Dubai has over 20 different free zones (free trade zones) in which you can set up a company. But which free zone is the best for setting up a company, what is the procedure and how much does it cost to set up a company?
What free zones are there?
There are now over 20 different free zones in Dubai. These differ primarily in terms of the respective industry specialization and the licenses (business licenses) they issue. Here is an overview of the most important free zones in Dubai.
JAFZA (Jebel Ali Freezone)
One of the best known and oldest free zones in Dubai is JAFZA, short for Jebeli Ali Freezone. It was established over 40 years ago to boost Dubai's economic growth. This free zone has its own port and is of particular interest to industrial companies engaged in trade. Hundreds of billions of dollars of trade pass through JAFZA every year and is an essential part of Dubai's economy.
In addition to the port, JAFZA is one of the few free zones that also offers the option of renting warehouses. This is particularly important for traders in goods and raw materials.
THEZ
One of the fastest growing free zones is the DIEZ, short for Dubai Integrated Economic Zone. This free zone is located in the Dubai Silicon Oasis district and specializes primarily in the technology and services sector. Accordingly, there are many licenses in this area. DIEZ is also the free zone with which IFZA works together.
Ideal for service providers, online entrepreneurs, consultants, agencies and digital business models. Low entry costs, wide range of licenses, fast processing, good banking relationships. One of the most popular entry points for individual founders and small teams.
MEYDAN
The Meydan Freezone is also one of the most important freezones in Dubai and is located next to the well-known Horse Race Stadium in the Meydan district. In terms of licenses and services, the Meydan is very similar to the DIEZ and these freezones are not only geographically close, but are also strong competitors in terms of business.
Positioned similarly to IFZA/DIEZ, somewhat more flexible in terms of licensing and interesting for founders who want to bundle several activities under one roof. Also competitive prices and fast start-up times.
DMCC
Another important freezone in the retail sector is the DMMC, short for Dubai Multi Commodities Center. The freezone has been an important part of Dubai's freezone infrastructure for over 20 years. But the DMCC has also often been named one of the most important free zones worldwide.
DMCC originally specialized in trade (precious metals, energy, steel and agricultural products), but now has a broad base and has developed into a comprehensive economic hub in recent years.
DIFC
The most important location for financial and crypto companies is clearly the DIFC, short for Dubai International Financial Center. All major banks and financial institutions, as well as new exchanges, are listed in the DIFC.
Among tourists, the town is best known for its high-end restaurants and clubs.
Exclusively for financial service providers, funds, family offices, crypto companies with regulated activities and law firms. Own legal system (common law), own regulatory authority (DFSA), significantly higher costs and compliance requirements. Not suitable for standard start-ups.
Dubai Internet City / Dubai Media City
Specialized in tech companies and the media and creative industries. Strong network within the respective industry, physical office obligation, therefore more expensive than IFZA or Meydan.
Advantages of a Freezone company
Freezone companies in Dubai offer a number of advantages. Below is an overview of the reasons why this legal form has become so popular in recent years.
Advantages of the Freezone company vs Mainland
1. in principle Freezone companies in Dubai much cheaper. There are several reasons for this.
- Freezone companies do not need a physical office
- Freezone companies can be founded remotely
- Freezone companies are largely unregulated. Only a few licenses require regulation or approval by the authorities.
2. moreover, freezone companies can be set up and closed more quickly than mainland companies.
3. freezone companies do not need an Emirati sponsor. A company can therefore be owned by a foreign founder without restriction.
Special tax feature: the Qualifying Free Zone Person (QFZP)
With the introduction of the 9 % corporate tax in 2023, many freezone entrepreneurs are wondering whether the tax advantages of the freezone still apply. The answer: Yes - under certain conditions. Anyone who Qualifying Free Zone Person (QFZP) is classified as „qualifying income“ continues to pay 0 % corporation tax. One of the prerequisites for this is that the company demonstrates sufficient economic substance in the free zone, carries out its core activities within the free zone and generates certain types of income - known as qualifying activities. These include shipping, logistics, commodities trading and manufacturing activities. Non-qualifying income - such as income from local UAE businesses - remains subject to the normal 9 % tax. The exact classification depends on the specific business activity and should be discussed with a tax advisor prior to incorporation.
However, small businesses (less than AED 3,000,000 turnover) are still eligible for the Small Business Reflief, which exempts them from corporation tax. Otherwise, the aforementioned 9% corporation tax applies. In practice, you still receive an allowance of AED 375,000 (around €85,000) and can pay yourself a generous tax-free salary, which means that the tax-free withdrawals amount to several hundred thousand euros per year.
General advantages of the Freezone company
Independent of mainland companies, freezone companies are also very popular in international comparison and offer some interesting advantages from a global perspective.
Low taxes As described above, no tax is payable on company profits if turnover is less than AED 3,000,000. Above this amount, you benefit from an allowance of around AED 375,000 as well as numerous opportunities to reduce tax through depreciation or tax-free salaries.
High reputation The UAE now has a high reputation and has already been removed from the gray list of the FATF has been taken. Its international reputation beyond the Gulf is better than ever before.
Residence visa By creating a Freezone in Dubai company, you have the opportunity to create a Residence visa including Emirates ID in the UAE. This is one of the main arguments for setting up a company, especially for expats, in addition to the tax advantage. You can also open bank accounts locally.
Disadvantage: Restriction on the mainland
If you want to do business in Dubai yourself, you will need a Found a Mainland company must. Freezone companies are „restricted“ in their activities and business operations to Freezone and all countries of the world. So if you want to open a restaurant locally (in Dubai), you need a mainland company. Only certain (digital) services that can be carried out remotely may be charged to mainland companies.
In other words, if you operate worldwide or within the free zone, you should set up a free zone company. If you physically operate a business in the UAE and have local customers, you need a mainland company.
Examples: Restaurants, craft businesses, real estate companies, etc..
Freezone company formation procedure
The process of setting up a company in a free zone in Dubai is relatively clear, as are the costs (more on this later). Here is a step-by-step guide to setting up a freezone company in Dubai.
Freezone choice
The first and sometimes most important step is the choice of freezone. With over 20 freezones, the choice is correspondingly large and you should think carefully about which freezone to choose. The freezones differ mainly in terms of location, costs and licenses.
The location is less important in the selection process, as you don't have to travel to the Freezone every day. Usually 1-2 times a year in day-to-day business.
The costs are of course always decisive, although they do not vary greatly within Dubai. The free zones are in competition with each other and are therefore very similar in price. There are therefore no major differences here. Only outside Dubai is it cheaper, but we do not necessarily recommend this.
Foundation
Once you have decided on a free zone in Dubai, the second step is to set up the company. This is usually possible regardless of location or remotely and takes 3-5 working days.
After incorporation, you can theoretically open an account with certain online banks such as 3S Money or Currenxie. For all those who want to open an account with a physical bank or who already Emigrate to Dubaimust perform the following steps.
E-VISA / Entry
After incorporation, an E-VISA is usually applied for for the managing director (if he does not yet live in Dubai). With this E-VISA, entry into the UAE as an employee is officially possible. The E-VSIA must then be presented and stamped or scanned at passport control at the airport.
This step is essential; if it is skipped, enormous additional costs will be incurred as the VISA process will have to be restarted.
VISA / Emirates ID
With the stamped E-VISA or the E-VISA stored in the system, you can then start the process for the R-VISA (Residence VISA) and the Emirates ID start. This process is in turn divided into 3 essential steps.
- Medical Check - The medical check is a brief examination for highly infectious diseases such as: HIV/AIDS, syphilis, hepatitis A, B and C, tuberculosis and polio.
- EID Application - If the medical check is positive, you can apply for an Emirates ID. You then go to biometrics with this completed form.
- Biometrics - During biometrics, fingerprints are taken once. This provides clear identification for future transactions with the Emirates ID.
Once these three steps have been completed, the Emirates ID will be sent to the address provided. This usually takes 3 working days.
Bank Account Opening
As soon as the manager or you yourself have the Emirates ID, you can Open a bank account in Dubai. It is important that the company is not only set up correctly, but also has a legitimate appearance. Letterbox companies without physical or digital substance are generally rejected. It is therefore important to have a comprehensive web presence if you cannot prove that you have an office or similar. Website, LinkedIn and social media are mandatory.
Depending on the type of business you run, there are different banks that make sense. WIO is recommended for start-ups or service providers, Mashreq for companies of different types and corporations will be well served by FAB or HSBC.
Corporate Tax Registration
An essential step since 2023 is the registration of the company with the Dubai FTA, short for Federal Tax Authority. Anyone who fails to do so within 90 days risks severe penalties of up to AED 10,000.
In addition, it is necessary to register VAT or VAT-Exempt from a certain turnover. The threshold value for this is AED 375,000. Anyone who issues invoices within the UAE above this turnover must charge a 5 % VAT.
Accounting & annual financial statements
Ongoing tax compliance also includes ongoing bookkeeping and annual financial statements. For this purpose, it is recommended that an accountant or Tax consultants in Dubai to get involved.
Costs
The costs vary slightly depending on the free zone. Basically, you can assume that you can get a company with 3 licenses and a VISA for +- €5,000. This is usually required for the managing director. In addition, there are costs for the medical check, biometrics and issuing the Emirates ID. This is necessary if you want to open an account locally.
Additional VISAs for employees increase the costs accordingly. From the 4th employee onwards, it is also necessary to rent a physical office.
Costs are generally higher for 3 or more licenses. The combination of licenses is also decisive. If you combine commercial licenses with service licenses, additional costs usually arise.
Freezones that are located outside of Dubai usually cost a little less. However, they have a less good reputation and are usually not as reliable when it comes to processing. In some cases, there are also problems when opening an account.
If the entire process is to be supervised and handled by a professional service provider, we are usually talking about costs of €7,000 for a full service package. This includes a Freezone company including residence visa, Emirates ID (incl. medical check & biometrics) and account opening.
Frequently asked questions
The following is an overview of the most frequently asked questions when it comes to setting up a free zone company in Dubai or the UAE.
Can I set up a freezone company in Dubai and continue to live in Germany?
This is theoretically possible, but not necessarily advantageous in practice from a tax law perspective. This is because if you continue to live in Germany as a founder and managing director, the tax must also be paid in Germany. Germany's tax system is based on the so-called world income tax principle. This means that worldwide income must be taxed in Germany.
This does not apply to companies that are founded abroad and are actually managed there. This means that anyone who hires a local managing director (in Dubai) who actually manages the business can establish a de facto tax domicile in Dubai and benefit from the tax advantages.
Summary
Setting up a Freezone company in Dubai has numerous advantages and is very popular with expats or global entrepreneurs for good reason. The ease of incorporation, a large selection of licenses and tax advantages speak for Freezone. In addition, you can obtain your own residence visa via the Freezone to work in Dubai living to be allowed.
However, the foundation should be well considered and ideally accompanied once. After all, the costs are +-5,000 € for the company formation alone and this should be handled properly. It is not possible to reorganize or move the company to another free zone.
Finally, you should also know and comply with the legal framework. These include tax registration, bookkeeping and annual financial statements. Additional permits are required for certain activities, for example.
