Free zone company setup

A UAE free zone company (FZCO/FZE) gives you 100% foreign ownership, a trade licence, the right to sponsor residence visas and, while it keeps Qualifying Free Zone Person status, 0% corporate tax on qualifying income instead of the standard 9% above AED 375,000. Licence fees depend on the zone and the tier: the Free Zone Index compares all 45 zones, and at the upper end DMCC’s Basic Biz package is AED 35,484 (licence and flexi‑desk, eligible for one visa), with sector packages for crypto, gaming and AI companies at AED 31,000. A licence is typically issued in 3–10 working days, depending on the zone.

What an FZCO gives you

A free zone company gives you full foreign ownership, a UAE trade licence for your chosen activities, the right to sponsor residence visas for owners, family and staff and, while it keeps QFZP status, 0% corporate tax on qualifying income. That combination makes the FZCO the usual choice for consultancies, holding structures, e-commerce, trading and most service businesses that do not need to sell onshore at scale.

It does not give you an automatic right to invoice mainland UAE customers in volume. Selling into the onshore market beyond the de minimis limit puts both the 0% rate and the free zone model under strain. If onshore revenue is central to your plan, read mainland vs free zone before you commit, because changing structure later costs more than choosing correctly at the start.

There is no single UAE free zone. There are more than forty, each a separate authority with its own fee schedule, activity list, visa rules and standing with banks. The Free Zone Index sets them out side by side, and a few minutes there often saves several thousand dirhams against the first package an agent quotes.

How to choose a free zone

Licence fees range from a few thousand dirhams in the budget zones of Sharjah, Ajman and Ras Al Khaimah to AED 31,000–35,484 for DMCC’s sector and Basic Biz packages, and a low licence price does not always mean a low total cost once visas, desk requirements and renewals are added. The useful comparison is the total two-year cost against what your business needs: the number of visas, whether you must take a flexi‑desk, and how banks view that zone. If you want a Dubai address, see company formation in Dubai for the Dubai zones in more detail.

There is no single best zone. A Sharjah or Ajman budget zone usually has the lowest entry cost. SHAMS allows up to 50 visas on one licence and SPC allows unlimited visas on a flexi‑desk. Banks tend to ask fewer questions of companies with a physical office in zones such as DMCC, DIFC and ADGM. Meydan and SPC can be set up entirely remotely. Once you state your customers, the visas you need and your budget, the choice narrows to one or two zones, which is what the Index filters are for.

The free zone setup process step by step

Reserve a company name and confirm your activities. Submit KYC: your passport, a short background questionnaire and an outline of the source of funds. The licence is then typically issued in 3–10 working days, depending on the zone. Next comes the establishment (immigration) card, after which residence visas and the bank account run in parallel. What it depends on is a correct reading of the zone’s fee schedule and an activity list that matches what you actually do.

The two decisions that matter most are made before anything is filed: the zone and the activities. With the right activity list, customs codes, VAT treatment and the bank’s review all follow without difficulty. With the wrong one, you pay to amend it later, usually when a bank is already asking why your licence says one thing and your invoices another.

For a line-by-line budget including visas and the bank, see company formation cost or run the setup-cost calculator before you speak to anyone.

QFZP status and the 0% corporate tax rate

UAE federal corporate tax is 0% on taxable income up to AED 375,000 and 9% above it. A free zone company can instead pay 0% on its qualifying income, but only as a Qualifying Free Zone Person (QFZP). It then pays 9% on all its other taxable income, with no AED 375,000 band, and it has to meet the QFZP conditions in every tax period.

In outline, a QFZP must earn qualifying income, keep adequate substance in the zone, not elect out of the regime, comply with transfer-pricing rules and prepare audited financial statements. Non-qualifying revenue is allowed only within the de minimis limit: it must not exceed the lower of 5% of total revenue or AED 5 million. A company that crosses that line loses QFZP status from the start of that tax period and for the next four tax periods (Ministerial Decision 229 of 2025, Art. 5).

If your revenue is small, Small Business Relief is simpler. With revenue of AED 3 million or less in each tax period (the current one and every earlier one), you can elect in the return to be treated as having no taxable income, for tax periods ending on or before 31 December 2029. The relief has to be claimed in each return. It is not available to a QFZP or to members of multinational groups, and losses from relief periods cannot be carried forward. For an early-stage FZCO that does not need QFZP status, it can remove corporate tax for the first years.

Visas, the establishment card and running costs

Once the licence is issued, you apply for the establishment card, the immigration file that lets the company sponsor visas. Each residence visa then follows the same steps: entry permit, change of status, medical fitness test, Emirates ID and residence visa. Owner and investor visas are straightforward. The number of employee visas depends on the zone and the package and, in some zones, on the desk or office you lease. Plan the allocation you need from the start, because upgrading a package later to add visas is one of the standard extra fees.

If you hire, budget for the obligations that come with staff: salaries paid through the Wages Protection System (WPS), so the authorities can see that wages are paid on time; mandatory health insurance; and end-of-service gratuity, which accrues over each employee’s service. None of these is optional, and gratuity is a real liability that grows every year, so account for it from the first month. Our visas overview covers every category, and the turnkey setup puts the licence, visas and bank account on one timeline.

For owners planning to stay long term, residence through the FZCO can lead to a Golden Visa (10 years in Dubai under GDRFA rules; check the issuing emirate), for example through property worth AED 2 million or more or through salary and professional criteria. A Golden Visa means your residence no longer depends on the renewal of one company.

VAT, e‑invoicing and ongoing compliance

A free zone company is inside the VAT system like any other business. Registration is mandatory once taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to within the next 30 days, and voluntary from AED 187,500, which helps if you want to reclaim input VAT early. Being in a free zone does not make you exempt. Only designated zones have special treatment, and it applies mainly to goods; services are generally standard-rated at 5%. See VAT for registration and filing.

Business-to-business e‑invoicing becomes mandatory in stages. Businesses with revenue of AED 50 million or more must appoint an Accredited Service Provider by 30 October 2026 and issue e-invoices from 1 January 2027; smaller businesses must appoint one by 31 March 2027 and start on 1 July 2027. Since 1 July 2026 only the Ministry of Finance pilot and voluntary adoption are running. For a new FZCO the practical step is to choose accounting software that can produce the structured format, which costs little now and a lot to add later.

All of this rests on bookkeeping. Whether or not you claim QFZP, you need accurate books to file corporate tax and, in most zones, to pass the annual audit. Bookkeeping done properly from the first month is what makes a 0% claim defensible and the audit straightforward.

Common mistakes in free zone setups

Most costly problems are visible in advance once the numbers are written down. Activities that do not match invoices are the usual one: a licence for management consultancy while you invoice for software resale causes banking and tax trouble as soon as anyone checks. A visa allocation bought too small to save a little at the start gets upgraded at a higher price in the month you hire. And a heavily discounted first-year package can renew at a far higher price in year two.

The way to avoid all three is the same: have the full two-year cost, the activity list and the visa plan in writing before you sign anything. That is how we cost every setup, from the zones' own fee schedules and against what your business actually does. If you are unsure which structure fits, compare the free zone with the mainland and offshore routes.

Free zone licence fees by zone

Frequently asked questions

This is general information on UAE rules. It is not legal, tax or immigration advice for your situation. Rules and government fees change; we confirm the position for your facts in writing before you act.