What is a “tax-free company”?
The term “tax-free company” generally refers to a company that benefits from a preferential tax regime in the UAE due to its legal status, type of activity, or place of incorporation. In practice, this most often applies to companies registered in free economic zones, as well as certain corporate structures that meet the requirements of UAE tax legislation.
It is important to note that the UAE tax system has undergone significant changes. Since 2023, a federal corporate tax has been in force in the country; therefore, the notion of a complete absence of taxes for all companies is no longer universally applicable. At the same time, companies registered in free zones may continue to benefit from tax incentives, provided they meet the established conditions, including carrying out permitted activities and complying with the requirements for qualifying income status.
Value-added tax (VAT) at a rate of 5% has been in effect in the UAE since 2018 and applies to companies that fall within the scope of VAT registration requirements.
Business environment in the UAE
The United Arab Emirates continues to be regarded as one of the most attractive jurisdictions for doing business at both regional and international levels. Companies operating across a wide range of sectors are well established in the country, including media, manufacturing, trade, consulting, logistics, tourism, technology, financial services, and professional services.
Flexible corporate regulation, well-developed infrastructure, a strategic geographic location, and access to international markets make Dubai and other emirates attractive to entrepreneurs from around the world.
Audit and tax obligations of companies
Despite the widespread perception of a “complete absence of taxes,” requirements related to financial reporting and audit do exist in the UAE and depend on the type of company and the jurisdiction of incorporation.
Companies registered in free economic zones are, in most cases, required to maintain accounting records and prepare annual financial statements. In many free zones, the submission of an audited financial report at the end of the financial year is mandatory. The existence of an audit requirement does not, in itself, mean the automatic occurrence of tax liabilities; rather, it forms part of the regulatory framework.
For offshore companies, audit requirements are generally absent; however, such structures are subject to restrictions on permitted activities and are not allowed to conduct business within the UAE.
Tax registration number and VAT
With the introduction of the federal corporate tax in the UAE, companies are required to register with the tax authorities and obtain a corresponding tax registration number. This requirement applies to both mainland companies and free zone companies, regardless of the applicable tax rate.
VAT registration is mandatory for companies that exceed the established threshold of taxable turnover or voluntarily register under the VAT system. Companies that do not fall within the VAT registration requirements may be exempt from VAT registration; however, this does not eliminate other tax or reporting obligations.
Who can register a company with a preferential tax regime in the UAE?
Companies in the UAE may be registered by both local and foreign individuals and legal entities. Foreign investors are permitted to own companies with 100% foreign ownership in free economic zones and, in most cases, on the mainland.
Companies registered in free economic zones may benefit from tax incentives for extended periods, as provided for by the relevant zone's rules. However, the application of a preferential tax regime depends on compliance with current corporate and tax legislation requirements, not solely on free zone registration.
Registration timeline and procedure
Company registration in the UAE is a relatively fast and transparent process. Depending on the type of company, the chosen jurisdiction, and the licensed activity, the procedure may take from several working days up to two weeks.
Subsequent company administration does not present significant difficulties, provided regulatory requirements are met, and professional local support is in place. A licensed consulting firm can handle company registration, licensing, tax support, and interaction with government authorities.
Where to start?
To obtain detailed information on available options for registering a company under a preferential tax regime in Dubai and other emirates of the UAE, please contact us. We will prepare a comprehensive information package and provide professional support at all stages – from selecting the optimal jurisdiction to launching and maintaining your business.
