Quick Answer
A free zone is a special UAE jurisdiction administered by its own authority, offering 100% foreign ownership, simplified company formation, and corporate-tax incentives — but with restrictions on direct trade with the UAE mainland market.
The UAE has 40+ free zones, each operated by its own authority and tailored to a specific industry: DMCC for commodities, DIFC and ADGM for finance, Dubai Internet City for tech, JAFZA for logistics, etc. Free-zone companies have 100% foreign ownership by default and historically operated outside mainland tax and customs regimes.
The trade-off: a free-zone company can sell to other free-zone companies, export internationally, or sell to UAE mainland companies through an importer or distributor. It cannot invoice end-customers in the UAE mainland directly without a special permit (the Free Zone Mainland Operating Permit introduced in 2023 partially addresses this).
Free-zone licences cost AED 12,000–50,000+ per year depending on the zone. The 2023 corporate-tax law applies a 0% rate to qualifying free-zone income (essentially income from outside the UAE or to other qualifying free-zone entities) and 9% to the rest.
Frequently asked questions
What is a free zone in the UAE?
A special jurisdiction run by its own authority offering 100% foreign ownership, simplified company formation, and corporate-tax incentives — with restrictions on direct trade into the UAE mainland market.
What is the difference between a free zone and a mainland company?
A mainland company (licensed by DET in Dubai) can trade anywhere in the UAE; a free-zone company gets 100% ownership and tax incentives but cannot invoice mainland end-customers directly without a distributor or special permit.
How much does a free-zone licence cost?
Roughly AED 12,000–50,000+ per year depending on the zone.
Can a free-zone company do business on the mainland?
Only through an importer or distributor, or with a special permit (the Free Zone Mainland Operating Permit introduced in 2023) — not by invoicing mainland end-customers directly.
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