How to set up a company in the UAE (2026): free zone vs mainland, cost & tax

Overview

The UAE is one of the most popular places on earth to incorporate, and for real reasons: a foreigner can own 100% of the company, there is no personal income tax on the salary or dividends you draw, and setting up a licence usually comes bundled with a renewable residence visa for you and your family. Since June 2023 the country also has a federal corporate tax, so the picture is no longer a flat 0% - it is a 9% headline rate with meaningful exemptions.

The two structures foreigners actually choose between are a free zone company (fast, packaged, and eligible for a 0% rate on qualifying income) and a mainland LLC (able to trade freely inside the UAE market and bid for government work). Both now allow full foreign ownership for the large majority of activities, so the real decision is about who your customers are and how you want to be taxed - not about finding a local sponsor.

Who it's for

A UAE company fits people who genuinely operate from, or intend to relocate to, the Emirates - or who run a clean, location-independent business and are ready to build real substance in the zone. It is a poor fit for someone who wants a nameplate abroad while living and working somewhere else, because the country where you actually manage the business will usually want to tax it.

• Founders and consultants who will move to Dubai or Abu Dhabi and become UAE tax resident
• Location-independent service and trading businesses that can put real staff, office and activity in a free zone
• Holding, IP or headquarters structures that want a credible 0% or 9% jurisdiction with 140+ tax treaties
• E-commerce and trading firms selling internationally (free zone) or into the UAE market (mainland)
• Not for: people staying tax-resident elsewhere who want an 'offshore' shell - CFC and management rules can pull the profit home
• Not for: anyone unwilling to file corporate tax returns, keep audited accounts, or maintain genuine local substance

Types of company

There are three practical routes. Most foreigners pick a free zone entity for speed and the 0% opportunity, or a mainland LLC if they need to sell inside the UAE. A true 'offshore' company exists but cannot trade in the UAE or sponsor visas, so it is mainly a holding vehicle.

Corporate tax & key taxes

The federal corporate tax (Federal Decree-Law No. 47 of 2022) applies UAE-wide. The 0% band on the first AED 375,000 of taxable profit is designed to protect small businesses; everything above is taxed at 9%. A separate 15% Domestic Minimum Top-up Tax (DMTT) took effect for financial years starting on or after 1 January 2025, but it only touches large multinational groups with global revenue of EUR 750 million or more - it is irrelevant to a typical founder.

How to set it up, step by step

1. Choose the structure and location - free zone (pick a zone such as IFZA, Meydan, DMCC or a financial free zone like DIFC/ADGM) or a mainland LLC via the emirate's Department of Economy.
2. Pick your business activities from the authority's list, since they drive your licence type and whether income can be 'qualifying' for the 0% rate.
3. Reserve a company name and get initial approval, submitting passport copies and basic KYC for each shareholder.
4. Sign the incorporation documents (MOA / application) and secure premises - a flexi-desk, office or, on the mainland, an Ejari-registered office.
5. Pay the fees and receive your trade licence and certificate of incorporation, usually within days to a couple of weeks.
6. Apply for the establishment card and your investor/partner residence visa: entry permit, medical fitness test, biometrics and Emirates ID.
7. Open a corporate bank account (budget several weeks and thorough source-of-funds checks) and register for Corporate Tax with the Federal Tax Authority via EmaraTax - and for VAT if you cross the AED 375,000 threshold.

Costs & timeline

Substance, banking & the reality

Two things routinely trip people up. First, the corporate bank account is the hard part, not the licence - UAE banks run heavy KYC and source-of-funds review, and a thin, staff-less company with no local activity can wait months or be declined. Second, economic substance and the 0% regime both assume you are genuinely doing the work in the UAE. The old federal Economic Substance Regulations were repealed for periods from 2023 onward (they now sit inside the corporate tax substance tests), but the substance expectation did not go away - it moved into the QFZP conditions and transfer-pricing rules.

Common mistakes

• Assuming 'free zone = 0% forever'. Only qualifying income qualifies, and only if every QFZP condition is met.
• Selling services to UAE mainland customers from a free zone and expecting 0% - that income is generally taxed at 9%.
• Skipping Corporate Tax registration. Registration with the FTA is mandatory even for a 0% free-zone company, and there are penalties for late filing.
• Running the company from abroad while living elsewhere, ignoring CFC and management-and-control rules back home.
• Under-budgeting. Renewals, mandatory office/Ejari, visas and (where required) audits add up well beyond the headline licence price.
• Choosing the cheapest zone without checking its activity list allows your business and whether banks accept it.
• Forgetting the AED 375,000 VAT threshold and the separate AED 1 million revenue trigger that can bring a natural person into corporate tax.