Company Setup in Dubai Tax Free Zone

Dubai is a preferred destination for establishing businesses. The reason why entrepreneurs are choosing Dubai is its strategic location, world-class infrastructure, highly developed economy, a supportive government and most importantly, low taxes. Especially, in Dubai’s tax-free zones, businesses can enjoy 0% corporate and personal income taxes.

Company setup in Dubai tax free zone allows businesses to save on taxes on their earned profits, provided they meet the required criteria. Instead of paying a large portion of their income to the government, they can use it for business growth or personal purposes.

This guide will help you understand the basics of setting up a company in Dubai tax free zone, the general requirements, and what costs to expect. Let us begin.

Why do Businessmen Move to Dubai?

Businessmen across the world are expanding their operations to Dubai as it is considered one of the most advantageous global business hubs. Its geographic location, pro-business environment, tax policies make the city highly attractive.

Besides that, companies in Dubai get access to:

• Advanced infrastructure and facilities
• A diverse and skilled workforce
• Wide range of permitted business activities
• Luxurious lifestyle and culture
• Stable and rapidly growing economy
• Easy and streamlined residency options

Last and the most important, the city offers tax free zones where entrepreneurs can benefit from a range of incentives.

What is a Tax Free Zone in Dubai?

A tax free zone in Dubai is a designated area where businesses can enjoy 0% tax on their income. However, the catch is that they must meet the criteria set by the government to qualify for such an exemption.

People also sometimes refer to free zones in Dubai as tax free zones, and the terms are used interchangeably. Basically, these free zones are special economic areas where businesses can be established with ease.

They offer 100% foreign ownership, advanced infrastructure, and significant tax exemptions which makes them highly attractive for entrepreneurs and investors.

There are more than 30 flourishing freezones in Dubai that cater to specific industries, with some popular being:

• Dubai Multi Commodities Centre (DMCC)
• Jebel Ali Free Zone (JAFZA)
• Dubai Airport Free Zone (DAFZA)
• Dubai Silicon Oasis (DSO)
• Dubai International Financial Centre (DIFC)
• International Free Zone Authority (IFZA)

How to Start Business in Dubai Tax-free Zone?

Steps for company setup in Dubai tax free zone are as follows:

1. Determine your business activity

First, choose the business activities for your venture. You should select an industry that interests you, is in demand, and is permitted by the UAE government.

2. Choose the right free zone

Dubai has over 30 free zones, each with its own features, regulatory authority, licensing rules and industry focus. Select the one that aligns best with your business nature.

3. Decide the legal structure of the business

You can start a limited liability company (LLC), free zone establishment, a freezone company, a partnership, a civil company, or a branch of an existing company. The structure depends on the level of control you want and the number of shareholders.

4. Register a trade name

Next, register a trade name for your business. The name must comply with the UAE’s naming guidelines and not violate any restrictions. Also, it should be unique and must reflect your business’s nature.

5. Get the initial and external approvals

Obtain initial approval from the relevant free zone authority. Depending on your business type, you may also need external approvals or permits from specific government departments.

6. Secure an office space

If required, arrange a suitable office space. This can be a private office, a rented unit, or a shared workspace, depending on your business needs.

7. Apply for the business license

Finally, apply for the business license (commercial, professional or industrial) with the appropriate authority. Submit the necessary documents, such as a passport copy, passport sized photos, trade name reservation, application form, and other supporting paperwork. Pay the necessary fees.

8. Open a business bank account

Once you have secured your business license, go ahead with the corporate bank account opening. In Dubai you need to have a separate bank account for business as personal cannot be used.

9. Obtain your visa

Finally, you can get your visa to legally stay and work in Dubai freezone. You can also apply for your foreign staff and family members once you secure yours.

Documents for Company Setup in Dubai Tax Free Zone

You will need the following documents for getting business license in Dubai tax free zone:

• Passport copy
• Passport sized photos
• Visa copy, if applicable
• Trade name reservation
• List of business activities
• Office lease contract, if needed
• Bank reference
• Attested MOA

Documents required to apply for corporate tax exemption Dubai free zone:

• Incorporation certificate
• Valid trade license
• Audited financial statements
• Proof of income
• Proof of eligibility (for example your transactions)
• Other documents as asked by tax authorities

There may be additional document requirements based on your specific business nature. It is better to consult our tax and business setup experts in Dubai.

Cost of Company Setup in Dubai Tax Free Zone

The cost to start a business in Dubai free zones starts from AED 5,999*. The cost is subject to changes and may vary from one free zone to another. It also depends on your specific business requirements and nature.

You can calculate your costs using our license estimator here.

Qualifying for 0% Tax in Dubai Free Zone

In a Dubai free zone, businesses can for sure benefit from 0% corporate tax. However, you should know how to qualify for that. For that you must understand the concept of “Qualifying Free Zone Person”.

A Qualifying Free Zone Person is a business set up in a UAE free zone that is eligible for 0% corporate tax on certain types of income.

0% corporate tax applies only to qualifying income earned from approved activities and transactions. If the income is from non-qualifying activities, then it will be subject to 9% corporate tax.

In short, a free zone business can get the 0% tax rate, as long as it meets the following conditions:

• Maintains adequate economic substance with real business activities in the UAE
• Derives income from qualifying activities like manufacturing, services, and others eligible for the tax exemption
• Complies with transfer pricing rules and keeps proper documentation as required by corporate tax law
• Prepares audited financial statements for tax purposes
• Non-qualifying income does not exceed the lower of AED 5 million or 5% of its total revenue (de minimis requirement).

Is There 0% Tax in Mainland Dubai?

Let us talk about mainland Dubai, also referred to as the onshore area of the Emirate. It offers vast business opportunities to companies established there.

You will be happy to know that mainland companies in Dubai can also benefit from a 0% corporate tax rate. However, this is applicable only up to a certain amount of taxable income.

If your business earns up to AED 375,000 in taxable income in an accounting year, you will pay 0% corporate tax. But if your taxable income in a particular accounting year exceeds AED 375,000, then the amount above that threshold will be taxed at a 9% corporate tax rate.

Let’s understand this with an example:

• In his first accounting year, Joe earns AED 275,000. He will pay no corporate tax, as his income is below the threshold.
• In his second accounting year, he earns AED 500,000. He will have to pay 9% of AED 225,000 (500,000 – 275,000), which is AED 20,250 as corporate tax.

Conclusion on Tax Free Zones

Dubai’s tax free zones remain a top magnet for entrepreneurs and investors worldwide. Lower taxes and allowing businesses to keep more of their earnings brings a whole new level of success and satisfaction.

For a successful company setup in Dubai tax free zone, simply follow the steps outlined in this guide and you are good to go.

Dubiz can Simplify your Setup in Dubai

If you are looking for a company setup in Dubai tax free zone, we can help you. Dubiz Business Setup has been assisting entrepreneurs to launch their businesses smartly in free zones and mainland Dubai.

Our experts have years of experience and can handle licenses, permits, approvals, and business bank account setup on your behalf. Besides that, we also offer tax consultancy services to help you optimize your tax position, while taking care of corporate tax registration and filing in UAE.

For a consultation, reach out to:

📞 Call: ‪+971 563695485

💬 WhatsApp: ‪+971563695485

📧 Email: info@dubiz.co

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