This is the first decision, and almost everything else follows from it. The UAE is not one legal system but three: the federal mainland, the non-financial free zones, and the common-law jurisdictions of DIFC and ADGM. An employment contract, a data protection policy or a shareholders’ agreement that is correct in one may be wrong in another.
Choosing Your UAE Jurisdiction
Mainland, free zone, DIFC or ADGM
This is the first decision, and almost everything else follows from it. The UAE is not one legal system but three: the federal mainland, the non-financial free zones, and the common-law jurisdictions of DIFC and ADGM. An employment contract, a data protection policy or a shareholders’ agreement that is correct in one may be wrong in another.
| Item | Detail |
|---|---|
| Business | [DESCRIBE] |
| Owners | [NAMES AND NATIONALITIES] |
| Where are the customers? | [UAE mainland / Free zone / Overseas / Mixed] |
| Regulated activity? | [Yes — which regulator / No] |
| Employees expected in year one | [NUMBER] |
| External investment expected? | [Yes / No / Possibly] |
| Jurisdiction selected | [Mainland / Free zone — name it / DIFC / ADGM] |
| Reason recorded | [WHY] |
| Decision date | [DATE] |
1. The Question That Decides It
1.1Who will you invoice? This single question resolves most cases.
| If you will invoice… | Then | Because |
|---|---|---|
| UAE mainland customers, regularly | Mainland | A free zone entity selling into the mainland needs a distributor, a branch, or accepts that the income is non-qualifying for corporate tax |
| Customers outside the UAE, or inside your own free zone | Free zone | Qualifying income may be taxed at 0% as a Qualifying Free Zone Person |
| Financial services clients | DIFC or ADGM | Regulated financial activity generally requires a financial free zone licence |
| A mix, with mainland revenue material | Mainland, or a dual structure | Breaching the free zone de minimis costs the 0% rate for five periods |
| Nobody yet — pre-revenue | [Depends on the plan] | Choose for where revenue will come from, not where setup is cheapest |
1.2The old shorthand — "free zone for 100% foreign ownership" — is out of date. Since the Commercial Companies Law amendments, 100% foreign ownership is available on the mainland for most activities. Ownership is no longer the deciding factor; market access and tax treatment are.
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This is page 1 of the Word document, exactly as it appears when you open it. Fields shown like THIS are placeholders for you to complete.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
The jurisdiction determines which employment contract, which data protection policy, which constitutional document and which courts apply. Every other template in this library has a jurisdiction assumption built into it. Getting this wrong means rebuilding the document set, and in some cases restructuring the company.
The Commercial Companies Law amendments opened 100% foreign ownership to most mainland activities. The old advice to use a free zone purely for full ownership is out of date. Market access and tax treatment are what now distinguish the options.
A Qualifying Free Zone Person pays 0% on qualifying income. The de minimis for non-qualifying revenue is the lower of AED 5,000,000 or 5% of total revenue. Breach it and QFZP status is lost for that tax period **and the four following periods**, with all income taxed at 9%. For a consultancy that occasionally invoices a mainland client, one invoice can be more expensive than the trade licence.
A free zone company is not automatically exempt. It must meet the QFZP conditions, maintain adequate substance in the zone, comply with transfer pricing, and — under current rules — prepare audited financial statements. Marketing that says "0% tax in a free zone" is describing a conditional rate as though it were automatic.
Certain activities remain subject to Emirati ownership requirements or additional approvals, set by Cabinet decision. Confirm the specific activity rather than relying on the general position.
The licence activity must match what the business actually does, and visa job titles must match the licence. Companies discover the mismatch at the first work permit refusal or the first regulator query, by which point amending the licence is slower than getting it right.
They are separate common-law jurisdictions with their own courts, company law, employment law and data protection regimes, and direct application of English law in ADGM. That is a genuine advantage for holding structures, venture vehicles and financial services — and unnecessary cost for a trading company.
A mainland or ordinary free zone employer accrues gratuity and is subject to Federal Decree-Law 33/2021. A DIFC employer contributes monthly to DEWS instead and operates under a common-law style code with different notice, leave and termination rules. The employment documents are not adaptations of each other; they are different documents.
Quota obligations, Nafis registration and penalties attach to mainland establishments. Free zone and financial free zone entities are generally outside the regime. For a business approaching 50 employees, this is a material cost difference that should be in the three-year model.
Federal Decree-Law 20/2025 introduced a mechanism to transfer a company’s registration between competent authorities, including between the mainland and free zones. That reduces the cost of getting the initial choice wrong — but it is a process with approvals, not a switch.
Mainland LLC share structures are inflexible, transfers require notarisation and DED approval, and option schemes are awkward. Companies raising venture capital commonly hold the operating entity beneath an ADGM, DIFC or offshore holding company. Decide the holding structure at the same time as the operating jurisdiction, not at the first term sheet.
Licence renewal, visa costs, office or flexi-desk, corporate tax, VAT compliance, audit where required, WPS, and Emiratisation exposure all differ. The cheapest first-year licence frequently produces the most expensive third year.
There are more than forty free zones with different activity lists, visa packages, office requirements, audit rules and whether federal employment law applies in full. Choose the zone after choosing the category, and verify the specific zone’s rules rather than assuming a general free zone position.
A free zone entity for international revenue with a mainland branch or subsidiary for local business is a normal arrangement. It costs more to run and requires clean separation of income for tax purposes, but it resolves the market access problem without risking QFZP status.
Reflects UAE law and practice current as of {{DATE OF USE}}. The Commercial Companies Law was amended by Federal Decree-Law 20/2025; corporate tax rules, qualifying activity lists, free zone conditions and Emiratisation targets all change frequently — take legal and tax advice on the structure before incorporating, and confirm the specific free zone’s rules directly with the zone authority.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.