Free zones:
law, taxes and real business

01

Free zones map

Each zone is created by its own legal act and establishes company forms, acceptable licenses, office products and registration procedures. DIFC and ADGM differ from regular zones by having their own civil and commercial legal systems, courts and financial regulators.

02

Regular industry free zones

DMCC, JAFZA, DAFZ, Dubai South, KEZAD, Masdar City, RAKEZ and other zones have different specializations and rules. The name of the zone in itself does not determine whether it is possible to perform a specific function or sell a product on the mainland.

Trade and commodities

Compare permitted goods, warehouse, customs, importer and channels on mainland

Logistics and production

Land, warehouse, industrial license, EHS and access to port or airport

Services and technologies

License wording, personnel, data and place of service provision

Criterion

Regulatory suitability and economics of operations, not just the registration package

03

DIFC: financial center and separate legal environment

DIFC offers companies, partnerships, branches, foundations and SPVs. Unregulated business registration does not provide the right to provide regulated financial services: these require separate authorization from the DFSA. The choice of structure relates to DIFC Companies Law, Foundations Law, UBO rules, data protection and applicable audit requirements.

Registrar

DIFC Registrar of Companies

Financial regulator

Dubai Financial Services Authority — DFSA

Courts

DIFC Courts

Typical tasks

Finance, professional services, holding, SPV, foundation and regional HQ

04

ADGM: financial and holding structures

In ADGM, registration is maintained by the Registration Authority, and regulated financial activities are controlled by the FSRA. For financial businesses, the regulatory process precedes or goes along with the registration process. For an unregulated structure, it is still necessary to clearly define the business activities and purpose of the company.

Registrar

ADGM Registration Authority

Financial regulator

Financial Services Regulatory Authority — FSRA

Courts

ADGM Courts

Typical tasks

Finance, fintech, holding, SPV, foundation and professional services

05

SPV and foundations: purpose is more important than name

SPV is usually used for passive ownership of an asset, project isolation or holding function. Foundation can be used for asset ownership, succession and governance. Both structures require analysis of control, beneficiaries, tax residency, corporate tax, reporting and banking purpose.

06

0% is a mode, not a zone promise

Free Zone Person is included in the federal corporate tax system. The zero rate can only be applied to Qualifying Income by a Qualifying Free Zone Person who complies with all conditions. Other taxable income is subject to the applicable tax regime.

Checking

Legal status, adequate substance, qualifying income and absence of prohibited choice

Income

Source, counterparty, activity, place of performance and excluded activities

De minimis

Control of the share of non-qualifying revenue according to current rules

Documents

Separate accounting, transfer pricing, audited financial statements and evidence of substance

Risk

Violation of the conditions may result in loss of status for a specified period

Read a practical article about the free zone tax →

07

Designated zone for VAT is a separate concept

The name “free zone” does not mean an automatic special VAT regime. Only a zone recognized as a designated zone for VAT purposes can receive special regulation of individual transactions with goods, subject to compliance with the conditions. Services and many other transactions continue to be analyzed according to general rules.

08

Sales and presence on mainland

The mainland model depends on the product or service, delivery method, license and local regulations. For goods, importer of record, customs, warehouse and distribution are checked; for services - place of performance, personnel, contractual outline and the need for a mainland permit or branch.

Product

Importer, customs declaration, duty, VAT and permits

Service

License, place of service, client and actual presence

Staff

Place of work, visa sponsor and employment documents

Tax

Qualifying / non-qualifying income and permanent establishment rules

09

Procedure for registration in the zone

1. 01
   Shortlist

   Activities, market, premises, visas, budget, tax and bank.

2. 02
   Form and license

   Company, branch, SPV or foundation; adjustable perimeter.

3. 03
   KYC and documents

   Owners, UBO, source of funds, corporate documents and business plan.

4. 04
   Registration

   Approval, articles of incorporation, premises, fees and license.

5. 05
   Launch

   Taxes, accounting, bank, visas, contracts and compliance calendar.

10

The bank assesses the reality of the structure

What is important to the bank is not the prestige of the zone, but clear operations: owners, source of capital, office, team, counterparties, countries, currencies and expected traffic. Holding, SPV, foundation and trading company require different KYC profiles.

Before submission

Business plan, group chart, UBO, source of wealth/funds and contracts

Operations

Suppliers, buyers, countries, currencies, average bill and purpose of payments

Substance

Why the UAE, why this zone, who runs it and where the work is done

Result

Application to the bank corresponding to the license, tax and real business

11

Short selection matrix

1. 01

   What activity and what regulator?

2. 02

   Where are the customers, product, team and management?

3. 03

   Do you need a regular operating company, financial license, SPV or foundation?

4. 04

   How is qualifying income formed and substance fulfilled?

5. 05

   Which bank is capable of servicing real currencies and countries?

Go to step-by-step company registration →