Setting up in Dubai or the UAE: free zone or mainland, corporate tax, and what the UAE does not solve

The UAE is a common choice for founders: no personal income tax on salaries and investment income, a low corporate tax rate and fast company formation. The choice between a free zone and a mainland company affects where you can trade and how you are taxed, and a UAE company does nothing to change the rules of the country you live in until you genuinely move.

Free zone or mainland

A mainland company is licensed by the economic department of the relevant emirate and can trade throughout the UAE. Since reforms in 2021, full foreign ownership is permitted for most activities onshore, with exceptions for certain strategic sectors. A free zone company is licensed by the free zone authority, is fully foreign owned, and is limited to the activities on its licence. Trading directly with customers in the mainland market generally requires a distributor, a branch or a specific permit.

Corporate tax: 9%, and 0% on qualifying income

UAE corporate tax applies to financial years starting on or after 1 June 2023. Taxable income up to AED 375,000 is taxed at 0% and the balance at 9%. Groups with consolidated revenue of €750 million or more are subject to a domestic minimum top-up tax bringing their effective rate to 15%. Every company must register and file, even if no tax is due.

A free zone company can be a Qualifying Free Zone Person, taxed at 0% on qualifying income and 9% on the rest. The conditions include adequate substance in the free zone, earning qualifying income, complying with transfer pricing rules, preparing audited financial statements, not electing for the standard regime, and keeping non-qualifying revenue within a de minimis limit (the lower of 5% of total revenue and AED 5 million). Qualifying income broadly covers income from other free zone persons and from specified qualifying activities, such as manufacturing, certain trading, fund management and headquarters services; income from mainland customers is generally non-qualifying, with limited exceptions. Failing a condition removes the status for that tax period and the following four, so the conditions need monitoring every year.

Personal residency and the tax residency certificate

Individuals pay no UAE income tax on employment income or personal investment income, although a person running a business in their own name above a turnover threshold is within corporate tax. A residence visa gives the right to live there; tax residence is a separate question. Broadly, an individual is UAE tax resident if their usual place of residence and centre of financial and personal interests is in the UAE, if they spend 183 days or more there in a 12-month period, or if they spend 90 days or more there and meet further conditions on nationality or residence permit and on a home or work in the UAE. A tax residency certificate, issued on application, is what other countries and treaty claims rely on.

What the UAE does not solve

• Your home country's residence rules. If you keep a home, family and working days in your old country, you may remain resident there, and taxed there on worldwide income, whatever your visa says.
• Where the company is managed. A UAE company run by a director living elsewhere may be treated as resident in that country, or as having a permanent establishment there.
• Controlled foreign company rules and, in the UK, the transfer of assets abroad rules, which can tax the owner or their home company on the UAE company's profits.
• Exit taxes and temporary non-residence rules, which can reach gains made after you leave.
• United States citizenship, which keeps worldwide US taxation wherever you live.

Before you sign

• Before signing a free zone or mainland licence application, map who your customers are and where they sit, and whether your income would qualify for 0%.
• Plan your personal move against your current country's residence test, and keep records of days and ties from the first day.
• Check your home country's controlled foreign company, exit tax and anti-avoidance rules before transferring any business or assets.

Considering the UAE? Call us before you sign the licence application or the lease. The first 30-minute consultation is free, your dedicated consultant is available 24/7, and every request is answered within 24 hours.

General information, not advice. Tax rules change and depend on your facts. Greyridge Global coordinates and delivers cross-border tax and corporate work through appropriately licensed professionals in each jurisdiction. Legal, tax, immigration, fiduciary, and regulated services are provided by qualified advisors engaged for your matter. Nothing on this page is tax or legal advice.