In previous reviews, we examined the use of offshore companies and companies registered on the UAE mainland. This material focuses on the practical use of legal entities registered in the free economic zones of the United Arab Emirates, as well as the most common scenarios for their application.
As a rule, registering a company in a UAE free economic zone does not present procedural difficulties. Upon completion of the registration process, the company obtains the status of a fully-fledged legal entity with the right to conduct activities within the scope of the selected license, as well as access to banking, immigration, and corporate instruments provided under UAE law.
Using a company to obtain UAE residence visas
One of the most common scenarios is registering a company in a free economic zone to obtain UAE residence visas for the business owner and their family members. Such a company provides the right to apply for residence visas within the quota established by the relevant free zone.
The company may conduct commercial activities or be used exclusively as a corporate and immigration structure, provided that the requirements of the free zone, immigration authorities, and banking compliance are met. For visa renewal purposes, maintaining the company’s status and compliance with formal requirements are of primary importance, rather than the volume of actual commercial activity.
Tax residency of individuals and legal entities
After obtaining a residence visa, the company owner may consider applying for a UAE tax residency certificate. Similarly, a company registered in the UAE may qualify for a corporate tax residency certificate, provided it complies with the established requirements.
It should be noted that obtaining such a certificate is not automatic and requires confirmation of a tax nexus with the UAE, including factual presence, income structure, and compliance with the current requirements of the UAE Ministry of Finance. A tax residency certificate allows the use of benefits under double taxation avoidance agreements concluded by the UAE with other countries.
Holding and management activities
Companies registered in UAE free economic zones are often used as holding or management structures. Unlike classic offshore companies, such legal entities may have real presence in the UAE, including an office and personnel, and may obtain a tax residency certificate if the relevant conditions are met.
Such structures are suitable for holding shares in international companies, asset management, and corporate structuring, subject to proper tax and legal planning.
Consulting and service activities
Free zone companies are also widely used for consulting, IT, management, and other service activities. An important distinction from offshore structures is the ability to legally provide services within the UAE while maintaining 100% foreign ownership.
The specific types of permitted activities and the conditions for their performance depend on the license and the rules of the relevant free zone.
Conducting business with physical presence in the UAE
For companies planning an actual presence in the UAE, registration in a free economic zone may be an optimal solution. When selecting a specific zone, factors such as location, available infrastructure, the range of licensed activities, capital requirements, visa quotas, and the total cost of company maintenance should be considered.
Such companies may be used in a wide range of sectors – from trade and logistics to manufacturing, assembly, and warehousing.
Taxation and corporate advantages
Following the introduction of corporate tax in the UAE, free zone companies may apply a 0% corporate tax rate only if they meet the qualifying income conditions and have the status of a Qualifying Free Zone Person. In other cases, the general corporate tax rate established by UAE legislation applies.
At the same time, the UAE continues to offer a favorable business environment, including the absence of personal income tax, no payroll taxes for foreign employees, a developed banking infrastructure, and a stable legal system.
Conclusions
Company registration in the UAE can be an effective solution in various scenarios – from immigration planning to international corporate structuring and business operations. The key factor for the successful use of such structures is a proper understanding of the applicable rules, tax requirements, and their practical implementation.
