for the current tax period and the four following periods. During that time its entire profit is taxed under the regular rules: 0% up to AED 375,000 and 9% on the portion above. Even at 0%, registration, bookkeeping and filing obligations continue to apply.

The main zones at a glance

A few figures for context: in 2025, around 2,500 newly registered companies joined the DIFC, an increase of 39%; more than 1,000 firms there are regulated. The DMCC recorded more than 2,300 new members in 2025, with technology now the largest sector in the zone, ahead of the commodities from which it originated.

There are also specialised zones: Dubai Internet City for technology, Dubai Media City for media and publishing, Dubai Design District for fashion and design, Dubai Healthcare City for clinics and research, Dubai CommerCity for e-commerce.

Which licence suits which business

• Trading licence – import, export, distribution, wholesale and retail. Typical in JAFZA, DAFZ, DMCC and Dubai South.
• Professional licence – consulting, IT, marketing, agencies. Common in Internet City, Media City and d3.
• Industrial licence – production, assembly, packaging. Mainly JAFZA and Dubai South.
• E-commerce licence – online retail, platform and marketplace models.
• Specialised licences – financial services in the DIFC, healthcare services in DHCC, media licences in Media City and Studio City.
• Freelance permit – for individuals without their own company, available in several zones.

The activity chosen in the application must match the business model exactly. Opening a bank account, compliance and tax classification all depend on it later.

Legal forms

• FZE – one shareholder, limited liability, suitable for sole founders
• FZCO or FZ-LLC – two to fifty shareholders, flexible shareholding structures
• Branch – for foreign parent companies, without a separate legal entity

Banks have different requirements depending on the legal form. Shareholder resolutions, details of the ultimate beneficial owner and passport copies of all parties involved are standard.

The process in eight steps

1. Define the activity – specifically, not as a catch-all term
2. Choose the zone by industry, budget and location
3. Reserve the company name – online, usually within one to two working days
4. Submit the licence application with passport copies, photos and the form
5. Choose the office model – flexi-desk, shared office or your own space
6. Receive the licence – two to five working days for simple services, several weeks for regulated sectors
7. Visa and Emirates ID – entry permit, medical test, biometrics, one to three weeks
8. Open a corporate bank account – the most time-consuming step, usually with an in-person appointment

Costs and what drives them

• Annual licence fee, depending on zone and activity
• Rent for a flexi-desk, shared office or your own space
• Visa fees per person, payable again every two years
• Registration fees, deposits, translations and attestations
• Bookkeeping and tax return from the first financial year

Premium zones such as the DIFC, DMCC or Media City are considerably more expensive than newer or peripheral zones. The biggest lever, however, is rarely the licence but the office model, which also determines your visa quota.

The limits

A free zone company may not simply sell on the mainland. For customers within the UAE you need a distributor or an additional mainland licence. If you want to serve the local market, clarify this before choosing the zone, not afterwards.

Switching zones later is in practice a new setup with a new licence number. Moving to the mainland is also possible, but it means an additional licence, a subsidiary or a restructuring.

What also applies in 2026

• Corporate Tax registration within three months of incorporation, otherwise a penalty of AED 10,000
• Tax return within nine months of the end of the financial year
• Small Business Relief on application for revenue up to AED 3 million, limited to tax periods ending on or before 31 December 2029 (extended by Ministerial Decision No. 131 of 2026); not available to Qualifying Free Zone Persons
• Maintaining an up-to-date register of ultimate beneficial owners (UBO); the former Economic Substance Regulations were repealed for periods from 1 January 2023
• Electronic invoicing, which will become mandatory in stages from 2027

Common mistakes

• Defining the activity in the application too narrowly, so the first extension costs fees
• Choosing a zone that does not offer your own sector
• Not budgeting for renewal costs from year two
• Starting the bank account opening too late, without prepared supporting documents
• Assuming QFZP status without being able to meet the substance requirements

How we assess the choice of zone

The cheapest package price is rarely the best advice. Three things are decisive, and they are usually not in the offer: whether the zone properly covers your activity, how banks view the zone, and how flexibly the office model grows with you.

The banking point is the one most often underestimated. Zones with a mixed reputation regularly lead to longer reviews when opening an account. A saving of a few thousand dirhams on the licence is then set against weeks without an account, and during that time the company cannot operate.

Our advice: before choosing, ask which banks the zone regularly works with, and calculate the costs over three years rather than the first. Both decide the success of the structure more than the price of the starter package.

What to clarify before deciding

• Which activity is in the catalogue, and does your preferred zone offer it?
• Do you sell internationally or also to customers in the UAE?
• How many visas do you need in the first and in the third year?
• Are you aiming for QFZP status, and can you build up the substance?
• Have you budgeted for renewal, bookkeeping and the CT deadline?

How a company formation in a free zone works in detail is explained on our dedicated page.