Designated Free Zones in the UAE: Guide for Investors and Business Owners

What Is a Designated Free Zone in the UAE?

Designated free zones in the UAE are specific areas officially recognised under the country's Value Added Tax (VAT) legislation. These zones are treated as being outside the UAE for certain VAT purposes, particularly qualifying transactions involving goods.

However, not every UAE free zone is a designated zone. A free zone provides a specialised environment for business activities and company formation, while designated-zone status is a separate classification established under UAE tax legislation.

To qualify for designated-zone treatment, an area must satisfy specific requirements, including physical boundaries, security measures and customs controls governing the movement of goods.

Businesses operating within designated zones may benefit from special VAT treatment for qualifying goods transactions, including certain movements and storage of goods. However, these benefits are conditional and do not provide a general VAT exemption for all transactions or services.

Commercial free zones across the UAE also support a wide range of activities, including industrial operations, international trade, logistics and professional services. Many offer industry-specific infrastructure and business ecosystems that can make establishing and operating a company more convenient.

For businesses considering a designated zone, it is important to distinguish between the area's VAT status, the company's licensing requirements and its eligibility for any separate corporate tax benefits.

List of Designated Free Zones in the UAE (2026)

Each emirate in the UAE has free zones catering to different industries and business requirements. However, only certain locations are officially classified as designated zones for VAT purposes.

The following list is based on the Federal Tax Authority's published List of Designated Zones, incorporating the amendments shown in that document.

Designated Free Zone Areas in Dubai

• Jebel Ali Free Zone (JAFZA – North and South)

• Dubai Cars and Automotive Zone (DUCAMZ)

• DAFZA Industrial Park Free Zone – Al Qusais

• Dubai Aviation City

• Dubai Airport Free Zone

• International Humanitarian City – Jebel Ali

• Dubai CommerCity

Designated Free Zones in Abu Dhabi

• Free Trade Zone of Khalifa Port

• Abu Dhabi Airport Free Zone

• Khalifa Industrial Zone (KIZAD)

• Al Ain International Airport Free Zone

• Al Bateen International Airport Free Zone

Designated Free Zones in Sharjah

• Hamriyah Free Zone

• Sharjah Airport International Free Zone

Designated Free Zones in Umm Al Quwain

• Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port

• Umm Al Quwain Free Trade Zone on Sheikh Mohammed Bin Zayed Road

Designated Free Zones in Ras Al Khaimah

• RAK Port Free Zone

• RAK Maritime City Free Zone

• Al Hamra Industrial Zone – Free Zone

• Al Ghail Industrial Zone – Free Zone

• Al Hulaila Industrial Zone – Free Zone

Designated Free Zones in Ajman

• Ajman Free Zone

Designated Free Zones in Fujairah

• Fujairah Free Zone

• Fujairah Oil Industry Zone (FOIZ)

Important: Dubai Textile City, the Free Zone Area in Al Quoz and RAK Airport Free Zone previously held designated-zone status but were removed from the list in 2021 and 2019 respectively.

Furthermore, several prominent business free zones, including DMCC, DIFC and ADGM, are not listed as designated zones for VAT purposes.

Businesses should verify the status of their specific location against the latest FTA guidance before assuming that special VAT treatment applies.

Free Zone vs Mainland UAE

Many companies and investors inquire about free zones vs mainland in the UAE, as both jurisdictions have significant differences in regulations and business requirements. As rules can vary between emirates, this section focuses specifically on the differences between mainland and free zone companies in Dubai.

While free zone areas in Dubai are attractive for foreign investors wanting to establish a business and operate internationally, mainland businesses are regulated by the Dubai Department of Economy and Tourism (DET).

Mainland companies generally offer greater flexibility to conduct business directly across the UAE, while free zones provide specialised commercial environments, licensing arrangements and infrastructure for particular industries.

Here are some key differences between mainland and free zone areas in Dubai:

Dubai introduced the Free Zone Mainland Operating Permit in 2025, allowing eligible free zone companies to conduct certain activities in mainland Dubai through a regulated permit system.

It is also important to distinguish between free zone business registration and designated-zone status. Not every free zone qualifies as a designated zone for VAT purposes, and neither status automatically exempts a business from VAT or corporate tax.

Companies should therefore consider their intended business activities, target markets, licensing requirements, office space needs and tax obligations before choosing between a free zone and mainland structure.

Free Zones With Significant Commercial Property Opportunities

Having understood the differences between free zones and mainland business structures in the UAE, it is also important to consider the commercial property opportunities available within different business districts.

Several UAE free zones are particularly attractive to companies and investors because of their specialised infrastructure, business ecosystems and accessible locations. However, not all free zones qualify as designated zones for VAT purposes.

Dubai Multi Commodities Centre (DMCC)

A major mixed-use free zone in Dubai, DMCC offers extensive modern office space across Jumeirah Lakes Towers (JLT) and Uptown Dubai, alongside facilities supporting industries such as precious metals, energy, agricultural commodities and technology.

Businesses can access commercial properties ranging from flexible office spaces and business centres to premium office towers. Its established business community, transport connections and surrounding amenities make it an attractive location for companies seeking a presence in Dubai.

DMCC is a business free zone, but it is not itself listed as a VAT-designated zone.

Jebel Ali Free Zone (JAFZA)

An industrial and logistics powerhouse, JAFZA benefits from its direct connection to Jebel Ali Port and proximity to Al Maktoum International Airport. It offers established business ecosystems for sectors including logistics, food and agriculture, pharmaceuticals, manufacturing and automotive industries.

Commercial property options include warehouses, offices, logistics facilities and industrial land available for lease, making JAFZA particularly relevant to companies requiring substantial operational or storage space.

Jebel Ali Free Zone (North and South) is also officially recognised as a designated zone for VAT purposes.

Ras Al Khaimah Economic Zone (RAKEZ)

RAKEZ offers a diverse business environment supporting more than 50 industries, including manufacturing, logistics, tourism, hospitality, food processing and professional services.

Its commercial property offerings include serviced offices, warehouses, industrial facilities and land for development, catering to businesses of different sizes and operational requirements.

Certain industrial areas within RAKEZ, including Al Hamra, Al Ghail and Al Hulaila, are officially recognised as VAT-designated zones. However, designated-zone treatment depends on the specific location and applicable conditions.

Corporate Tax and UAE Free Zones

Corporate tax is an important aspect of the free zone vs mainland discussion, as businesses operating in the UAE are generally subject to federal corporate tax. However, companies established in free zones may benefit from preferential tax treatment if they meet the relevant eligibility requirements.

Under the standard UAE corporate tax regime, taxable income up to AED 375,000 is subject to a 0% rate, while taxable income exceeding this threshold is generally taxed at 9%.

A separate 0% corporate tax rate is available to businesses classified as Qualifying Free Zone Persons (QFZPs), but only on their qualifying income. Non-qualifying taxable income is generally subject to 9% corporate tax, without the standard AED 375,000 threshold applying to that income.

To be classified as a Qualifying Free Zone Person, a business must meet several conditions, including:

• Maintaining adequate economic substance in the UAE, including undertaking core income-generating activities within an appropriate free zone

• Earning qualifying income from approved activities, such as certain manufacturing, logistics, distribution, commodity trading and other eligible business operations

• Meeting the permitted limits for non-qualifying revenue and avoiding excluded activities that could affect eligibility

• Maintaining audited financial statements and complying with applicable transfer pricing and tax reporting requirements

Importantly, simply registering a company in a UAE free zone does not automatically qualify it for the 0% corporate tax rate. Businesses must satisfy the relevant conditions and maintain compliance to retain their preferential treatment.

Designated-zone status for VAT purposes is also separate from corporate tax eligibility. A business operating in a VAT-designated zone is not automatically a Qualifying Free Zone Person, and businesses should assess their VAT and corporate tax obligations independently.

Finding a Commercial Property in the UAE

Finding a commercial property in the UAE is not just about finding the right unit. It is about establishing long-term goals and choosing a location that aligns with your commercial vision and business requirements.

Whether you're looking for office space, warehousing or other commercial premises, factors such as location, accessibility, licensing requirements and proximity to customers or logistics networks can influence your decision.

With Engel & Völkers, you gain access to expert commercial real estate guidance and a selection of properties suited to different business requirements.

Our premium real estate services offer you:

• Experienced commercial real estate agents with in-depth local market knowledge

• Tailored consultations to understand your business and property requirements

• Support throughout the property search, negotiations and leasing or purchasing process

Explore our commercial office properties in Dubai, or contact Engel & Völkers Dubai on +971 4 422 3500 for personalised assistance.

For questions about designated-zone eligibility, VAT treatment or corporate tax obligations, businesses should also consult a qualified UAE tax adviser.