Module V·Article II·~1 min read
Freezone Companies: Tax Incentives and Conditions
UAE and DIFC Tax Regime
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What is a Freezone
Free Economic Zones (Free Zones, Freezones) are special economic territories with simplified regulation and tax incentives. In the UAE, there are over 40 freezones, each with its own specialization.
Key ones: DIFC (finance), ADGM (finance, ADGM), JAFZA (logistics, trade), Dubai Internet City / Media City (IT, media), Dubai Healthcare City, Sharjah Publishing City.
Tax Incentives in Freezones
Historically, Freezone companies were completely exempt from corporate tax for a period of 15–50 years. With the introduction of corporate tax (2023), the situation changed.
Qualifying Income (Freezone) — 0% rate: income from transactions between Freezone companies; income from qualified types of activities (asset management, finance, HQ functions, distribution); export income.
Non-qualifying income (Excluded Activities) — taxed at 9%: sales to UAE mainland (through an intermediary — 0%).
Substance requirement: to maintain incentives, the company must have a real presence: office, employees, management onsite.
DIFC: Special Jurisdiction
Dubai International Financial Centre is an independent jurisdiction with its own law (DIFC Law based on English Common Law). Regulator — DFSA.
DIFC tax regime: companies registered in DIFC and conducting business through DIFC are exempt from UAE corporate tax if conditions are met.
Practical Assignment
Choose the optimal registration option for three types of businesses: (1) Management company for an investment fund ($500 million AUM), servicing clients from Gulf countries. (2) IT company developing SaaS and selling globally (30% of clients — UAE). (3) Trading company importing goods and reselling in UAE mainland. For each: mainland, DIFC, or another freezone?
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