UAE Company Setup: Mainland, Free Zone, Offshore and Substance Rules

This article is part of the Zagdim wiki series on setting up a company in the UAE. It sets out the structural choices and substance requirements that a foreign company founder in the UAE needs to understand, for international readers who are considering buying property, starting a company, or living long-term in the UAE, including people who are not yet in the country.

Step One: Choose the Business Activity Before the Company Type

Decide what business you want to run before you choose a company type. The UAE government’s guide to starting a business on the mainland (Mainland meaning a company set up outside the free zones) states that the intended business activity is the basis for choosing the legal form and the commercial, industrial, or professional license, and that the legal form must match the business activity.

In other words, the starting point is not “I want a Free Zone company,” but “I want to do trading, consulting, e-commerce, or manufacturing” – and only then do you work out which registration type and license fit.

Can Foreigners Own 100% of a UAE Company?

Yes, except for Strategic Impact Activities. According to the UAE Ministry of Economy and Tourism (MOET), under Cabinet Resolution No. 55 of 2021, economic activities other than Strategic Impact Activities are open to 100% foreign ownership. Of the 7 categories of Strategic Impact Activities listed, 6 require the competent authority’s approval of the ownership ratio, board participation, and other conditions.

For readers, this means: before planning a shareholding structure, check whether your business activity falls under Strategic Impact Activities. Activities outside that list allow 100% foreign ownership; activities on the list require the ownership ratio and conditions to be approved by the relevant authority.

How Do Mainland, Free Zone, and Offshore Differ?

The main differences are the registration location, address requirements, and operating permissions. The table below summarizes the key points covered in this article; details follow after it.

Mainland

A Mainland company is not located inside a free zone; its business location must meet the rules of the emirate where it operates. Running the business requires a physical address, and the premises and location must meet the requirements of that emirate’s economic development department and the local municipality’s land-use planning.

Setting up a Mainland company requires office and warehouse lease contracts; some emirates also require the contract to be attested. In Dubai, this contract must be registered with the Ejari rental registration system.

Free Zone

Free Zone companies register in an individual free zone, and the company types each free zone can register are not necessarily the same. The UAE government’s guide to starting a business in a free zone notes that company types differ by the number of shareholders and whether shareholders are natural persons or legal entities; not every free zone registers every type, so a founder needs to check with each free zone’s authority on which company types it offers.

Using DMCC and JAFZA as examples:

• Dubai Multi Commodities Centre (DMCC): offers a setup-option tool; applicants can apply, pay, and sign documents through the DMCC portal, then choose an office package that fits their needs.
• JAFZA: a Free Zone Establishment (FZE) can be set up with 1 natural or legal person as shareholder; a Free Zone Company (FZCO) can have 2 to 50 shareholders, who may be natural persons, legal entities, or a mix of both. JAFZA currently sets no fixed minimum share capital for an FZE or FZCO, but requires the share capital to be sufficient for the activities approved under the license.

Also worth noting: in Dubai, a Free Zone company is not automatically allowed to operate outside the free zone. Under Articles 2 and 3 of Dubai Executive Council Resolution No. 11 of 2025, a Free Zone Establishment that wants to operate outside the free zone but within the Emirate of Dubai needs the license or permit listed under Article 4; the resolution does not apply to financial institutions licensed in the Dubai International Financial Centre (DIFC). A company approved to operate outside the free zone but within Dubai must also keep financial records for that outside-the-zone activity separate from its inside-the-zone business; operating outside Dubai altogether still requires whatever license and permit the relevant local authority requires.

For a more detailed comparison of Mainland and Free Zone business scope and cost, see our article on UAE Mainland company versus Free Zone company: business scope and cost comparison.

Offshore

Using JAFZA’s offshore company rules as the example: offshore registration by itself is not an operating license inside the country. Under Articles 14.1 and 14.3 of the JAFZA Offshore Companies Regulations 2023, an Offshore Company may carry out lawful activities the registrar permits from time to time; if it actually conducts business inside the zone or in another jurisdiction, it must obtain the appropriate license or permit from the authority with jurisdiction there.

Article 14.2 of the same regulations also lists arrangements an offshore company may carry out inside the UAE, including: engaging legal, accounting, or management services; keeping books and records; holding board or member meetings; leasing a registered office in a designated freehold area approved by the relevant authority; holding real estate in a designated freehold area; holding shares in a UAE operating company; and holding a UAE bank account.

Note: being legally permitted to hold a bank account does not mean a bank is guaranteed to open one.

An offshore company also does not mean no address or agent is needed at all. Under Article 31.1 of the same regulations, an offshore company must continuously maintain a registered office able to receive notices – this can be an office inside the free zone, real estate the company holds in a designated freehold area, or the office of its registered agent in Dubai. In principle it must also continuously appoint a Registered Agent approved by the relevant authority; however, an offshore company that maintains an office inside the free zone may choose whether to appoint an agent.

Can You Set Up a Company Fully Online From Abroad?

Using DMCC as the example: the application and signing can be done entirely online, but identity verification still requires a video call matched against a passport. DMCC’s Company Formation Application – Individual guide, Version 5, dated January 11, 2024, states that DMCC’s Business Setup Executives (BSE) must verify the identity of every authorized company signatory by video call against their passport, and send the company’s documents to signatories for signature through an e-signature platform (DocuSign).

The same guide requires each shareholder, director, manager, and secretary to provide proof of address in their country of residence – a valid signed lease, a utility bill no older than 6 months, a bank confirmation letter no older than 6 months, or an official document issued by an authority in the country of residence within the last 6 months; a UAE residence visa and Emirates ID are provided where applicable.

For readers, this means: someone outside the UAE can prepare proof of address and a passport ahead of time, but applying online does not remove the identity-verification step.

For the process, licenses, visa quotas, and office requirement details, see our article on the Dubai Free Zone company setup process: licenses, shareholders, visa quotas, and office requirements.

Are Company Formation Type and License Type the Same Thing?

No. Using JAFZA’s explanation as the example: the company’s formation type is its legal structure – for example FZE, FZCO, or branch; the license type sets the range of activities available, for example an industrial license. A company still has to choose specific activities from each license type’s activity list before it can determine what business it may actually run.

A simple way to picture it: the formation type is like the company’s “skeleton,” and the license is like the “line of business it may run.” The two need to be assessed separately, and both need to match the actual business. For manufacturing, there are additional facility requirements; in JAFZA’s case, the industrial license is for companies planning a manufacturing process, and the core requirements include setting up a production facility and warehouse inside the free zone, with licensed companies subject to regular audits by the Health, Safety, and Environment (HSE) authority.

For how to choose among license types, see our article on UAE business license types: trading, consultancy, e-commerce, and service categories.

Does Forming a Company Guarantee a Bank Account?

Not necessarily. Under Article 14 of UAE Cabinet Resolution No. 134 of 2025 on anti-money laundering implementing rules, if a financial institution cannot carry out Customer Due Diligence (CDD), it must not establish or maintain a business relationship and must not carry out transactions, and must consider filing a suspicious transaction report where necessary. If there is suspicion of a crime and reasonable grounds to believe that performing CDD would tip off the customer, the institution may forgo CDD, but must still file a suspicious transaction report and explain why.

Article 9 of the same rules also requires banks to obtain, for a legal person or legal arrangement: its name, legal form, and constitutional documents; the tax registration number of any entity subject to corporate tax; a unique reference number, if one exists; the address of, and supporting evidence for, its registered office or principal place of business; and information on senior management. A foreign legal person must also provide the name and address of its UAE legal representative, if any. Banks must also verify an agent’s authorization and identity, and understand the purpose and intended nature of the business relationship and the customer’s business, ownership, and control structure.

So beyond the license, a bank will also ask about the business address, business purpose, and shareholder and management information – this is a legally required check, not an arbitrary one.

For more on bank account opening, KYC, substance, and transaction-background requirements, see our article on whether forming a UAE company guarantees a bank account: KYC, substance, and transaction-background requirements.

Is Company Approval the Same as Residence Visa Approval?

No: company approval and residence visa approval are reviewed separately. Using DMCC as the example, under the terms of its Basic Biz package, each stage of the setup application is approved at DMCC’s discretion based on the regulatory requirements in effect at the time; a residence visa still has to pass UAE federal security review and approval, DMCC does not guarantee a visa will be issued, and DMCC reserves the right to refuse a setup application if the applicant does not obtain a residence visa.

Employee residence is also not available the moment a company is formed. Under DMCC’s New Employee Residence Visa Guidelines, a company must hold a valid license and an establishment card before it can apply, and any sanctions already imposed on the company’s account must be cleared first.

For an investor or partner considering a green residence visa, there are two separate stages to look at:

• Green entry visa: according to the General Directorate of Residency and Foreigners Affairs – Dubai (GDRFA Dubai) service page, the holder may stay for 60 days from entry to complete the residence process. The company must take the legal form listed on that page; an investor or partner’s share, at the time the company is formed or when contributing capital, must not be less than AED 1,000,000 paid in, or the equivalent in another currency. This is the share requirement for this specific pathway, not the formation capital required of every company.
• Green residence permit: an investor or partner in a commercial project may apply for residence of up to 5 years without a sponsor or employer, renewable on the same conditions as the original grant. It requires approval from the relevant authority and authorization for the activity carried out, with documents including a photo, a passport copy valid for at least 6 months, partnership or company constitutional documents or an investment contract, and the business license. The listed conditions must continue to be met to maintain and renew the green residence.

Note: the document list for an investor’s green residence is not a complete list of eligibility requirements, and the entry visa and the residence permit are processed in separate stages; not every company shareholder automatically gets 5 years of residence.

After Setup: What Ongoing Obligations Follow?

Once a company is formed, there are ongoing matters to handle: corporate tax, free zone substance requirements, audits, VAT, e-invoicing, and license and lease renewal.

When Do You Register and File for Corporate Tax?

The UAE Federal Tax Authority (FTA) clarified on June 11, 2024 that a Resident juridical person incorporated, established, or recognized on or after March 1, 2024 must apply for corporate tax registration within 3 months of the date of incorporation, establishment, or recognition; a juridical person recognized under foreign law but managed and controlled in the UAE must apply within 3 months of the end of its financial year.

On filing and payment, under Articles 53 and 48 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, for tax periods starting on or after June 1, 2023, a taxable person required to file must file within 9 months of the end of the relevant period, or by another date set by the FTA, and must settle corporate tax due within 9 months of the end of the relevant period, or by another date set by the FTA; filing obligations are also governed by Article 51.

Under Cabinet Decision No. 116 of 2022, under the general corporate tax framework, the portion of Taxable Income up to AED 375,000 in each tax period is taxed at 0%, and the portion above that is taxed at 9%; if the same taxable person runs multiple businesses in that period, this does not raise the 0% threshold. There is also separate relief such as Small Business Relief, and a 0% rule for a Qualifying Free Zone Person (QFZP), each with its own eligibility conditions.

Does All Free Zone Income Get the 0% Rate?

Registering in a free zone does not automatically make all income eligible for the 0% corporate tax rate. Under Articles 3 and 18 of the same law, a Qualifying Free Zone Person (QFZP) is a free zone person that maintains adequate substance in the UAE, derives Qualifying Income, has not elected to be subject to the regular tax regime, complies with Articles 34 and 55, and meets other conditions set by the Minister; its Qualifying Income is taxed at 0%, while taxable income that is Non-Qualifying Income under Article 18 and related Cabinet decisions is taxed at 9%.

“Adequate substance” is not as simple as having a single registered address. Article 8 of UAE Cabinet Decision No. 100 of 2023 requires that a QFZP’s core income-generating activities be carried out in the free zone or a designated zone as required for each activity, with adequate assets, enough qualified full-time employees, and operating expenditure appropriate to the scale of each activity. General activities may be outsourced to a person inside the relevant free zone or designated zone, provided there is adequate supervision; core activities related to Qualifying Intellectual Property may, as an exception, be outsourced to another person inside the country or to an unrelated person outside the country, still subject to adequate supervision.

Under Article 5 of Ministerial Decision No. 229 of 2025, if the relevant statutory conditions are not met at any point during a tax period, QFZP status is lost from the start of that period and for the following 4 tax periods.

Which Companies Need an Audit?

Companies above the revenue threshold under the general regime, QFZPs, and companies required to by free zone rules all need audited financial statements:

• General taxable persons: under Ministerial Decision No. 84 of 2025, for tax periods starting on or after January 1, 2025, a taxable person that is not part of a Tax Group must prepare and keep audited financial statements if its revenue for the relevant period exceeds AED 50,000,000; a non-resident calculating this revenue threshold counts only revenue earned through a UAE permanent establishment or nexus. Tax Groups are subject to separate rules.
• QFZP: also for tax periods starting on or after January 1, 2025, a QFZP must prepare and keep audited financial statements, and this condition is not subject to the AED 50,000,000 revenue threshold.
• Free zone rules themselves: for example, DMCC’s Guidelines on Audited Financial Statements Submission, dated April 29, 2025, require member companies to submit audited financial statements and a summary sheet signed and stamped by the auditor through the member portal within 6 months of the end of each financial year, applicable to subsidiaries and branches; the auditor must be on DMCC’s approved list, except that a branch with an existing group auditor is not subject to that list requirement.

Note: a tax-law audit threshold does not mean there is no audit requirement under free zone rules or other laws.

Do You Need to Register for VAT and Issue E-Invoices?

The FTA’s VAT registration page states that a business must register for Value Added Tax (VAT) if the total value of its taxable supplies and imports over the past 12 months exceeds AED 375,000, or is expected to exceed that amount in the next 30 days; this mandatory threshold does not apply to foreign businesses. The FTA’s VAT registration service page also states that a non-resident business making taxable supplies in the UAE must, in principle, still register even if the supply value is below the standard registration threshold, except where another party in the UAE is responsible for paying the VAT on those supplies.

On e-invoicing, the Ministry of Finance’s Electronic Invoicing Guidelines, Version 2.0, dated October 26, 2026, states that business transactions carried out by anyone doing business in the UAE are, in principle, within the scope of e-invoicing regardless of whether they are established in the UAE or already VAT-registered, subject to specified exclusions; supplies to, or received from, a natural person not conducting business are out of scope, and a supplier or collecting agent has no e-invoicing obligation for a supply to a consumer. The same guidelines explain that a party in scope for e-invoicing but not required to register for any tax must still register with the FTA to obtain a Tax Identification Number (TIN). In other words, a company that has not registered for VAT may still have an e-invoicing obligation; the applicable exclusions and phased timeline need to be checked separately.

How Do You Keep a License and Lease Valid?

Using JAFZA as the example, both the license and the lease need to stay valid. Under Articles 6.2 and 6.3 of the JAFZA 2023 rules, a customer must hold a valid lease and a valid license to operate inside the zone, and must renew the lease and license on JAFZA’s set schedule; a user of a workstation inside a business center or incubator may be subject to different requirements, and an entity registered and licensed by another UAE authority that leases premises inside the zone needs JAFZA’s permission.

For the full picture on accounting, corporate tax, VAT, and renewal obligations, see our article on what comes after company formation: UAE accounting, corporate tax, VAT, and license renewal obligations.

Which Authorities Will You Deal With?

FAQ

Does initial approval mean you have a business license? No. Initial approval in the mainland company setup process means the government has no objection to the business being set up and allows the applicant to proceed with the remaining setup steps, but it does not grant permission to operate or carry out the business activity.

Are Free Zone company tax and VAT both always 0%? No. For corporate tax, only a Qualifying Free Zone Person’s (QFZP) Qualifying Income gets the 0% rate. For VAT, under Article 51 of the VAT Executive Regulation, a designated zone must meet statutory conditions – not every free zone is a VAT-designated zone, so free zone status alone does not mean all business is exempt from VAT.

Does Small Business Relief apply automatically just because revenue is low? No. A resident taxable person electing Small Business Relief must have revenue not exceeding AED 3,000,000 in the relevant period and in all previous tax periods; exceeding that in any period disqualifies the election, and it excludes members of defined Multinational Enterprise Groups and QFZPs. The threshold applies to tax periods starting on or after June 1, 2023 and ending on or before December 31, 2029.

Do large international groups only face the 9% rate or the free zone 0% rate? No. The Domestic Minimum Top-up Tax (DMTT) takes effect for financial years starting on or after January 1, 2025, and applies to Multinational Enterprise Groups with global consolidated revenue of at least EUR 750 million in at least 2 of the previous 4 financial years; 15% is a minimum effective tax rate framework, not the statutory rate for every company.

Did obligations from past years disappear once the economic substance requirement was removed? No. According to an official announcement from Abu Dhabi Global Market (ADGM), the economic substance requirement no longer applies for financial years ending after December 31, 2022, but license holders must still submit the notifications and reports legally required, and meet the substance test, for the period from January 1, 2019 to December 31, 2022.

Glossary

• Mainland: A company set up outside the free zones, whose business location must meet the rules of the emirate where it operates.
• Free Zone: A designated area where companies register separately; the company types each free zone can register are not necessarily the same.
• Ejari: Dubai’s rental registration system; a Mainland company’s lease contract must be registered with Ejari in Dubai.
• QFZP (Qualifying Free Zone Person): A free zone person that meets the conditions in the corporate tax law and related decisions, whose Qualifying Income can be taxed at the 0% corporate tax rate.
• CDD (Customer Due Diligence): The checks banks and other financial institutions carry out on a customer’s identity, business, and ownership structure to prevent money laundering.

About the Sources

This article’s facts were checked as of November 2, 2026. The rules cited are drawn from official pages or documents of the UAE Government Portal, the Ministry of Economy and Tourism, the Ministry of Finance, the Federal Tax Authority, Dubai’s Executive Council resolutions, JAFZA, DMCC, GDRFA Dubai, and ADGM. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is cited from the FTA’s published unofficial English translation; the official Arabic legal text governs. The ADGM economic substance paragraph is based on ADGM’s own official announcement and does not quote Cabinet Decision No. 98 of 2024 directly. Free zone rules vary by free zone; this article uses DMCC and JAFZA only as examples and does not represent that all free zones follow the same rules. The offshore company section is based solely on JAFZA’s offshore company rules. The paragraph on the general 0%/9% corporate tax rate describes only the general taxable-person framework, not a complete rate table covering every special category of taxable person or later amendments; this article does not list every e-invoicing phase and exclusion. The full list of Strategic Impact Activities by sector, and each free zone’s complete list of company types, must be confirmed with the relevant authority on a case-by-case basis.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.

Sources

• UAE Government Portal – Steps to start a business on the mainland
• UAE Ministry of Economy and Tourism – Promising Sectors
• Strategic Impact Activities
• UAE Government Portal – Starting a business in a free zone
• JAFZA – Company formation
• JAFZA – JAFZA Offshore Companies Regulations 2023
• Dubai Supreme Legislation Committee – Executive Council Resolution No. 11 of 2025
• DMCC – Company Formation Application – Individual
• DMCC – Basic Biz Terms and Conditions
• DMCC – New Employee Residence Visa Guidelines
• GDRFA Dubai – Issuing green residence permit (partner investor)
• GDRFA Dubai – Green visa issuance (investor/partner)
• UAE Cabinet – Cabinet Resolution No. 134 of 2025 (hosted by JAFZA)
• UAE Ministry of Finance – Ministerial Decision No. 84 of 2025
• UAE Cabinet
• Ministry of Finance – Cabinet Decision No. 116 of 2022
• FTA – Corporate Tax Registration Timelines Public Clarification
• FTA
• UAE Federal Government – Federal Decree-Law No. 47 of 2022
• FTA
• UAE Cabinet – Cabinet Decision No. 100 of 2023
• UAE Ministry of Finance – Ministerial Decision No. 229 of 2025
• DMCC – Guidelines – Audited Financial Statements Submission
• FTA – Registration For VAT
• FTA – Value Added Tax (VAT) Registration – FAQ
• UAE Ministry of Finance – UAE Electronic Invoicing Guidelines V2.0
• FTA – VAT Executive Regulation and amendments, 2026-09 version
• JAFZA – Jafza Rules 2023
• ADGM – ADGM Economic Substance
• UAE Ministry of Finance – DMTT announcement
• FTA
• UAE Ministry of Finance – Ministerial Decision No. 73 of 2023, and No. 131 of 2026
• JAFZA – Business licence in Dubai with Jafza

Disclaimer

This article is a general information summary and is not tax or legal advice for any individual case. The facts were checked as of November 2, 2026. UAE regulations may be updated; please follow the current announcements of the relevant authorities. For individual cases, consult a qualified professional.