Choosing a UAE free zone: the decisions that actually bind

Founders choose a free zone on price and meet the constraint afterwards: the activity is not licensable there, the desk caps them at three visas, the 0% was never available for what they sell, or the address is a problem at the bank. None of that is visible in a package comparison, and all of it is decided before price is.

This is a framework, not a directory. Forty-five zones collapse into four families. Within a family the differences are marketing; between families they are structural — different law, different regulator, different quota mechanics, different exit.

Start by discarding the headline

100% foreign ownership stopped being the differentiator in 2021. Federal Decree-Law No. 26 of 2020, amending the Commercial Companies Law, annulled the requirement for a commercial company to have a major Emirati shareholder or agent. Full foreign ownership is now available for more than 1,000 commercial and industrial activities on the mainland, excluding activities of strategic impact in seven sectors — Abu Dhabi identifies 1,105 of them.

A founder choosing a free zone in order to own their own company is choosing on a basis that no longer decides anything. Almost every zone still leads with it. Read past it.

What a free zone actually is

A free zone is a defined area with its own authority — licensing body and registrar of companies, applying its own companies regulations rather than the federal Commercial Companies Law, and at the two financial free zones hosting a regulator and courts of its own. The entity forms are the FZE, the FZCO or FZ-LLC, and a branch. Share capital is a per-zone question: JAFZA prescribes no minimum, requiring only capital "sufficient for the activities for which it is licensed"; Dubai Internet City requires 10,000 paid up for an FZ-LLC and nothing for a branch.

A free-zone licence does not give you onshore trading by default — with a significant 2025 exception in Dubai, below — nor government tenders, which are generally restricted to mainland entities, nor any regulated activity without its regulator. Financial services need DFSA authorisation in DIFC, FSRA authorisation in ADGM, or a Central Bank licence onshore; clinical healthcare, education, legal practice and audit are gated the same way.

The eight axes, in binding order

This is the spine; everything after it is elaboration.

• (a) Activity permissibility and regulator. The authority's activity list is the first hard constraint. If the activity cannot be licensed there, nothing downstream matters.
• (b) Where your customers are. Three cases, three answers. Mainland UAE businesses and consumers: a free zone is friction. Goods for export and re-export: you need customs standing and warehousing. Services sold abroad: almost any zone works, and this is where cost-led zones are genuinely rational.
• (c) Corporate tax outcome. Whether the 0% is realistically available for what you sell, to whom.
• (d) Visa quota needed. Quota belongs to the facility, not the licence. Need eight people on residence visas and a desk capped at three has disqualified itself.
• (e) Facility and substance. Related to (d), different constraint: (d) is immigration, this is tax and banking.
• (f) Cost over three years. Not year one, which is engineered to win a comparison.
• (g) Banking acceptability. No bank and no regulator publishes a zone whitelist, so structural drivers are all anyone can honestly work with.
• (h) Exit cost. Never considered at selection; disproportionately painful later.

Founders start at (f) and finish at (f), having chosen wrongly. Cost is sixth because each of the five axes above it can independently make a zone unusable, and none of them is repaired by a discount.

The most useful line in that list is that (b) and (c) are the same question. Under the qualifying free zone person regime, income from a person outside the free zones is qualifying only where the activity sits on a defined list — so your customers set your tax rate. A free-zone consultancy selling to mainland clients is very probably paying 9%, whichever zone it picked and whatever the zone told it.

Four families, not forty-five zones

Financial free zones — DIFC and ADGM

Not free zones in the ordinary sense but separate legal jurisdictions, with their own commercial law, courts and financial regulator; ADGM applies English common law directly, and both have their own employment, data protection and insolvency regimes. They suit regulated financial services, family offices, holding structures where governing law matters, and any counterparty who wants an English-law contract.

From 1 January 2025 ADGM cut its licence fees to USD 5,500 initial and USD 5,000 renewal for non-financial, USD 2,500 and USD 2,000 for retail and USD 16,700 and USD 16,200 for financial services, plus USD 300 for data protection each time; premises are extra and not published. DIFC's standard fee schedule is not published in retrievable form — what it does publish is the Innovation Licence at USD 1,500 a year plus co-working at USD 250 a month, for new registrants in defined technology sectors. ADGM has the sharpest facility rule in the market: physical space is required and hot-desking is not accepted.

Commodity and trade zones — DMCC, JAFZA, DAFZ

Built around physical goods, logistics and customs position: JAFZA at the Jebel Ali deep-water port, DAFZ airside at Dubai International, DMCC the commodity and general-trade zone in JLT. They suit import and re-export, commodity trading and anything needing warehousing — and they are the default where a bank or a large counterparty must recognise the licence without explanation.

DMCC is the only large zone publishing a full schedule of charges, which makes it the reference point for what the others are hiding: a standard trading or service licence at AED 20,265 a year, general trading at AED 50,265, registration AED 9,020, articles of association AED 2,020, establishment card AED 1,825 a year, flexi desks AED 16,000–19,000 and serviced offices AED 35,000–140,000, with amendments, additional licences and share transfers each separately priced. JAFZA and DAFZ publish no prices at all.

Cost-led general zones — IFZA, Meydan, SHAMS, RAKEZ, SPC

The volume market: headline price and speed, sold largely through agents. They suit service businesses selling outside the UAE, freelancers, consultants and holding vehicles. They do not suit anyone selling into the mainland at scale, anyone needing more than about six visas, or anyone whose tax position depends on demonstrable substance.

Pricing transparency is itself a selection signal. IFZA publishes no prices, quoting per deal through registered agents — any IFZA figure you are shown is an agent's, not the zone's. Meydan publishes a licence from AED 12,500 for up to three activity groups and a flexi desk, explicitly at zero visa allocation. SHAMS publishes a real ladder, AED 8,050 to AED 16,223 across 0 to 6 visas — the clearest published evidence of what a visa slot costs on the licence side. RAKEZ publishes AED 14,000 a year all-in with one residence visa and a same-renewal-price guarantee, plus three further visas at AED 4,000 each. SPC publishes an entry price with per-item add-ons — visa allocation AED 1,600, establishment card AED 640, e-channel registration AED 2,280 — though its own site carries two different entry figures.

Sector zones — TECOM, DHCC, Dubai South, Masdar

Built around an industry cluster, where the value is the neighbours, the landlord's specialisation and sometimes the regulator. The TECOM cluster — Dubai Internet City, Dubai Media City, Dubai Design District, Dubai Knowledge Park, the production and science parks — publishes no company licence prices, only that pricing is aligned to market rates; it does publish its quota rule. Dubai Healthcare City is a zone that is also a health regulator, licensing the facility and every clinician in it — the point of being there, and also the cost; its published price list is years old and should not be budgeted against. Dubai South publishes a tariff page whose content is not retrievable. Masdar City publishes Start Lite at AED 7,000 a year, two activities and one visa eligibility, lease excluded.

Five of the zones a founder is most likely to be sold — IFZA, JAFZA, DAFZ, Dubai South and most of TECOM — publish no prices at all. That is a finding, not a gap: where a zone publishes nothing, the only figure in circulation is an intermediary's, and it should never be substituted for the zone's own.

The tax axis, stated honestly

A free-zone licence does not mean 0%. It means the possibility of 0% on a defined subset of income, on five conditions, with a five-period penalty for failing any one of them. Every free zone person must register and file a return, whether or not it qualifies.

To be a qualifying free zone person you must maintain adequate substance in the zone, derive qualifying income, not have elected into the standard regime, comply with the arm's length principle and keep transfer pricing documentation, meet the de minimis requirement, and prepare audited financial statements regardless of revenue. That last is an annual cost cost-led marketing never mentions.

The activity list. Income from a person outside the free zones is qualifying only where it falls within the 13 qualifying activities in Ministerial Decision No. 229 of 2025, which repealed and replaced Ministerial Decision No. 265 of 2023 — anything citing MD 265 is out of date. The list is built for manufacturing, processing, trading of qualifying commodities, holding securities for investment, ship ownership and operation, reinsurance, fund management, wealth and investment management, headquarter services to related parties, treasury and financing, aircraft financing and leasing, distribution of goods in or from a designated zone, and logistics; ancillary activities sit separately and are not a fourteenth head. The excluded activities are led by any transaction with a natural person, subject to narrow exceptions — which removes the 0% thesis from every consumer-facing business. A free-zone shop selling to individuals has non-qualifying revenue on essentially every sale.

The de minimis rule. Non-qualifying revenue must not exceed the lower of 5% of total revenue or AED 5,000,000. Read that twice: the lower — below AED 100m of revenue the binding cap is always the 5%. It is a revenue test, not a profit test, and a cliff rather than a taper: breaching it does not tax the excess, it destroys the status.

One asymmetry decides more cases than founders expect: Small Business Relief is not available to a qualifying free zone person. The relief lets a resident person with revenue of AED 3,000,000 or less elect to be treated as having no taxable income, and it now runs to tax periods ending on or before 31 December 2029 under Ministerial Decision No. 131 of 2026. A small mainland company under AED 3m can therefore pay less tax than a free-zone company that reached for the 0% and missed.

The election out

A free zone person may elect out of the qualifying regime onto standard rules. The election binds for the year it is made and the four following, so it is not a switch to flick annually. But for a small free-zone consultancy selling to mainland clients — the most common shape of business in the cost-led zones — electing out and claiming Small Business Relief can beat chasing a status it will never satisfy. On one side: a mandatory annual audit, transfer pricing documentation, a de minimis measured in tens of thousands of dirhams, and 9% on the mainland income anyway. On the other: a simplified return and no tax below AED 3m of revenue. Almost nobody states it, because nobody selling licences benefits from it. Registration, filing and penalties are the same for a free-zone company as for any other, and are covered in the corporate tax guide below.

Visa quota is a property of the facility

Quota does not come with the licence. It comes with the premises, and it is the constraint that most often invalidates a chosen zone after the founder has paid.

The spread is real, not a sourcing artefact: Dubai Internet City's rule is around 60% more generous per square metre than DMCC's, and on floor area the mainland comparator beats both.

Quota is raised three ways, in ascending order of pain. Buy allocation where the zone sells slots à la carte. Upgrade the facility — desk to serviced office to leased area — the only route at DMCC, ADGM, Dubai Internet City and DAFZ. Or apply for a discretionary increase, which DMCC grants only to a company operating from a physical unit and expressly not from a business centre, flexi desk or any shared workspace, on a justification letter and fees. JAFZA charges nothing for the equivalent.

If you will need more than about three visas, the flexi-desk price you were quoted is not your price. Model the office, and compare zones on that basis.

Substance: four audiences who do not agree

The zone accepts a flexi desk or co-working membership as a registered address and licenses against it — the easiest test, and the only one most founders meet before paying. Immigration ties quota to the facility. Lease registration is a third test. A flexi desk produces a membership agreement, not a registered lease, and bank onboarding, some visa categories and mainland branch registration expect a registered lease. In Dubai that is Ejari at AED 160 per contract; Abu Dhabi's equivalent is Tawtheeq.

The Federal Tax Authority applies the substance test for the 0%: core income-generating activities must occur in the zone, supported by adequate assets, qualified full-time employees and operating expenditure there. Outsourcing to another free zone person is permitted under adequate supervision.

There is no published bright line on flexi desks and this guide will not invent one. What can be said is that adequacy is judged against the income claimed, and that "adequate operating expenditure in the free zone" is hard to evidence when the only free-zone spend is a AED 16,000 desk licence with four hours of weekly access. ADGM refusing hot desks and DMCC refusing quota increases to flexi-desk holders are two authorities conceding the point in their own documents.

Banks are the strictest and least transparent audience, and no bank or regulator publishes acceptance criteria by zone — so every zone-specific banking claim in this market is unverified, and none appears here. What is observable is structural: physical premises read better than shared desks, UAE-resident signatories better than non-resident ones, and an activity that matches the facility better than a general trading licence run from a desk. Zones sell "banking assistance"; it buys introductions, not outcomes.

Free zone, mainland, offshore — and what changed in 2025

The federal default is that a free-zone company may not carry on business outside the free zone — that is, on the mainland. In Dubai that default is now qualified, and the qualification reframes the comparison.

Dubai Executive Council Resolution No. 11 of 2025, regulating the conduct of free zone establishments' activities within the Emirate of Dubai, was issued on 3 March 2025. A free-zone establishment may operate in mainland Dubai under an authorisation from the Department of Economy and Tourism: a branch licence at AED 10,000 a year, renewable, or a temporary permit at AED 5,000 for not more than six months. It must keep separate financial records for the activities conducted outside the zone, and its workforce may stay on the free-zone portal. DIFC licensees are excluded, which makes DIFC's separation from mainland Dubai stricter than any other Dubai zone's.

Two caveats belong in the same breath. It is Dubai only — a SHAMS, RAKEZ, SPC or Masdar company faces the classic restriction unchanged. And it solves the licensing problem, not the tax problem: a mainland branch is a domestic permanent establishment, taxed at 9% and outside the qualifying regime, and that mainland revenue is non-qualifying revenue eating the de minimis. A Dubai free-zone company can spend AED 10,000 a year to legalise precisely the revenue that ends its 0%. Resolution 11 makes onshore selling legal. It does not make it tax-free.

When mainland is simply the right answer. When your customers are UAE consumers or mainland businesses and you are not in Dubai, or you are but do not want a branch and the permanent establishment with it. When you want government or semi-government work. When you need a retail, food and beverage, clinic or other physical consumer-facing location. When your activity is on the mainland list but not licensable in the zone you like. When you will be under AED 3m of revenue and Small Business Relief is worth more than a status you would never satisfy. And when you need headcount cheaply relative to floor area. Mainland is wrong when your revenue is genuinely export or intra-free-zone, when you want a common-law forum, or when you need a customs-advantaged warehouse.

Offshore is a holding tool, not a business. A RAK ICC international business company costs AED 3,250 to incorporate and AED 3,950 to renew, and carries no residence visas, no office, no trade licence and no UAE market access. Its uses are asset holding, intellectual property, property title and group structuring. It is not an alternative to a free zone; it is a different instrument.

Three-year cost, and the fees nobody quotes

Year-one pricing is engineered to win a comparison. Almost every advertised figure is a "from" price for a zero-visa licence with a shared desk — and the visa is what the founder is actually buying.

Meydan's is the clearest worked example, because Meydan publishes the components. The headline is AED 12,500 for a licence with up to three activity groups and a flexi desk, at zero visa allocation. Add visa allocation AED 1,850, an employment visa AED 3,500 and medical plus Emirates ID AED 2,250, and one person on one visa reaches roughly AED 20,100 in year one — a 61% overrun on the number that won the comparison, before an accounting fee is paid.

Two contrasts run the other way. RAKEZ publishes AED 14,000 a year all-in with one residence visa and a same-renewal-price guarantee: AED 42,000 over three years, the most legible three-year number any zone publishes. DMCC Jump Start is AED 43,780 in year one, which reads expensive against Meydan's headline and is not once that headline is corrected; DMCC also publishes a three-year package at AED 120,000, which is the figure to compare.

The fees that do not appear in a package comparison:

• Establishment or immigration card — annual, and separate from the licence.
• E-channel or immigration portal registration — a four-figure item at some zones, routinely omitted.
• Visa allocation and the visa itself are two charges. Founders budget one and pay both.
• Medical fitness, Emirates ID and status change — excluded by name from most packages, DMCC's included.
• Registration and articles of association fees — separate from the licence; at DMCC, together larger than it.
• Activity change or addition — charged, and named as an exclusion in Meydan's terms.
• Address amendment — incurred every time you move from desk to office, which is what growth forces.
• Share transfer — relevant the moment you take an investor; AED 4,515 at DMCC.
• No-objection certificates — needed repeatedly for banking, visas and moves.
• Additional licence — a second activity outside your category can cost a whole second licence, AED 20,265 at DMCC.
• The mandatory annual audit for a qualifying free zone person — charged by an auditor, not the zone.
• Corporate tax and VAT compliance, and bookkeeping — recurring, never in the licence price.
• End-of-service gratuity, accruing from the first employee.
• Mainland access — AED 10,000 a year, or AED 5,000 for six months, in Dubai under Resolution 11 of 2025.
• Exit — below.

Two structural warnings. General trading is not a cheap upgrade at any zone: at DMCC it is AED 50,265 against AED 20,265 for a standard licence. And no promotional price in this market publishes an end date — every zone reserves the right to withdraw a package, so a three-year plan resting on a year-one promotion rests on nothing.

Exit — why the choice is stickier than it looks

Moving between free zones is sold as redomiciliation: a no-objection certificate and an exit certificate from the current authority, then acceptance by the new one, without liquidating. That route exists in principle but is not universally available — it depends on both authorities permitting transfer out and transfer in, and several large zones in practice require an incoming company to incorporate fresh. Treat "you can just move" as unverified for any specific pair of zones, and get both authorities' position in writing first.

Even at best, moving is not administrative. Every residence visa is cancelled and re-issued, establishment cards with them. VAT registration must be re-registered with the Federal Tax Authority. Bank continuation is at the bank's discretion — some allow it, some require fresh onboarding and a full KYC review. Where migration is unavailable the route is liquidation and fresh incorporation, at which point the incorporation date, the banking history and the contracts all reset.

Free zone to mainland is not a transfer at all. The company is liquidated and a new mainland entity incorporated — or, in Dubai since March 2025, a mainland branch is licensed alongside the surviving free-zone entity, with the tax consequence set out above.

Liquidation means a licensed liquidator, cancellation of every visa, settlement of gratuity, bank closure, VAT deregistration taking four to six weeks, final tax returns and multiple clearances — two to sixteen weeks, AED 5,000 to AED 25,000. Where the zone publishes an exit fee: DMCC winding up AED 4,015 plus de-registration AED 2,015; RAK ICC voluntary strike-off AED 1,500; ADGM strike-off USD 0.

The switching cost is not really the fee. It is the visas, the bank, the VAT re-registration and a quarter of the founder's attention. Choose as if you cannot move, because functionally you nearly cannot.

The worksheet

Answer these in order. The output is a family, not a zone — the zone is then a question of price, address and who answers the phone.