Designated Free Zones in the UAE

Unlock 0% Tax Opportunities and VAT Optimisation
With Fintree’s Expert Guidance.

UAE free zones have long attracted entrepreneurs with promises of 100% foreign ownership and streamlined setup. Recent tax reforms have added layers of opportunity and complexity, especially around “designated free zones” that offer targeted VAT benefits and pathways to 0% Corporate Tax for qualifying activities.

Free Zones Basics

Free zones in the UAE are specialised economic areas designed to boost investment in targeted sectors like trade, tech, logistics, and manufacturing. They offer key perks such as full foreign ownership, full profit repatriation, no customs duties on re-exports, and ready infrastructure including flexi-offices and warehouses.

Over 40 free zones operate across emirates like Dubai, Abu Dhabi, and Ras Al Khaimah, each with unique focuses—Jebel Ali for logistics, Dubai Silicon Oasis for tech, or RAK for maritime. Fintree specialises in matching businesses to the right free zone through end-to-end formation, banking, and compliance support.

What Are Designated Free Zones?

Designated free zones represent a subset of UAE free zones that meet rigorous criteria set by the Federal Tax Authority (FTA). These include physical fencing, controlled customs entry/exit points, dedicated goods-handling protocols, and compliance with audit-ready standards.

Only zones proving they function as “outside the UAE” for goods movement earn this status, enabling zero-rated VAT on qualifying supplies like storage, processing, or re-exports within the zone. This designation applies separately to VAT rules and does not automatically confer Corporate Tax exemptions.

VAT and Corporate Tax Benefits

VAT Treatment

In designated free zones, supplies of goods between zone users or to/from outside the UAE can qualify for zero-rating if conditions like no mainland consumption are met. Services, however, follow standard 5% VAT rules even here, making proper classification essential.

Trading or logistics firms benefit most, avoiding VAT on intra-zone or export transactions while maintaining compliance.

Corporate Tax Perks

UAE’s 9% Corporate Tax spares Qualifying Free Zone Persons (QFZPs) on qualifying income like active trading or manufacturing, provided they meet substance rules, core activity tests, and de minimis non-qualifying revenue limits. Many designated zones double as potential QFZP candidates, but success hinges on real operations and documentation.

Fintree guides clients through these tests during setup to safeguard benefits long-term.

Key Designated Free Zones

Jebel Ali Free Zone (JAFZA)

Dubai’s flagship logistics hub sits adjacent to the world’s busiest man-made port and airport, suiting trading, distribution, and light manufacturing. It excels in VAT-optimised goods flows and QFZP potential for export-focused firms.

Fujairah Free Zone

This east-coast zone leverages its deep-water port for maritime, oil & gas, and commodities trading, with low costs and quick visas. Ideal for re-export models with VAT exemptions on qualifying goods.

RAK Economic Zone and Maritime City

Ras Al Khaimah offers industrial clusters for manufacturing and maritime services, blending affordability with designated status for storage and processing. Strong for SMEs scaling exports.

…

Fintree tailors zone selection to your sector, trading patterns, and tax goals.

Zone Best For Key Tax Edge Infrastructure
JAFZA Global trade, logistics VAT zero-rating on re-exports; QFZP path Port/airport access, 8,000+ companies
Fujairah FZ Maritime, commodities Goods storage exemptions Deep-sea port, low setup costs
RAK Economic Zone Manufacturing, industrial Intra-zone VAT benefits Warehouses, affordable land

Comparison: Designated vs Other Structures

Designated free zones shine for international trade but aren’t universal.

Structure Market Access Ownership Tax Snapshot Ideal Business
Designated Free Zone Zone-to-zone & exports strong; mainland limited 100% foreign VAT zero on qualifying goods; 0-9% CT potential Traders, logistics, exporters
Regular Free Zone Zone-focused; mainland via distributor 100% foreign Standard 5% VAT; CT per QFZP rules Tech, consulting, services
Mainland Full UAE (contracts, onshore sales) Up to 100% in most sectors Full VAT/CT exposure Retail, services, gov tenders
Offshore International holding/trading 100% foreign Often 0% CT; no UAE VAT Asset protection, investors

..

Fintree analyses your model to recommend the optimal path, avoiding common mismatches.

Staying Compliant

Qualifying benefits demand vigilance: maintain audited goods records, prove substance with local staff/decisions, limit non-qualifying revenue under 5%, and file accurate VAT/CT returns. Zone authorities enforce customs protocols, while FTA audits focus on economic substance.

Fintree’s PRO, VAT compliance, and renewal services handle this, with real-time reminders and FTA portal access.

Fintree’s Role in Your Success

With 20+ years navigating UAE regulations, Fintree acts as your neutral advisor for zone selection, formation, banking, and compliance. We start with a free consultation to map your business model, then deliver:

  • Custom structure design (designated zone or hybrid).
  • Full setup: licenses, visas, multi-currency accounts.
  • Ongoing support: tax filings, audits, expansions.

Our transparent pricing and dedicated teams ensure no surprises.

Speak To Our Experts +971 58 69 33 651
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