The UAE has become one of the most open economies in the Middle East. Liberalised ownership rules, a competitive tax regime and a choice of jurisdictions make it attractive — but they also mean that the first structural decisions matter a great deal.
A federal system with local authorities
The UAE is a federation of seven emirates. Federal legislation sets common rules for companies, tax, employment, anti-money laundering and data protection, while each emirate’s authorities issue business licences and administer many day-to-day processes. In Dubai, mainland companies are licensed by the Department of Economy and Tourism (DET).
For an international company, this means two layers to consider: the federal rules that apply everywhere, and the specific requirements of the emirate and authority where the business is licensed.
Three types of jurisdiction
- Mainland (onshore). Companies licensed by the emirate’s economic department can trade directly across the UAE, including with government entities.
- Free zones. More than 40 free zones each have their own authority, rules and licence categories. They typically offer simplified setup and full foreign ownership; trading directly with the mainland market usually requires a local distributor or additional permits.
- Financial free zones. The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have their own civil and commercial laws based on English common law, their own courts and independent financial regulators.
We compare these options in detail in Mainland or free zone?
Ownership and legal forms
Since amendments to the Commercial Companies Law took effect in 2021, foreign investors can own 100% of a mainland company for most commercial and industrial activities. A limited number of activities with strategic impact remain subject to additional conditions.
Common legal forms include the limited liability company (LLC), the branch of a foreign company and the representative office on the mainland. In free zones, companies are often established as a free zone establishment (FZE) with a single shareholder, or as a free zone company with several shareholders.
Key obligations to plan for
- Corporate tax. A 9% federal corporate tax applies to taxable income above AED 375,000 for financial years starting on or after 1 June 2023, with specific rules for free zone companies. See our corporate tax overview.
- VAT. VAT applies at a standard rate of 5%. Registration is mandatory once taxable supplies exceed AED 375,000 over twelve months.
- Beneficial ownership. Companies must keep records of their ultimate beneficial owners and file this information with the relevant registrar.
- Anti-money laundering. Businesses in designated sectors — for example real estate brokerage, precious metals trading and corporate services — must register on the goAML platform and apply AML controls.
- Data protection. The federal Personal Data Protection Law applies to most onshore businesses, while the DIFC and ADGM have their own data protection regimes.
- Employment. Employees need work permits and residence visas. Mainland employment is governed by the federal labour law, and Emiratisation targets apply to private-sector companies above certain sizes.
Practical recommendations
- Start from your business model: who your customers are and what you will actually do in the UAE.
- Choose the jurisdiction and legal form with tax, visas and banking in mind — not just setup cost.
- Allow time for document attestation and bank account opening; they often take longer than the licence itself.
- Put a compliance calendar and clear governance in place from the start.
This article provides general information only and does not constitute legal, tax or financial advice. Rules change and their application depends on specific facts — please seek advice on your situation.
