Dubai company formation: free zone, mainland and offshore options

Benefits of mainland setup

• No restrictions on trading within the UAE or internationally
• Ability to bid on government contracts
• No limits on the number of visas (based on office size)
• 100% foreign ownership in most sectors
• Greater flexibility in choosing office locations across Dubai
• Easier bank account opening compared to free zone and offshore entities

Cost range

Mainland company setup costs typically range from AED 15K to AED 35K in the first year. This includes the trade license, initial approval, registration fees and a local service agent (required for professional licenses). Office space is an additional cost, with Ejari-registered offices starting from around AED 15K per year.

Professional vs. commercial license

A professional license covers service-based activities such as consulting, IT, legal and marketing. It allows 100% foreign ownership but requires a UAE national as a Local Service Agent (LSA), whose role is purely administrative with no equity stake. A commercial license covers trading activities such as import/export, retail and general trading, and is structured as an LLC.

Offshore companies

Offshore companies in Dubai are designed for international business activities. They cannot conduct trade within the UAE market but are useful for asset protection, holding structures, intellectual property management and international invoicing.

Popular offshore jurisdictions

The two main options for offshore company formation in the UAE are:

• RAK ICC (Ras Al Khaimah International Corporate Centre): The most popular and cost-effective choice. Setup costs start from around AED 11K with annual renewals around AED 8K . Incorporation takes just 1 to 3 business days.
• JAFZA Offshore: A more established option with higher credibility among international banks. Setup and annual costs are higher, typically starting from AED 19K . JAFZA offshore companies can own property in Dubai's designated freehold areas.

Common uses for offshore companies

• Holding company for real estate or investments
• International trading and invoicing
• Intellectual property ownership
• Estate and asset protection planning
• Parent company for subsidiaries in the UAE or abroad

Key limitations

Offshore entities cannot conduct business directly within the UAE, cannot obtain residence visas (in most cases) and cannot lease physical office space in Dubai. They are not subject to UAE corporate tax if they have no nexus in the country, but this should be assessed on a case-by-case basis.

Corporate tax considerations

The UAE introduced federal corporate tax effective from June 2023. The standard rate is 9% on taxable income exceeding AED 375K per year. Income below that threshold is taxed at 0%, effectively creating a generous small-business exemption.

Free zone tax advantages

Free zone companies that qualify as a Qualifying Free Zone Person (QFZP) can benefit from a 0% corporate tax rate on their qualifying income. To meet QFZP status, a company must:

• Be incorporated and registered in a UAE free zone
• Maintain adequate economic substance within the free zone
• Derive "qualifying income" as defined by the regulations
• Not elect to be taxed under the standard corporate tax regime
• Prepare and submit audited financial statements

Non-qualifying income earned by a QFZP (such as income from mainland UAE sources) is still taxed at the standard 9% rate. Businesses must keep clear records to distinguish between qualifying and non-qualifying revenue streams.

No personal income tax

The UAE does not levy personal income tax on individuals, regardless of the company structure. This applies to salaries, dividends and capital gains at the personal level. VAT is charged at 5% on most goods and services.

Setup costs and timeline comparison

The following comparison summarizes the key differences between the three company types available in Dubai.

Practical steps to register your company in Dubai

While the exact process differs slightly by company type, the general steps to register a company in Dubai follow a consistent pattern.

Step 1: Choose your business structure and activity

Decide whether a free zone, mainland or offshore entity best fits your business model. Identify your specific business activities, as these determine the license type, eligible free zones and regulatory requirements.

Step 2: Select a trade name

Submit at least three proposed company names to the relevant authority (DET for mainland, or the free zone authority). Names must comply with UAE naming rules, avoiding religious references, abbreviations and names already in use.

Step 3: Gather required documents

The standard documentation package includes:

• Passport copies of all shareholders and directors
• Proof of residential address (utility bill or bank statement)
• A brief business plan outlining activities and projected revenue
• No-objection certificate (NOC) if currently employed in the UAE
• Board resolution or power of attorney (for corporate shareholders)

Step 4: Obtain initial approval and license

Submit your application and documents to the relevant authority. For mainland companies, DET issues an initial approval before you secure office space. Free zones handle the entire process internally, often issuing the license within days.

Step 5: Lease office space

Mainland companies need an Ejari-registered lease agreement. Free zone companies choose from the workspace options available within their zone, ranging from flexi-desks to full offices. Offshore companies typically do not require physical office space.

Step 6: Open a corporate bank account

Bank account opening in the UAE requires your trade license, shareholder identification, proof of office address and a business plan. Most banks also request personal bank statements and details of expected transaction volumes. The process takes 2 to 4 weeks on average, though some free zones offer expedited banking services.

Banks in the UAE apply strict anti-money laundering (AML) and know-your-customer (KYC) procedures. Minimum balance requirements range from AED 25K to AED 500K depending on the bank and account type. Having clear documentation and a well-prepared business plan significantly improves approval chances.

Step 7: Apply for residence visas

Once the company is established, you can apply for residence visas for yourself and employees. Free zone and mainland companies both support visa sponsorship. The number of visas available depends on your license type and office size.