In Dubai, company formation gives founders access to one of the world’s most dynamic business hubs: no personal income tax, a corporate tax that can be 0% on qualifying free zone income, and a currency pegged to the US dollar. At the same time, the rules have changed fundamentally since 2023. The old formula “free zone equals tax-free” no longer holds, and anyone who keeps a residence elsewhere must also look at the structure from the perspective of their home country.
Corporate tax for companies in Dubai
Since June 2023, the United Arab Emirates (UAE) have levied a corporate tax. Profits up to AED 375,000 (approx. €91,000) remain tax-free; above that, a rate of 9% applies. Every company must register with the Federal Tax Authority (FTA), even if it owes no tax. Missing the deadline results in a penalty of AED 10,000 (approx. €2,400). The legal framework is published by the UAE Ministry of Finance.
Anyone who wants to set up a company in Dubai today needs to understand the free zone regime. Companies in a free zone can qualify as a Qualifying Free Zone Person and pay 0% on qualifying income. This requires adequate substance in the free zone, audited financial statements and arm’s length pricing for transactions with related parties. Non-qualifying revenue must not exceed 5% of total revenue or AED 5 million (approx. €1.2 million), whichever is lower. Breaching this threshold means losing the status for five years and paying 9%.
Smaller companies with annual revenue of up to AED 3 million (approx. €730,000) can elect Small Business Relief instead and are treated as having no taxable income. The relief was extended in 2026 to tax periods ending by 31 December 2029, but it cannot be combined with the free zone regime.
Dividends paid to shareholders are not subject to withholding tax, and there is no personal income tax. In short, the tax burden in the Emirates is low, but no longer zero across the board. The tax comparison of all locations puts the UAE into context.
Free zone or mainland?
The most important decision is between a free zone and the mainland. Dubai alone has around two dozen free zones, each with its own fees and rules; among the best known are DMCC, IFZA, Dubai Silicon Oasis and Meydan. A Dubai free zone company suits internationally active businesses whose clients are mainly outside the UAE or located in a free zone themselves. It is quicker to set up, cheaper to run and not tied to a minimum office size.
A mainland licence is issued by Dubai’s Department of Economy and Tourism. It allows trading throughout the country, including with consumers, retail outlets and government clients. Since the reform of company law, full foreign ownership is possible for most activities, so a local partner is no longer required. In return, the mainland requires a leased office with a registered tenancy contract (Ejari).
Since 2025, free zone companies in Dubai can also apply for a permit to carry out certain activities on the mainland. Whether a free zone or the mainland is the right choice therefore depends on activity and client base, not on the tax rate alone. Choosing the cheapest free zone instead of the one that fits the activity is one of the most common mistakes. The differences at a glance:
| Free zone | Mainland | |
|---|---|---|
| Clients | Abroad and in other free zones | Throughout the UAE, including consumers and authorities |
| Licensing | Authority of the respective free zone | Department of Economy and Tourism |
| Office | Flexi-desk or business address often sufficient | Own office with Ejari tenancy contract |
| Corporate tax | 0% on qualifying income, otherwise 9% | 0% up to AED 375,000 (approx. €91,000), 9% above |
| Setup time | around 1–2 weeks | around 2–4 weeks |
For most founders, company formation in a Dubai free zone is the faster and leaner route; a mainland licence pays off as soon as the local market is the focus.
The process in six steps
In most Dubai free zones, the formation of a company in Dubai follows a clearly defined process with six steps:
- Define the activity: it determines which licence and which free zone are possible.
- Choose the free zone or authority: fees, visa allocation and office requirements are compared.
- Reserve the trade name and obtain initial approval.
- Submit the documents: passport and shareholder details; for corporate shareholders, certified registry extracts.
- Receive the licence and register the company with the tax authority.
- Apply for the residence visa and Emirates ID: a short visit is needed for the medical test and biometrics.
In many free zones the licence is issued within one to two weeks; on the mainland it usually takes somewhat longer.
Accounting and obligations
The key obligations for bookkeeping, accounts, audit and VAT at a glance – so you know from the start what running your company involves.
| Obligation | Rule |
|---|---|
| Bookkeeping | Under IFRS; keep records for seven years |
| Annual accounts | Annually; basis of the corporate tax return |
| Statutory audit | Required for free zone companies with 0% status, tax groups and from AED 50 million revenue |
| Tax return | Corporate tax return with the FTA within nine months of year-end |
| VAT: registration | From AED 375,000 taxable turnover; rate 5% |
| VAT: returns | Usually quarterly |
| Ongoing register duties | Annual renewal of the trade licence |
For the 0% free zone rate, the company needs adequate substance in the Emirates – premises, staff and decisions made locally; it should be planned in from the start. Tax and filings are handled by the Federal Tax Authority.
As of 2026. Bookkeeping and filings are usually handled by specialised accountants in the target country.
Residence visa and tax residency in the UAE
Owning a company allows shareholders and managers to obtain a UAE residence visa, usually valid for two years and renewable. It is the basis for the Emirates ID, a tenancy contract and a home in Dubai.
An individual becomes tax resident in the UAE after spending at least 183 days there within twelve months; under certain conditions, 90 days are enough. Those who can prove this receive a Tax Residency Certificate. Whether the previous residence has actually been given up for tax purposes, however, is decided not by Dubai but by the law of the country you are leaving. The tax treaty check below shows whether a double tax treaty exists between your country of residence and the UAE.
Is a company in Dubai right for you?
Whether it pays to set up a company in Dubai depends less on the tax rate than on residence, client base and the size of the venture:
Suitable for
- Consultants, agencies and service firms with international clients
- Trading businesses active in the Middle East, Asia or Africa
- Digital business models that work independently of location
- Founders who move their centre of life to Dubai
Less suitable for
- Founders who want to make use of EU funding
- Online retail focused on consumers in the EU
- Small ventures whose costs outweigh the tax benefit
- Manufacturers with their own plant in Europe
If you are looking for a location within the EU, compare Cyprus and Malta; for online businesses without relocating, a US LLC is often the better fit. All options are listed in the overview of all locations. Which free zone fits best can be clarified in an initial consultation.
