Free Zone Companies in the UAE

Most comparisons of free zones are lists of amenities. The decision underneath them is legal, and it is made once: Article 5(1) of Federal Decree-Law No. 32 of 2021 provides that the Commercial Companies Law “shall not apply to companies incorporated in the free zones of the State where a special provision to this effect is stipulated in the laws or regulations of the relevant free zone” — and then adds the limb almost every guide leaves out: those companies are governed by the Decree-Law “if such laws or regulations permit them to conduct their activities outside the free zone in the State”. Article 5(2) leaves the conditions for entry and registration of such companies to a Cabinet decision.

Read the two limbs together and the practical consequence is unusual. Two companies that look identical on a letterhead — same activity, same shareholders, one in each of two zones — can be formed under two different bodies of company law, because one zone's regulations displace the federal statute and the other's do not. And the displacement is conditional: a zone whose regulations let its companies work outside the zone brings the federal law back over them. Trading into the mainland is therefore not only a licensing question. It can change which statute governs your shareholders' meetings, your managers' liability and your reserves.

Two federal provisions reach into the zones regardless. Article 336(1) carves free zones out of the general rule for foreign companies: other than foreign companies licensed to conduct their activities in free zones, a foreign company may not conduct an activity, or open an office or branch, inside the State without a licence from the Competent Authority and the Ministry's approval. That carve-out is precisely why a foreign parent can hold a zone licence without going through the Foreign Companies Register — and why the exemption evaporates the moment the same parent wants a mainland presence. Article 32 goes the other way: no company, entity or person incorporated or registered inside the State, in the free zones, or abroad may publish any advertisement in the State inviting public subscription in securities without the prior approval of the Securities and Commodities Authority.

The UAE Government Portal lists, for free zones, a private limited liability company, a Free Zone Company (FZ Co.), a Free Zone Establishment (FZE), a public joint stock company and a branch of a local or international company — adding that “all free zones might not register all types”, so the register you are joining decides the menu. What separates the forms is the number of shareholders and whether a shareholder may be a legal person rather than a natural one.

Terminology is where this gets misreported. It is often said that “FZ-LLC” is not an official term. As a blanket statement that is wrong. The Dubai Development Authority registers exactly three things and calls the first of them a Free Zone Limited Liability Company (FZ-LLC) — a separate legal entity whose shareholders may be individuals and/or corporates; a branch of a foreign or UAE company, which it describes as “a place of business that forms a legally dependent part of the parent company”; and a freelancer, or sole professional licence, issued in the professional's birth name rather than a brand name. FZ-LLC is an official entity type in that zone. What it is not is a form under the Commercial Companies Law, whose Article 9 permits five forms and none of them by that name, and it is not interchangeable with the FZE and FZCO used elsewhere.

The branch point deserves more weight than it usually gets. A branch has no separate legal personality, so your customer's counterparty is the parent company and the parent's balance sheet stands behind every contract the branch signs. That is sometimes exactly what a customer wants, and sometimes the reason a founder should have incorporated instead.

This is the question behind can a free zone company trade in the UAE, and the honest answer is that it can trade freely inside its zone and internationally, while access to the mainland market is regulated. The UAE Government Portal puts it plainly: free zone companies “are considered outside the UAE mainland jurisdiction”, direct sales in the mainland “are generally not permitted unless the company obtains the required mainland licences or approvals”, and to sell locally a free zone company “must either work through a licensed mainland distributor or establish a mainland branch or company”.

A mainland distributor is not a paperwork workaround, and it is worth being clear about what it does. It is an independently licensed mainland business that buys from you and resells on its own account, so your counterparty is the distributor and not the end customer: the distributor holds the customer relationship, prices the goods, and takes a margin that is a commercial cost rather than a government fee. It also changes your tax and VAT picture, because the transaction that lands in the UAE market is the distributor's, not yours. If you need the end customer relationship, you need a licence — not a distributor.

For goods the customs position runs alongside this. Goods entering the zone attract no customs duty and none is payable on goods held there for re-export; duty arises on movement into the mainland market, cleared under a customs declaration. Foreign trade, import, export and re-export are the part of the free zone proposition that genuinely is frictionless.

Dubai is the one emirate that has codified the alternatives in a single instrument. Executive Council Resolution No. 11 of 2025, issued 3 March 2025, applies to establishments wishing to conduct activities outside the free zones and does not apply to financial establishments licensed in the DIFC. Article 4(a) gives three routes; Articles 5(b) and 6(b) confirm a branch licensed under it has no separate legal personality; Article 3(b)(2) requires separate financial records for the activities conducted outside the zone; Article 10 applies the emirate's legislation, including its administrative penalties, to the activity; and Article 11 subjects it to audit and inspection under procedures agreed between the Department of Economy and Tourism and the zone authority. Article 9 required a list of the economic activities available under each route within six months of the Resolution taking effect — that list, not general guidance, is what tells you whether your activity qualifies for a permit or needs a branch.

Employment inside a zone is not a separate legal universe. The UAE Government Portal states that employees in free zones are “generally governed by the employment regulations of the relevant free zone authority, together with the provisions of” Federal Decree-Law No. 33 of 2021, and that certain financial free zones operate under their own independent employment frameworks. That matches the statute: Article 3(1) applies the Labour Law to all establishments, employers and workers in the UAE private sector, and the exclusions in Article 3(2) are government employees, the armed forces, police and security, and domestic workers. There is no free zone exclusion in the scope article. DIFC and ADGM sit apart because they are financial free zones with their own legislation, which is why Federal Law No. 8 of 2004 Concerning Financial Free Zones appears among the laws the portal lists as governing zone businesses — not because zones are outside federal labour law generally.

Work permits and residence visas are applied for through the zone authority rather than through the Ministry of Human Resources and Emiratisation, and the establishment card that opens the immigration file is issued in that channel too. On quota, the portal is deliberately unspecific: the number of visas a business can get “depends on various factors such as the package they have signed up for”, and it directs you to the zone for eligibility and for scope to increase the quota. There is no federal formula and no published national ratio. Any “one visa per X square feet” rule you are quoted is a particular zone's own allocation rule, and it belongs in writing from that zone before you sign a facility lease sized around it.

One provision is worth knowing before you assume a mainland branch means a second payroll. Article 8 of Executive Council Resolution No. 11 of 2025 allows an establishment licensed or permitted to work within the Emirate to engage its existing workforce registered on the free zone portal, and to continue to benefit from all free zone employment privileges applicable to that workforce. Outside that framework, a residence visa sponsored by a zone entity is granted for employment by that entity, and the exposure from ignoring it sits with employer and employee both.

These two are conflated constantly, and the mistake is expensive because it usually runs the wrong way. Article 50 of Federal Decree-Law No. 8 of 2017 treats a Designated Zone that meets the conditions in the Executive Regulation as being outside the State; Article 51 lets goods move between Designated Zones without tax becoming due; Article 52 lets the Executive Regulation specify when business conducted inside them is regarded as conducted in the State. The zones themselves are named in the list annexed to Cabinet Decision No. 59 of 2017 — not 2023, a date that circulates widely — as amended by Cabinet Decision No. 35 of 2018. We counted 23 zones on the Federal Tax Authority's published list on 17 August 2026, spread across all seven emirates. Being licensed in a free zone does not put you on it.

Then read Article 51 of the Executive Regulation, because it takes most of the concession back for anyone who is not moving physical goods:

• The status is conditional on the zone, not on you: it must be a specific fenced geographic area with security measures and customs controls monitoring entry, exit and the movement of goods, with internal procedures for keeping, storing and processing goods, and an operator complying with the Authority's procedures. Clause 2 provides that a zone which changes how it operates or breaches those conditions is treated as if inside the State.
• Clause 6: the place of supply of any services is inside the State if the place of supply is in the Designated Zone. A consultancy, agency or software business in a Designated Zone is making UAE supplies for VAT.
• Clause 5: goods supplied within a Designated Zone to be consumed there are supplied in the State, with narrow exceptions for goods incorporated into another good, exported with customs evidence, or moved into the State with import VAT evidenced.
• Clause 10: any person established, registered or resident in a Designated Zone is deemed to have a place of residence in the State for the purposes of the Decree-Law — so the registration thresholds apply to you like anyone else.

The short version: the Designated Zone regime is a goods regime. If you sell services, being inside one changes very little, and “my zone is outside the UAE for VAT” is the wrong sentence to build a pricing model on.

A zone licence is a company-law and customs arrangement. It is not a tax exemption, and the single most under-priced consequence of claiming the 0% corporate tax rate is the audit.

Article 2(1) of Ministerial Decision No. 84 of 2025 requires audited financial statements from two categories: at paragraph (a), a taxable person that is not a tax group and derives revenue exceeding AED 50,000,000 in the tax period; and at paragraph (b), a Qualifying Free Zone Person — with no revenue floor at all. A two-person zone company claiming 0% therefore carries the same audit obligation as a mainland group fifty times its size, and the audit has to be arranged, budgeted and completed rather than promised. Article 2(3) adds that a qualifying free zone person distributing goods or materials in or from a Designated Zone must comply with any additional procedures the Authority prescribes. Article 3 repeals Ministerial Decision No. 82 of 2023, which continues to apply to tax periods that commenced before 1 January 2025.

The 0% rate itself is a separate test with its own conditions in Article 18 of Federal Decree-Law No. 47 of 2022 and the decisions under it, including what counts as qualifying income, the de minimis calculation and what a breach costs. That test is set out in full on the qualifying free zone person page and is not repeated here — the point that belongs on this page is that the audit obligation is one of the conditions, so it is not optional, and a zone company that treats the accounts as a year-end formality has put its rate at risk before any of the income tests are even reached.

Everything else federal applies as normal: corporate tax registration whether or not tax is payable, VAT registration on the usual thresholds, ultimate beneficial owner filings, anti-money-laundering registration where the activity is in scope, and electronic invoicing as it phases in.

There is no single national register of free zone companies, and the searches that ask for one are usually asking one of three different questions. Each has a real answer.

“Which companies are in this zone?” Zones publish their own member directories, and the UAE Government Portal links a Dubai comparison feature that lets you filter zones by sector and by facility — warehousing, plots, and which zones support which activity. That is the right tool for “which zone suits a construction, media or logistics activity”, because permitted activity lists differ by zone and a contracting activity carried out on mainland sites needs mainland approvals whatever your licence says.

“Is this named company a free zone company?” Do not take that from a directory or from us. The National Economic Register is the federal platform for enquiring about a business licence and its activities, and it publishes the list of licensing authorities in the UAE; the authority named on a licence is what settles whether an entity is mainland or free zone. Ask a counterparty for its licence copy and check it there. We do not publish status claims about individual companies we have not verified, which is the honest answer to questions about any specific employer or supplier by name.

“Where is the list of finance companies?” Financial firms are licensed by the Central Bank of the UAE, or by the DFSA in the DIFC and the FSRA in ADGM, and each publishes its own public register. We could not read the Central Bank's register from here on 17 August 2026 — centralbank.ae returned HTTP 403 — so this page reproduces no list of licensed financial institutions. Go to the regulator's own register rather than to a compiled list, because the compiled ones are stale the day a licence is withdrawn.

Free zones exist in all seven emirates — the Federal Tax Authority's Designated Zone list alone names zones in every one of them — so proximity is rarely the binding constraint. Activity, facility and market access are.