Company formation in the United Arab Emirates has been rebuilt around Federal Decree-Law No. 32 of 2021 on Commercial Companies, which took effect on 2 January 2022 and was amended by Federal Decree-Law No. 20 of 2025 issued on 1 October 2025. Full foreign ownership is now the default for most mainland activities, more than forty free zones offer their own incorporation regimes, and the two financial centers, the DIFC and ADGM, run separate common-law systems. The choice between these routes controls licensing, tax, banking and access to the local market, and it is far cheaper to decide correctly at the start than to restructure later. This article reads the current statutes in practical terms.
The governing framework: the Commercial Companies Law and its 2025 amendment
Federal Decree-Law No. 32 of 2021 on Commercial Companies repealed Federal Law No. 2 of 2015 and is the main statute for mainland companies, their shareholders and their managers. It regulates incorporation, governance, shareholder rights, transformation and liquidation, and under Article 3 it applies to companies established in the State and to foreign companies that practice an activity in the State or establish a head office, branch or representative office in it. Companies licensed in free zones and financial free zones sit outside most of its provisions while they operate inside their zones.
Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, modernized the tools investors use daily. Limited liability companies may now issue shares of different classes with different rights, drag-along and tag-along arrangements received a statutory basis, the succession of shares on a partner's death was clarified, a framework for non-profit companies was introduced, and companies gained a clearer path to transfer their registration between registries, including into the UAE, with continuity of legal personality. When we review a new structure, we test it against the amended text, not the older commentary.
Full foreign ownership and the strategic impact list
The starting position under the Commercial Companies Law is that a foreign investor may own up to one hundred percent of a mainland company. The exception sits in Article 10, which empowers the Cabinet to define activities with a strategic impact and the controls for licensing them. Cabinet Resolution No. 55 of 2021 issued that list: security, defense and military activities; banks, exchange houses, finance companies and insurance; currency printing; telecommunications; Hajj and Umrah services; Holy Quran memorization centers; and services related to fisheries, in which national ownership must be one hundred percent. For listed activities, the competent authority, together with the sector regulator, sets the permitted foreign shareholding and any board requirements case by case.
Two practical points follow. First, the default is openness: most commercial, industrial and professional activities admit full foreign ownership without a local partner or sponsor. Second, the strategic list is activity-specific, so the first step of any formation exercise is an exact mapping of the intended activities against the licensing catalog of the chosen emirate and against Cabinet Resolution No. 55 of 2021, with the sector regulator's own conditions added for regulated activities such as healthcare, education or financial services.
Choosing the legal form on the mainland
The Commercial Companies Law offers several forms. The limited liability company is the workhorse for foreign investors: liability is limited to the share capital, management may be vested in one or more managers, and after the 2025 amendment the memorandum may create classes of shares and embed transfer mechanics that used to live only in shareholders' agreements. The private joint stock company suits larger capital raises and institutional shareholders, while the public joint stock company is the only form that may offer shares to the public and, under Article 11, the only form that may conduct banking and insurance business, unless the laws regulating those activities or the decisions issued under them provide otherwise. A sole establishment is available to a single owner but without limited liability.
A foreign company may also register a branch in the UAE under the foreign companies provisions of the law, carrying on the parent company's activity under the parent's name and liability. The older requirement to appoint a national service agent for a branch was abolished by the 2020-2021 reforms, which simplified branch registration considerably. A representative office, by contrast, may only study the market and promote the parent; it may not trade. Choosing between a subsidiary and a branch is a tax, liability and licensing question, and we settle it by reference to the contracts you expect to sign, not by habit.
Mainland licensing: how the Department of Economic Development track works
Mainland companies are licensed by the economic department of the emirate of incorporation, such as the Department of Economy and Tourism in Dubai or the Department of Economic Development in Abu Dhabi. The sequence is standard: reserve the trade name, obtain initial approval, notarize the memorandum of association, secure the premises or office package the activity requires, obtain any external approvals for regulated activities, and receive the commercial license and commercial register entry. Article 11 requires the company to obtain every approval and license its activity needs before commencing work, so the sector approvals are not an afterthought but a condition of lawful operation.
After licensing come the registrations that make the company operational: establishment card and immigration file for visas, corporate tax registration with the Federal Tax Authority, VAT registration when the threshold is met, and the bank account. Our standing advice is to plan these as one project with a single timeline; delays usually come from incomplete activity mapping or underestimated bank compliance, not from the licensing authority.
Free zones: what they offer and where their limits are
The UAE hosts more than forty free zones, each with its own registrar, license categories and sector focus, from technology and media to commodities, logistics and healthcare. A free zone company offers full foreign ownership, fast incorporation, flexible office and visa packages, and a customs regime designed for re-export. For international trading, holding and specialized service businesses whose customers sit outside the UAE, a free zone is often the efficient answer.
The limit is the local market. A free zone license authorizes activity inside the zone and abroad; selling into the UAE mainland generally requires a mainland distributor or agent, a mainland branch, or a dual licensing arrangement where available, and goods entering the mainland from a zone are treated as imports for customs purposes. We review this point with particular care, because an investor who discovers the restriction after signing a local contract faces a forced restructuring.
The financial free zones: DIFC and ADGM
Federal Law No. 8 of 2004 on Financial Free Zones created the constitutional space for financial centers with their own civil and commercial laws. The Dubai International Financial Centre, now organized under Dubai Law No. 5 of 2021, and the Abu Dhabi Global Market, established under Abu Dhabi Law No. 4 of 2013, each apply English-language common-law systems with their own courts, company registrars and financial regulators. Financial activities in or from these centers are licensed by the Dubai Financial Services Authority or the Financial Services Regulatory Authority respectively.
These centers are the usual choice for regulated financial services, regional holding structures, investment funds and common-law documentation such as English-style security and trust arrangements. They are not, however, a shortcut around UAE federal obligations: criminal law, anti-money-laundering rules, and the federal tax regime apply, and the choice between a DIFC or ADGM vehicle and a mainland or ordinary free zone entity is a structuring decision that should follow the activity and the investors' exit plans, not a preference for a familiar legal style.
Corporate tax: the 9 percent regime and free zone treatment
Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses introduced federal corporate tax for financial years starting on or after 1 June 2023. Under the law and Cabinet Decision No. 116 of 2022, taxable income up to AED 375,000 is taxed at zero percent and taxable income above that threshold at nine percent. Registration with the Federal Tax Authority is required even where no tax is ultimately payable, and returns are annual. Free zone persons may benefit from a zero percent rate on qualifying income under Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025 on qualifying and excluded activities, provided the entity meets the qualifying conditions, maintains adequate substance and does not elect into the standard regime.
Two cautions. First, qualifying free zone status is conditional, not automatic: income from mainland-facing transactions can fall outside the zero rate, and breaching the conditions forfeits the benefit for the relevant period and beyond. Second, large multinational groups face a separate floor: the domestic minimum top-up tax under Federal Decree-Law No. 60 of 2023 and Cabinet Decision No. 142 of 2024 applies a fifteen percent minimum to groups with consolidated global revenues of at least 750 million euros, for financial years beginning on or after 1 January 2025. Tax now belongs at the center of the formation decision.
VAT, customs and the other registrations
Value added tax was introduced by Federal Decree-Law No. 8 of 2017 at a standard rate of five percent. Registration is mandatory once taxable supplies and imports exceed AED 375,000, with voluntary registration below that level, and compliance runs through periodic returns with the Federal Tax Authority. Customs duty on mainland imports is generally five percent on most goods under the GCC common tariff, while free zone inventory destined for re-export sits outside the mainland customs scope until it enters the local market.
Beyond tax, a trading company will touch importer and product registrations where the activity demands them, and every employer will deal with work permits and residence visas. None is individually difficult, but they are sequential and document-heavy. We map the full chain at the consultation stage so the client knows the true time-to-operation, not merely the advertised time-to-license.
If you do not incorporate: agency, distribution and the Commercial Agencies Law
Some investors prefer to sell through a local partner without establishing an entity. Federal Law No. 3 of 2022 on Regulating Commercial Agencies, which replaced Federal Law No. 18 of 1981 and entered into force in June 2023, governs registered commercial agencies. Under Article 2, agency activity is reserved to UAE nationals, public legal entities and companies wholly owned by nationals or by public entities, with two openings: public joint stock companies at least fifty-one percent owned by nationals may be authorized, and the Cabinet may permit an international company to act as agent for its own products where no agent exists in the State and the agency is new. Articles 3 and 4 make registration in the Commercial Agencies Register a condition of validity: an unregistered agency is not recognized and has no statutory protection.
Registration changes the balance of power. Under Article 8 the registered agent earns commission even on transactions the principal concludes itself in the agent's territory; Articles 9 to 11 regulate expiry, termination challenges before the Commercial Agencies Committee, and compensation, including where the agent's efforts produced evident success. An unregistered distribution agreement avoids this regime but offers no statutory protection: the choice is conscious risk allocation, and we draft it that way.
Banking, substance and people: the operational layer
Opening a corporate bank account is a compliance exercise in its own right. Banks expect the constitutional documents, the ownership chain to the ultimate beneficial owners, proof of substance and a coherent account of expected transactions, and UAE companies must file their beneficial ownership information under the applicable Cabinet resolutions. Incomplete ownership documentation is the single most common cause of account delays we see.
On staffing, residence visas for investors and employees are tied to the license, with quotas linked to office size on the mainland and to package in the free zones. Emiratization obligations apply to mainland companies above defined workforce thresholds in defined sectors and are tightened periodically by ministerial decisions, so the hiring plan should be built with the current targets in view. These operational questions belong in the same conversation as the legal form, because each route answers them differently.
Common mistakes and a realistic timeline
The mistakes repeat: choosing a free zone on price alone, then discovering the mainland restriction when the first local customer appears; incorporating on the mainland without mapping the activity against the strategic impact list and the sector regulators; assuming the bank account is a formality; building a structure around the free zone zero rate without testing the qualifying conditions; and signing a registered agency without weighing how difficult termination becomes under Federal Law No. 3 of 2022. Each of these costs more to unwind than the consultation that would have prevented it.
On timing, free zone incorporation is measured in days once documents are ready. Mainland licensing typically runs from one to four weeks depending on external approvals, and the honest planning number for a fully operational mainland company, banked and staffed, is six to ten weeks. Anything promised faster should be checked for what it omits.
What we review in a UAE formation
When we advise on a UAE formation, we begin with the activity: mapping it against the licensing catalogs, the strategic impact list under Cabinet Resolution No. 55 of 2021 and the sector regulators. We then settle the form and jurisdiction, mainland, free zone or financial center, against the client's contracts, tax profile and exit plans, and we test the corporate tax position under Federal Decree-Law No. 47 of 2022, including free zone qualifying conditions where relevant. We draft or review the memorandum to use the 2025 tools: share classes, drag and tag mechanics and succession wording. We also plan the full operational chain: licensing, external approvals, corporate tax and VAT registrations, banking, visas and, where distribution is preferred to incorporation, the agency question under Federal Law No. 3 of 2022.
See also: commercial contracts in the UAE and our commercial and corporate practice, plus our Gulf company formation comparison.
Frequently asked questions
Can a foreign investor own one hundred percent of a UAE mainland company?
Yes, for most activities, under Federal Decree-Law No. 32 of 2021; the exception is the strategic impact list in Article 10 and Cabinet Resolution No. 55 of 2021, where ownership and board composition are regulated case by case.
Mainland or free zone: how should I decide?
Follow your customers and your activity. Direct work in the UAE local market points to the mainland; international trading, holding and specialized services point to free zones, subject to the corporate tax qualifying conditions and the mainland dealing restriction.
Can a free zone company sell into the UAE mainland?
Not directly. It needs a mainland distributor or agent, a mainland branch, or an available dual license, and goods moving from the zone into the mainland are treated as imports for customs purposes.
What corporate tax will my UAE company pay?
Under Federal Decree-Law No. 47 of 2022 and Cabinet Decision No. 116 of 2022, zero percent up to AED 375,000 of taxable income and nine percent above; qualifying free zone persons may pay zero on qualifying income under Cabinet Decision No. 100 of 2023, and large multinational groups face a fifteen percent minimum from 2025.
Does a branch of a foreign company need an Emirati service agent?
No. The former national service agent requirement for branches was abolished by the 2020-2021 reforms, though the branch remains licensed and registered under the Commercial Companies Law's foreign companies provisions.
How long does UAE incorporation take?
Days in many free zones once documents are complete; typically one to four weeks on the mainland depending on activity approvals, with banking and visas adding further weeks. A fully operational setup is realistically six to ten weeks.
Is a registered commercial agency a good alternative to incorporation?
It can be, but it is a protected relationship: under Federal Law No. 3 of 2022 the registered agent gains commission rights, termination safeguards and potential compensation, so we weigh unregistered distribution against those consequences before you sign.
Do you handle UAE company formation?
Yes. We advise on the route, structure and tax position, draft the documents and manage the process with our partners in the UAE, remotely. Contact us through our contact page to discuss your plans.