To set up a company in the UAE you choose between three routes: a mainland company that can trade anywhere in the country, a free zone company that is cheaper and can qualify for 0% tax on certain income, or an offshore company that holds assets but cannot trade in the UAE or sponsor visas. For a solo founder or consultant selling mostly to clients abroad, a free zone licence with one residence visa is the usual starting point. Corporate tax is 0% on the first AED 375,000 of taxable income and 9% above that, and every company must register with the Federal Tax Authority (FTA) within 3 months of incorporation.
Last checked: October 2026
In short:
- Mainland companies can trade across the UAE and have allowed 100% foreign ownership for most activities since 1 June 2021; free zone companies are usually cheaper, and offshore companies (RAK ICC, JAFZA offshore) cannot trade in the UAE or sponsor visas.
- Corporate tax is 0% up to AED 375,000 of taxable income and 9% above; Small Business Relief (revenue up to AED 3 million) has been extended to tax periods ending by 31 December 2029, but free zone companies claiming 0% as Qualifying Free Zone Persons cannot use it.
- A company only helps your personal tax position if you actually live there: a UAE Tax Residency Certificate needs 183 days in the UAE, or 90 days plus a residence permit and a home or business there.
Mainland vs free zone vs offshore
| Mainland | Free zone | Offshore (RAK ICC, JAFZA offshore) | |
|---|---|---|---|
| Trade with UAE customers | Yes, anywhere in the UAE | Abroad freely; income from mainland customers or a mainland branch can break 0% tax | No UAE trading |
| Foreign ownership | 100% for most activities since 1 June 2021 | 100% | 100% |
| Residence visas | Yes | Yes, number depends on package | No |
| Corporate tax | 0% / 9% | 0% on qualifying income if a Qualifying Free Zone Person, otherwise 0% / 9% | Must register; treated as a UAE juridical person |
| Typical use | Local services, retail, government contracts | Consultants, online businesses, trading abroad | Holding shares, IP or property |
Mainland. Before 1 June 2021, Article 10 of the Commercial Companies Law required 51% UAE national ownership of onshore companies. That was removed for most activities. “Strategic impact” sectors still need national ownership, including banks and finance companies, insurance, defence, communications and fisheries.
Offshore. A RAK ICC company needs a UAE registered agent and one director, and has no audit requirement, per Trident Trust’s February 2024 fact sheet. Older material says offshore companies pay “zero tax”. That is out of date: the FTA clarified on 18 October 2024 that offshore companies incorporated in the UAE must register for corporate tax. For holding structures, see Holding company for founders (2026): how it works and where to set one up.
What popular free zones cost
Prices below are from each zone’s own website, checked 6 October 2026. Packages change often, and add-ons (extra activities, visas, medical, Emirates ID) are where totals grow.
| Free zone | Emirate | Published price | What it covers |
|---|---|---|---|
| Meydan Free Zone | Dubai | Licence from AED 12,500; instant “Fawri” licence from AED 15,000 | Up to 3 activity groups, flexi-desk. First investor visa about AED 7,850 extra (investor visa AED 4,000, immigration establishment card AED 2,000 one-off); medical and Emirates ID AED 2,250 |
| RAKEZ | Ras Al Khaimah | AED 14,000 a year all-inclusive package | Trade licence, 1 residence visa, shared workstation, 10 activities. Extra visas AED 4,000 each, up to 3 |
| DMCC | Dubai | Basic Biz package AED 35,484 for 1 year; DMCC says first year typically AED 35,000–50,000 | Licence AED 20,285 a year, registration AED 9,020. DMCC cites average share capital of about AED 50,000 |
| IFZA | Dubai | No price published on its own site | Get a written quote |
| SHAMS | Sharjah | No price published; online cost calculator | Get a written quote |
DMCC costs roughly three times Meydan or RAKEZ in year one. Pick on price, permitted activities, visa quota and renewal cost.
Corporate tax: the 9% rule
Per PwC’s UAE summary (reviewed 9 September 2026), the rate is 0% on taxable income up to AED 375,000 and 9% above. Returns and payment are due within 9 months of period end. New companies, including free zone ones, must register within 3 months of incorporation (FTA Decision No. 3 of 2024), or face an AED 10,000 penalty. A 2025 waiver applied if the first return was filed within 7 months; check it still applies.
Qualifying Free Zone Person (0% on qualifying income)
A free zone company pays 0% on all qualifying income if it meets Article 18 of the Corporate Tax Law: adequate substance in the UAE, qualifying income, no election into the standard rates, and transfer pricing compliance.
The de minimis rule lets non-qualifying revenue reach the lower of 5% of total revenue or AED 5 million. Go over it and, per BDO’s summary of Ministry of Finance guidance, the whole business is taxed at 9%. Income from a permanent establishment or immovable property is not qualifying. Take advice on your activity list before relying on 0%.
Small Business Relief
If revenue is AED 3 million or less, a resident company can elect to be treated as having no taxable income. It was originally available for tax periods ending on or before 31 December 2026. The Ministry of Finance announced Ministerial Decision No. 131 on 7 August 2026, extending it to tax periods ending on or before 31 December 2029. The AED 3 million threshold is unchanged.
Limits, per CMS: Qualifying Free Zone Persons and members of multinational groups with revenue over AED 3.15 billion cannot use it. Losses and net interest expense cannot be carried forward from years in which you elect it. A free zone company therefore chooses one or the other: QFZP status or Small Business Relief.
Compliance you will actually face
- Economic substance reports: gone. Cabinet Decision No. 98 of 2024 removed economic substance notifications and reports for financial years ending after 31 December 2022. Substance still matters for Qualifying Free Zone Person status.
- Beneficial ownership (UBO). Under Cabinet Resolution No. 109 of 2023, a UBO is anyone who directly or indirectly owns or controls at least 25% of capital or votes. You keep a register and update the registrar within 15 days of a change. Middle East Briefing reports fines of AED 15,000 for a second violation and AED 30,000 for a third. ADGM and DIFC companies follow their own rules.
- VAT is a separate registration with its own threshold (see Dubai remote work visa vs freelance visa vs company setup (2026)).
Residence visa and Emirates ID
Your company sponsors your residence visa as its investor. Meydan’s breakdown shows the parts: the investor visa fee, a one-off immigration establishment card for the company, then medical and Emirates ID (about AED 7,850 plus AED 2,250 there). RAKEZ bundles one visa into its package. Dependants add cost; Meydan asks an AED 3,000 deposit per sponsored dependant. You’ll need the Emirates ID for almost everything, including the bank. For living costs, see Cost of living in Dubai (2026): rent by area, budget and tax.
Bank accounts: the honest version
- Traditional banks expect balances. Emirates NBD’s 2023 business banking FAQ lists a minimum balance of AED 50,000 for its entry “Prime” package (AED 150 fall-below fee, plus a monthly relationship fee of AED 99), rising to AED 200,000, AED 500,000 and AED 3.5 million for higher tiers. That document dates from 2023, so check current terms with the bank.
- Digital banks are lighter. Wio Business lists plans at AED 99 and AED 249 a month and says accounts can be running in 3 working days.
- Expect questions. Banks typically want your Emirates ID, licence, lease, source of funds and client contracts. A non-resident owner with no UAE clients and no track record is the hardest profile.
- Rejections happen without explanation. That’s from members’ reports, not an official statistic. Keep a fallback account; see Offshore bank account (2026): what’s legal, costs, where to open.
Substance and the Tax Residency Certificate
A UAE company does not make you UAE tax resident, and it does not stop your home country taxing you. What matters is where you live and where the company is run.
Under Cabinet Decision No. 85 of 2022 (in force from 1 March 2023), you are a UAE tax resident if any of these applies:
- Your usual or primary residence and your centre of financial and personal interests are in the UAE.
- You’re physically present 183 days or more in a consecutive 12-month period.
- You’re present 90 days or more in a consecutive 12-month period, you hold a UAE residence permit (or are a UAE/GCC national), and you either have a permanent residence in the UAE or work or run a business there.
The FTA issues the Tax Residency Certificate (TRC). Its fees: AED 50 submission plus AED 500 for a registered person, AED 1,000 for an unregistered individual and AED 1,750 for an unregistered company. Processing is 10 business days. A company must have existed for at least 12 months and show a lease and evidence of effective management in the UAE.
Who it suits, and who it doesn’t
Suits:
- Founders who will actually live in the UAE and become tax resident there (see Tax-free countries (2026): no income tax countries you can actually live in).
- Consultants and online businesses selling abroad, with profits under AED 375,000 or with clean qualifying income.
Doesn’t suit:
- US citizens. The IRS taxes citizens on worldwide income wherever they live, and US shareholders and officers of certain foreign corporations must file Form 5471. A UAE company adds reporting without removing US tax.
- People who stay tax resident elsewhere. If you live in a country with CFC rules or a “place of management” test, your home country can tax the company’s profits or treat the company as resident there. For how this plays out by country, see Where to incorporate as a digital nomad: US LLC, UK, Estonia, UAE.
- Nomads who never stay. Without UAE days or a TRC, banking is harder and the tax benefit is mostly illusory.
Related guides: Dubai remote work visa vs freelance visa vs company setup (2026) · Where to incorporate as a digital nomad: US LLC, UK, Estonia, UAE · Cost of living in Dubai (2026): rent by area, budget and tax · Tax-free countries (2026): no income tax countries you can actually live in · Offshore bank account (2026): what’s legal, costs, where to open
Quick answers
Q: How much does it cost to set up a company in the UAE?
On free zones’ own sites (checked October 2026), Meydan licences start at AED 12,500, with about AED 7,850 more for the first investor visa. RAKEZ sells an AED 14,000 yearly package including one visa. DMCC says a first year typically costs AED 35,000–50,000. Add medical, Emirates ID, and dependants.
Q: Is a UAE free zone company tax-free?
Not automatically. Corporate tax is 0% up to AED 375,000 and 9% above. A free zone company pays 0% on qualifying income only if it qualifies as a Qualifying Free Zone Person: adequate substance, transfer pricing compliance, and non-qualifying revenue within the lower of 5% of revenue or AED 5 million.
Q: Does Small Business Relief still apply after 2026?
Yes. Ministerial Decision No. 131, announced by the Ministry of Finance on 7 August 2026, extends Small Business Relief to tax periods ending on or before 31 December 2029. Revenue must stay at or below AED 3 million. Qualifying Free Zone Persons and large multinational group members cannot claim it.
Sources
- PwC Worldwide Tax Summaries: UAE, taxes on corporate income
- PwC Worldwide Tax Summaries: UAE, tax administration
- PwC Worldwide Tax Summaries: UAE, individual residence
- PwC Middle East: FTA Decision No. 3 of 2024, registration timeline
- Deloitte: FTA decision on CT registration timelines
- Crowe UAE: waiver of penalty for late CT registration
- BDO: UAE guidance on free zone business
- The National: UAE extends corporate tax relief for small businesses until 2029
- Aletihad (WAM): Ministry of Finance extends Small Business Relief
- CMS: UAE corporate tax small business relief criteria
- UAE Ministry of Finance: amendment to Cabinet Decision on economic substance
- Clyde & Co: UAE Economic Substance Regulations discontinued
- Middle East Briefing: UAE UBO reporting and 15-day update rules
- Sovereign Group: UAE opens up to 100% foreign ownership
- PGP Law: Jebel Ali and RAK ICC offshore companies, corporate tax status
- Trident Trust: RAK ICC key facts (February 2024)
- RAK ICC: home page
- Meydan Free Zone: home page
- Meydan Free Zone: pricing calculator
- RAKEZ: business setup package
- DMCC: Dubai free zone company setup cost (February 2026)
- IFZA: home page
- SHAMS: business setup
- Emirates NBD: business banking packages FAQ (2023)
- Wio Bank: business onboarding
- Federal Tax Authority: issuance of tax residency certificates
- IRS: US citizens and resident aliens abroad
- IRS: about Form 5471
This is general information from the Nomad Forums team, not legal, tax or financial advice. Rules change; check the official source or a qualified adviser before acting.
Over to you: Which free zone did you pick, and what did your first year actually cost once visa, medical and Emirates ID were added? And which bank opened your business account, and how long did it take?