Free Zone: 100% foreign ownership and 0% personal taxes
A Free Zone allows you to own 100% of your company without the need for a local partner, something that was historically not possible in the rest of the country. It is the most common option for SMEs and self-employed professionals invoicing international clients.
The tax advantages are clear: 0% personal income tax, exemption from Corporate Tax for qualifying income and no customs duties on goods that do not enter the local market. That said, free zones do not allow you to sell directly to local consumers or businesses without going through an authorised Mainland distributor.
There are more than 40 free zones in Dubai, each specialised in a sector: DMCC and JAFZA for trade, Dubai Internet City for technology or IFZA for general services.
Key points
- 100% foreign ownership without a local partner
- 0% personal income tax
- Exemption from Corporate Tax for qualifying income
- No direct access to the local market without a distributor
Mainland: direct access to the UAE market
A Mainland company can operate throughout the territory of the United Arab Emirates and sell directly to local clients, which makes the difference in the free zone vs mainland comparison if your business depends on the domestic market.
It also allows a broader range of activities, including sectors such as restaurants, retail, construction or professional services with a physical presence. Since the recent reforms, most activities allow 100% foreign ownership, without the need for an Emirati partner.
Key points
- Direct access to the local UAE market
- A greater number of permitted activities
- Possibility of opening physical offices and shops
- 100% foreign ownership in most sectors
Taxes in both cases: 9% Corporate Tax and 5% VAT
Both in a Free Zone and on the Mainland, the federal Corporate Tax of 9% applies to profits exceeding AED 375,000 (around €94,000). Below that threshold, the effective rate is 0%.
VAT is 5% in both frameworks, applicable to your sales and deductible on your purchases. Individuals do not pay personal income tax in Dubai, which makes the Emirates a fiscally attractive environment.
Free Zones maintain the Corporate Tax exemption as long as the income is qualifying and does not come from operations with the mainland, a key nuance when choosing.
Key points
- Corporate Tax: 9% on profits above AED 375,000
- VAT: 5% on sales and purchases
- 0% personal income tax
- Free Zone: CT exemption for qualifying income
Costs and timelines: 1 to 3 weeks
The cost of the service is quoted on a bespoke basis after analysis with our specialists. The timeline to have the company operational is 1 to 3 weeks, one of the fastest in the region.
The final quote depends on the free zone chosen, the number of residence visas you need and the activity. At Filnet we prepare a fixed comparison for your specific case.
Which one to choose according to your business?
Choose a Free Zone if you sell services or products to clients outside the UAE, you want 100% ownership and you are looking for maximum fiscal and cost simplicity. It is the majority option among those who use Dubai as a base for international billing.
Choose Mainland if your business needs to sell within the Emirati market, open a physical premises or carry out an activity restricted in free zones. Access to the local market is the decisive factor.
The free zone vs mainland decision is not reversible without cost: migrating a company involves procedures and expenses. It is best to define it well from the start.
Key points
- Free Zone: export and services to international clients
- Mainland: direct sales to the UAE market and retail
- Both: valid for residence visas for you and your team
