Free Zone
Special economic zones in the UAE offering specific regulatory and tax benefits for businesses.
What is a Free Zone?
A Free Zone is a geographically defined area within the UAE that offers special economic regulations and incentives to businesses. There are over 45 free zones across the UAE, each with specific business focus areas such as trade, technology, media, healthcare, or logistics.
Key Characteristics
- 100% Foreign Ownership: No requirement for local Emirati partner
- Tax Benefits: Potential for 0% Corporate Tax on qualifying income (QFZP status)
- No Import/Export Duties: Customs duties exemptions on goods within the free zone
- Streamlined Setup: Simplified business registration and licensing procedures
VAT Treatment of Free Zones
For VAT purposes, UAE free zones are divided into two categories:
Designated Zones
Specific free zones designated by the FTA as being outside the UAE for VAT purposes. Supplies to these zones may qualify as exports (0% VAT).
Non-Designated Zones
Free zones not designated by the FTA. Supplies to these zones are treated as domestic supplies subject to standard VAT rules.
Corporate Tax and Free Zones
Under UAE Corporate Tax (effective from June 2023), free zone entities can qualify for 0% Corporate Tax rate by meeting Qualifying Free Zone Person (QFZP) criteria:
- Maintains adequate substance in the free zone
- Derives qualifying income from qualifying activities
- Complies with transfer pricing requirements
- Does not elect for standard 9% Corporate Tax rate
Major UAE Free Zones
Dubai
- • JAFZA (Jebel Ali Free Zone)
- • DMCC (Dubai Multi Commodities Centre)
- • DIFC (Dubai International Financial Centre)
- • Dubai Airport Free Zone
- • Dubai Silicon Oasis
- • Dubai Media City
Abu Dhabi
- • ADGM (Abu Dhabi Global Market)
- • Masdar City Free Zone
- • Khalifa Industrial Zone Abu Dhabi (KIZAD)
Sharjah
- • Sharjah Airport International Free Zone (SAIF Zone)
- • Hamriyah Free Zone
Ras Al Khaimah
- • RAK Economic Zone (RAKEZ)
- • RAK Maritime City
Mainland vs Free Zone
| Feature | Mainland | Free Zone |
|---|---|---|
| Ownership | 100% foreign (most sectors) | 100% foreign |
| Trade in UAE | Unrestricted | Requires agent/distributor |
| Corporate Tax | 9% (standard rate) | 0% (if QFZP) or 9% |
| Office Location | Anywhere in emirate | Within free zone only |
Compliance Requirements
Free zone companies must comply with both free zone authority regulations and federal tax requirements including VAT registration (if threshold met), Corporate Tax registration, and annual financial reporting.
Related Terms
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