Guide · updated 25.08.2026 · 11 min read · Lucent Legal team

UAE company formation: mainland or free zone, and what it really costs

The usual first question is "how much does it cost to open a company in Dubai". The right one is "where will you be selling". The answer decides the structure, the price, and whether six months from now you can work with local clients without a middleman. Here is the practical breakdown: how mainland differs from a free zone, how long it actually takes, what it actually costs, and where people trip up.

Mainland or free zone: how to choose

A mainland company (also called onshore) is licensed by the emirate's economy department — in Dubai, the Department of Economy and Tourism. It sells goods and services inside the UAE without restrictions: opens a shop or a restaurant, signs contracts with local companies, bids for government and semi-government tenders.

A free zone company is licensed by the authority of a specific zone — DMCC, IFZA, Meydan, RAKEZ and dozens of others. It operates within its zone and outside the country: exports, international services, foreign clients.

You can serve a mainland client from a free zone, but not directly: you need a local distributor or agent, and for some activities a mainland branch. Most founders learn this after the fact, when the first serious client turns out to be a Dubai company.

The choice is simpler than it looks. Selling inside the UAE, need a retail address, planning tenders or a larger team — mainland. Exporting, consulting or building software for clients abroad, want a cheaper entry — free zone.

The third form, offshore, is not an operating company in the UAE at all: it grants no visa and no right to trade inside the country, and is used as a holding structure.

100% ownership: the part the ads leave out

"Foreigners can now own 100%" is true, with a caveat rarely printed in the offer.

The rule came from Federal Decree-Law No. 26 of 2020, which amended the commercial companies law and took effect on 1 June 2021. Before that, a mainland LLC required a local partner holding 51%.

The caveat: full ownership is not available for every activity. Each emirate's economy department keeps a list of activities open to full foreign ownership — over a thousand entries. Outside that list sit activities of "strategic impact": defence and security, exploration and extraction of natural resources, certain Hajj and Umrah services and others. Those still require a local partner.

The practical takeaway: check the specific activity code you are licensing, not the company form. The same business can fall under different codes, and the requirements and the price change with it.

Timelines

Free zones are fast. The standard licence takes 3–7 working days, and some zones issue "instant" licences for straightforward activities such as e-commerce on the same day.

Mainland registration takes longer: usually 2–4 weeks. The reasons are trade-name and activity approval, a tenancy contract registered through Ejari, and for some activities sign-off from a sector regulator.

The investor visa is counted separately from the licence. After the licence come the visa application, the medical test, biometrics and the Emirates ID — another 10–15 working days. If you are planning a move, budget at least a month end to end, even with a fast zone.

What it actually costs

Consultants' numbers differ several times over, and that is not always dishonesty: they are quoting different things. "Licence from AED 5,500" usually means the bare licence, with no visa, no office and no mandatory fees.

A realistic first-year range:

• Free zone, one shareholder and one visa: AED 15,000–40,000. Dubai zones typically run around a third above comparable packages in Sharjah, Ajman or Ras Al Khaimah.
• Mainland: AED 25,000–50,000. The Dubai licence itself starts around AED 12,000–18,500; the rest is the tenancy with Ejari, name and activity fees and visa costs.

On top of that, in both cases: medical insurance for every visa holder, a rental deposit, accounting, and tax registration once you pass the threshold. The line item founders forget is the annual renewal — it costs about as much as the original issuance.

The figures above are market ranges, not a tariff. Only a calculation for your specific activity and emirate gives a real number; Dubai's economy department publishes a licence cost estimator for exactly this.

Documents and visa quotas

The base pack is almost identical everywhere: passport copies for every shareholder and the director, passport-style photographs, a copy of the visa and entry stamp if you are in the UAE, proof of address, a description of the activity. Professional licences add a degree or proof of experience; regulated activities add approvals from the relevant authority.

Visas are where people miscalculate. The number is tied to premises, not to intent:

• a flexi-desk (a shared workspace) usually allows one to three visas;
• a serviced office, four or five depending on size;
• a private office is counted by area, roughly one visa per 9 m².

So if you plan a team of five, the cheap flexi-desk package will not work no matter what the licence costs. That is the real fork in the price: not the licence, but how many people you intend to bring over.

Taxes: 9% corporate tax and 5% VAT

A UAE company does not mean zero tax. Corporate tax has applied since 1 June 2023: 0% on taxable income up to AED 375,000 a year and 9% above that. Registration with the Federal Tax Authority is mandatory for every taxable person, free zone companies on the 0% rate included.

The free zone 0% is not automatic: it applies only to a Qualifying Free Zone Person and only to qualifying income. Details are in our 9% corporate tax breakdown.

VAT is separate: registration is mandatory once taxable supplies and imports over the past 12 months exceed AED 375,000, or are expected to exceed it within the next 30 days. Voluntary registration starts at AED 187,500. The rate is 5%.

The bank account is the long pole

A licence is not a working business until you have an account. In practice this is the least predictable stage: the bank reviews the source of funds, the ownership structure, the nationality of the beneficial owners and what the company actually does.

Opening takes anywhere from two weeks to several months, and a refusal without stated reasons is not unusual. Russian founders have a harder time than most: some banks will not open an account at all, others demand extended compliance. What actually works is covered separately: a UAE bank account for Russians.

Practical advice: do not sign a long lease or pay for a "turnkey" package before you know which bank will open your account and on what terms.

Common mistakes

• Choosing a free zone on price, then discovering the main client is a mainland company that cannot be served directly.
• Budgeting the first year from the licence price alone, leaving out visas, the Ejari-registered tenancy, insurance and renewal.
• Taking a flexi-desk package while planning to hire five people.
• Assuming a free zone means no tax and skipping FTA registration — the late fine is a flat AED 10,000.
• Registering without checking whether the activity is on the 100% foreign ownership list.
• Leaving the bank account for later and finding the licence money spent with no account to operate from.

This material is for information only and is not legal advice. UAE law changes — a lawyer will assess how it applies to your situation.