Setting Up a Free Zone Company in Dubai: Choosing the Zone and the Process

More than 30 free zones are available in Dubai, with more in the other Emirates. They differ in fees, permitted activities, office models and visa quotas. The zone is therefore not a formality but a decision with consequences for years.

What characterises a free zone

• 100% foreign ownership without a local partner
• No minimum capital in most zones
• Fast procedures: the licence is often issued within a few working days
• Its own authority: registration, visas and immigration are handled by the zone itself
• 0% corporate tax possible if the conditions for a Qualifying Free Zone Person are met

Zones and their focus

The process in six steps

1. Define the activity and check which zones offer it
2. Reserve the company name: usually 24 to 48 hours
3. Submit documents: passport, proof of address, apostille where required
4. Choose an office model: flexi desk, shared office or your own space, depending on your visa needs
5. Receive the licence and establishment card
6. Visa, Emirates ID and bank account: in this order, as each step builds on the previous one

Five to ten working days are realistic if the documents are complete. The bottleneck is almost never the zone, but attestations and the bank meeting.

Which documents the zone requires

The requirements are similar across zones but differ in detail. If you put them together completely in advance, you shorten the process considerably.

• Colour passport copy of all shareholders, with the visa stamp of the last entry
• Proof of address from your home country, usually not older than three months
• For companies as shareholders: register extract, articles of association and shareholder resolution, each with apostille and certified translation
• Short company profile or CV, mandatory in some zones
• The desired activities from the zone's catalogue

The office models compared

• Flexi desk: the cheapest option, usually a workstation on an hourly basis, small visa quota
• Shared office: a fixed place in a shared office, more visas possible
• Own office: full space, highest quota, significantly higher costs

The office model is the lever through which the zone controls visas. If you need one visa today and four in two years, take that into account in your first contract. Switching in the middle of the year is possible, but it costs extra.

The limits you should plan for

• No direct sales on the mainland: this requires a distributor or an additional structure
• 0% is subject to conditions: adequate substance, qualifying income, transfer pricing documentation
• Registration is always mandatory: even at 0%, registration and a tax return are required
• Changing zones is expensive: in practice it is a new formation with a new licence number

What QFZP status involves

The zero percent does not automatically apply to every free zone company. It requires the status of a Qualifying Free Zone Person, and that requires more than an address in the zone.

• Adequate substance on site: staff, premises and core functions actually performed there
• Qualifying income within the meaning of the relevant Cabinet Decisions
• Compliance with transfer pricing rules, including documentation
• The limits for non-qualifying income must not be exceeded

If you lose the status, you are taxed at the regular rates for the current and several subsequent tax periods. That makes the review a question that belongs before the formation, not after the first annual financial statements.

After the formation: what needs doing immediately

The licence is not the end but the start of ongoing operations. Three points need to be handled straight away and are the ones most often postponed.

• Corporate tax registration within three months: the deadline runs from incorporation, not from the first revenue
• Setting up the accounting from the first receipt, regardless of the tax rate
• Checking the VAT registration obligation as soon as annual turnover of AED 375,000 is in sight

If you set up these three points in the first month, you have peace of mind for the rest of the year. If you leave them, you may pay AED 10,000 for the missed registration alone.

What we look for when choosing a 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 offers your activity, how banks view the zone, and how flexibly the office model grows with you.

The bank point in particular is 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. A zone that has no answer to that is a warning sign.

Clarify before choosing a zone

• 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 the substance required for it?
• Which bank should hold the account, and how does it view this zone?
• What does the renewal cost from year two?

You can find a comparison of the structures including costs under Free zone, mainland or offshore compared.