Who this is for
- Consultants, agencies and technology businesses serving clients mainly outside the UAE
- International trading and re-export businesses
- Founders who want a cost-conscious start with a small team
- Groups setting up a UAE holding or regional headquarters entity
- Businesses reviewing whether their existing free zone still suits them
What Scaleon helps with
- Shortlisting free zones that permit your activities
- Comparing packages, visa allocations, premises options and renewal costs
- Preparing the application, shareholder KYC and supporting documents
- Explaining how the company can serve mainland customers within the rules
- Corporate Tax registration awareness and Qualifying Free Zone Person considerations
- Preparing bank application documents and setting up VAT and bookkeeping processes
What a free zone company is
A free zone company is licensed and registered by a free zone authority rather than an emirate's economic department. It may carry on its licensed activities within the free zone and with customers outside the UAE. Free zones are typically known for full foreign ownership, streamlined registration and, for some zones, customs advantages for goods.
Comparing free zones
Free zones differ in ways that are not obvious from marketing material. A useful comparison looks at the total cost over several years, not just the first-year package, and at whether the zone suits how you will actually operate.
- Whether each of your activities is available, and on which licence type
- Location and whether you need a presence in a particular emirate
- Number of visas included in each package and the cost of adding more
- Premises options, from flexi-desk to dedicated offices and warehouses
- Renewal fees, and any audit or annual filing requirements set by the zone
- How familiar banks are with companies from that zone and your sector
Shareholders, visas and flexi-desk options
Most free zones accept individual and corporate shareholders, and many allow a single shareholder. Visa eligibility is generally linked to the package or space leased. Several free zones offer flexi-desk or shared-workspace packages that can support a small number of visas, which suits early-stage businesses; the exact allocation depends on the zone and package.
Serving mainland customers
A free zone company generally cannot trade directly in the UAE mainland market. Where mainland sales are part of the plan, common approaches include working through a licensed mainland distributor or agent, opening a mainland branch or company, or using a specific permit where a free zone and emirate offer one. These choices also matter for tax, because transactions with mainland customers can affect whether income is treated as qualifying for Corporate Tax purposes.
Corporate Tax for free zone companies
Free zone companies are within the scope of UAE Corporate Tax and must register with the Federal Tax Authority and file returns. A free zone company that meets every condition to be a Qualifying Free Zone Person (QFZP) may apply a 0% rate to its qualifying income, while non-qualifying income is taxed at 9%. The 0% rate is not automatic and is assessed every tax period.
If any condition is not met, the company generally loses QFZP status for that period and the following four tax periods, and becomes subject to the standard rates. Because a QFZP cannot elect Small Business Relief, the comparison between regimes should be modelled before the first return.
- Maintain adequate substance in the free zone, such as qualified employees, assets and operating expenditure appropriate to the activity
- Derive qualifying income, generally from qualifying activities or transactions with other free zone persons, excluding excluded activities
- Keep non-qualifying revenue within the de minimis limit, currently the lower of 5% of total revenue or AED 5 million
- Comply with arm's-length rules and keep transfer pricing documentation
- Prepare and maintain audited financial statements
- Not elect to be subject to the standard Corporate Tax rates
VAT, accounting and banking documentation
Free zone status does not remove VAT. Unless a free zone has been designated for particular goods treatment, VAT generally applies in the same way as on the mainland, and the usual registration thresholds apply. Proper accounting records are needed for Corporate Tax and VAT, and for audited financial statements where required.
Banks often ask free zone companies to show genuine operations: who the customers are, where the money comes from, and why the business is in the UAE. A clear business profile, contracts or letters of intent, and an expected transaction summary help support the application.
Free zone selection questionnaire
Answer five questions to build a checklist of what to look for when comparing free zones.
What to look for in a free zone
Answer the questions to build your checklist
Free zones change packages, fees and activity lists regularly. We compare current options for your exact activity before you commit — this checklist is general guidance, not a recommendation of a specific zone.
Information usually needed
- Passport copies and proof of residential address for shareholders and directors
- A short business plan or activity description, which some free zones require
- Professional CV or profile of the main shareholder, where requested
- Proposed company names in order of preference
- For corporate shareholders: incorporation certificate, constitutional documents, register of shareholders and board resolution, legalised as required
What you receive
- A shortlist comparison of suitable free zones, covering activities, visas, premises and renewal costs
- Coordinated application and KYC submission with the chosen authority
- Copies of the issued licence and incorporation documents
- A first-year compliance note covering Corporate Tax registration, QFZP considerations, VAT assessment and bookkeeping
What affects the fee
- Free zone selected and package or premises type
- Number of activities and whether any need additional approval
- Number of shareholders and visas
- Whether corporate shareholders are involved
- Optional support such as bank application preparation and tax registration
- Free zone authority fees, charged at cost
Quotations are itemised, with government fees shown separately from professional fees.
How the process works
- 1
Requirements review
We confirm your activities, customer locations, visa needs and budget.
- 2
Free zone shortlist
We compare two or three suitable free zones and explain the trade-offs, including multi-year renewal costs.
- 3
Application and KYC
We prepare the application, collect KYC documents and coordinate submission and any authority queries.
- 4
Licence issuance
Once the authority approves, the licence and incorporation documents are issued and shared with you.
- 5
Tax and banking readiness
We support Corporate Tax registration, assess VAT and QFZP points, and help prepare bank application documents.
Frequently asked questions
Do free zone companies pay Corporate Tax?
Free zone companies must register and file Corporate Tax returns. A company that qualifies as a Qualifying Free Zone Person can apply 0% to qualifying income, with non-qualifying income taxed at 9%. Companies that do not qualify are taxed at the standard rates.
Can a free zone company sell to customers on the mainland?
Generally not directly. Options include a mainland distributor, a mainland branch or company, or a specific permit where available. Mainland transactions can also affect Corporate Tax treatment.
What is a flexi-desk?
A flexi-desk is a shared workspace package offered by some free zones. It provides a registered address and may support a small number of visas, depending on the zone.
Do free zone companies need to register for VAT?
VAT registration depends on taxable supplies and imports against the statutory thresholds, in the same way as for mainland businesses. Being in a free zone does not exempt a company from VAT.
How do I choose between free zones?
Compare whether your activities are permitted, visa allocations, premises options, renewal costs over several years, location and bank familiarity. We prepare this comparison for your shortlist.