Licence, visa, audit and the zero percent that often does not apply: a practical walk through the first two years
A free zone licence in Dubai can be had for roughly 13,000 dirhams. The sentence “we pay no tax there” can cost a multiple of that. Most of what gets written about UAE free zones is about the first number. Hardly anything is written about the second, which is where founders are actually surprised.
So let us start with what you need, and then with what you are told you need but may not.
What you need on day one
A free zone company is a UAE company with its own licence, 100 percent foreign ownership and no requirement for a local partner. For one to three people running a consulting, trading or digital business, the formal minimum is short: a licence for your activities, a registered address (usually a flexi desk, which is included in the standard packages of the zone we work with), a shareholder, a manager, and a passport copy for each.
At the free zone we work with, the list prices are about AED 12,900 for a licence without visa and about AED 14,900 with one visa. With establishment card, e-channel registration, medical and Emirates ID, the first year with one FZCO-sponsored visa lands at around AED 28,800, roughly 7,800 US dollars. The renewal after that is around AED 24,400 with one visa. Multi-year licences are discounted.
From time to time the zone also runs promotions with lower prices or, under certain conditions, with a visa that is free for life. Check the current offer before you plan, list prices and promotions move.
The licence can be issued within a few working days once the application is complete. The visa steps follow their own timetable and need a visit to the UAE for the medical and biometrics. Opening a bank account is independent of both, may take several weeks and is never guaranteed. We covered that in our article on rejected accounts.
The zero percent: read the small print once
Here is where most expectations part ways with the law. Under the standard corporate tax regime, taxable income up to AED 375,000 is taxed at 0 percent and the excess at 9 percent. A Qualifying Free Zone Person (QFZP) instead pays 0 percent on its qualifying income and 9 percent on the rest, without the AED 375,000 band. That status is narrower than the brochures suggest.
The 0 percent depends on what the company earns and whom it deals with. Income from transactions with another Free Zone Person can qualify, provided that person is the actual beneficiary of the service and the activity is not an excluded one. For customers that are not Free Zone Persons, which includes most clients abroad, a closed list of qualifying activities generally decides. Separate rules apply to qualifying intellectual property (Cabinet Decision No. 100 of 2023, Art. 3).
Which income qualifies
Under Ministerial Decision No. 229 of 2025 (issued on 28 August 2025, with effect from 1 June 2023) the list includes manufacturing and processing, trading in qualifying commodities, holding shares and securities for investment, fund and wealth management, headquarter services to related parties, treasury and financing, ship ownership and operation, financing and leasing of aircraft, logistics, and distribution in or from a designated zone.
Ordinary consulting, marketing, software development and IT services are not on the list, nor is general trading with third parties. Income from qualifying intellectual property, including copyrighted software, follows separate rules and may qualify. Transactions with natural persons are excluded, with only a few exceptions such as fund and wealth management (Ministry of Finance, Art. 2).
Small amounts allowed, and what a miss costs
Income outside the list is allowed in small amounts. The limit is the lower of 5 percent of total revenue or AED 5 million. Above it, the company loses the status from the start of that tax period and for the next four periods as well. On top of that come substance in the zone (qualified staff, premises, local spending), arm’s length pricing with documentation, and audited financial statements, whatever the revenue (Art. 5).
But, you might say, I read that free zone companies pay nothing. For some, yes. For a one-person consultancy selling services to clients abroad, the 0 percent rate on all income is usually not available, and that is not a flaw, it is the design. A consultancy serving other free zone companies can come out differently, but that is a case for your adviser.
Two founders, two outcomes
Take a consultant with a one-person company in the zone. Revenue is AED 1.8 million, profit before the owner’s pay AED 1.2 million, clients are companies in several countries. The activity does not qualify, so the company is a free zone company under the normal regime. Without any salary, the tax is 9 percent on the profit above AED 375,000, which is AED 74,250.
But the owner will probably pay himself. Personal salaries in the UAE remain free of income tax. For the company, genuine pay for the owner’s work is an expense, as long as it meets the connected person rules: market value and a business purpose. Assuming AED 40,000 a month is supportable, AED 480,000 a year leaves AED 720,000 of profit. The tax is then 9 percent of AED 345,000, which is AED 31,050. Whether your home country taxes that salary is a different question, see below.
Small Business Relief: a threshold that works like a cliff
There is a second route for the consultant. Small Business Relief lets a resident company with revenue up to AED 3 million elect to be treated as having no taxable income. Ministerial Decision No. 131 of 2026 (August 2026) extended it to tax periods ending on or before 31 December 2029 (Entrepreneur Middle East).
It is not automatic, you elect it in the tax return. Qualifying Free Zone Persons and members of large multinational groups cannot use it. So in our example the tax can drop to zero, as long as revenue stays at or below the threshold and the election is made. Note that the line is a cliff, not a slope. Revenue must not exceed AED 3 million in the relevant tax period or in any previous one. A year with AED 3.2 million therefore costs the relief for that year and, under the existing conditions, for later years too, even if revenue falls again.
The founder who does qualify
Now the second founder: a company that processes goods or trades qualifying commodities from the zone, with its own staff. Here the 0 percent can work. The price is real: audited financial statements every year, substance that fits the activity, arm’s length pricing for related party transactions with the records to show it, and the formal master file and local file where thresholds require them. Fail one of the conditions and the status goes for five tax periods.
Audit: who needs one, and what it costs
The tax law requires audited financial statements for Qualifying Free Zone Persons, no matter how small. In addition, some zones ask for statements on their own account. Since 30 September 2025, the zone we work with requires financial statements at every licence renewal. A simplified template is enough if turnover is AED 3 million or less and the company had nine employees or fewer. Above either limit, audited statements are required. Other zones set other thresholds. Outside the QFZP regime, audited statements are also required for corporate tax purposes above AED 50 million of revenue.
What does it cost? Indicative quotes for small companies run from roughly AED 3,500 to 6,000 for a start-up with low revenue, and AED 8,000 to 18,000 for a company with a few million of revenue. Get a fixed fee in writing, extras tend to add up. For a cost-conscious owner that is a good reason to ask one question before choosing a structure: do I stay below the line where an audit becomes compulsory, or do I need QFZP status for a reason?
Tax return and VAT: two registrations
Even at zero tax, the company must register for corporate tax and file a return, due within nine months after the end of the financial year. Missing the registration deadline carries a penalty of AED 10,000. A waiver initiative of the tax authority can remove it if the first return is filed within seven months after the end of the first tax period. That is earlier than the normal nine months. People who see “0 percent” and stop reading end up here more often than anywhere.
VAT has its own rules. Taxable supplies and imports above AED 375,000 can trigger mandatory registration, zero-rated supplies included, and free zone status does not automatically remove that obligation.
And your home country?
A UAE licence says nothing about where you owe tax. If you manage the company from your country of residence, that country may treat it as managed there or attribute its profits to you under controlled foreign company rules. Residence in the UAE is a second step, not a by-product of the licence. A visa alone does not settle your tax residence anywhere. How far substance requirements reach into your home country, we describe in our article on economic substance.
Where to start
A short list in the right order: the activity, because it decides everything; the expected revenue and customer mix, because Small Business Relief has an AED 3 million revenue threshold while QFZP status has its own limit for non-qualifying revenue (the lower of 5 percent or AED 5 million); where the owners live and work; and whether your income would qualify at all. Only then the zone and the package.
If you want to talk it through, get in touch. We look at your activity and revenue and tell you whether a free zone makes sense, which regime you would likely fall under, and what the first two years cost. For tax and legal details, a licensed adviser from the Singabiz Network is the right contact.
Dubai sells sunshine, and that is the one thing guaranteed to be tax-free there. The rest you calculate.
