Setting up a business in the UAE often begins with choosing the right location. One option many companies prefer is a free zone. A free zone is a designated area where businesses can enjoy benefits like full foreign ownership, tax exemptions, and simplified setup processes. These zones are designed to support specific industries and attract foreign investment.
Abu Dhabi, the capital of the UAE, has become a leading centre for trade, industry, and innovation. Its free zones offer clear advantages for local and international investors who want to grow in a stable and well-regulated environment.
In this guide, we will give a full overview of the free zones in Abu Dhabi. We’ll explain how they work, what they offer, and how to choose the one that fits your business.
What Are Free Zones and How Do They Work in Abu Dhabi
Free zones are areas in the UAE where businesses can set up and operate under special rules. These areas are made to support business growth and attract foreign investors. In a free zone, a business owner can usually own 100% of the company without needing a local partner. Free zones also offer tax benefits and allow easy trade with other countries.
In Abu Dhabi, free zones are managed by different authorities, depending on the zone. Some of the main ones include:
Abu Dhabi Department of Economic Development (ADDED)
Khalifa Industrial Zone Abu Dhabi (KIZAD)
twofour54 for media and creative businesses
Abu Dhabi Global Market (ADGM) for financial services
Setting up a company in a free zone is often a simple process. First, the business owner chooses the free zone and activity. Then, they submit an application, provide documents, pay fees, and receive the licence. Some free zones also offer help with visas and office space.
What’s the Difference Between Mainland and Free Zone
Ownership structure
In the mainland, the UAE now allows 100% foreign ownership for many business activities, such as retail, services, manufacturing, and trading. This means a foreign national can fully own the business without needing a UAE national as a partner. However, certain sectors, mainly those linked to national interest, like oil and gas, defence, or banking still require a local partner or service agent. This is done to ensure local oversight in strategic industries.
In a free zone, a foreign investor can also own 100% of the business, and this rule applies to all activity types offered within that zone. These zones were created to attract international businesses by giving them full ownership rights, which removes the need to share profits or decision-making with a local partner. This is especially attractive for investors who want full control over their business operations, including management, finances, and growth strategies.
Business activity scope
Mainland companies are allowed to offer goods and services across the UAE without restrictions. This includes retail products, business consultancy, repair services, logistics, construction, and many other fields. They can deal directly with customers, government departments, and private companies. The reason they are allowed to operate freely across the country is because they are licensed by ADDED, which covers the entire Abu Dhabi area and allows access to all UAE markets without needing a third party.
Free zone companies, in contrast, are limited in where they can do business. Their licence only allows them to operate within their specific free zone or to conduct international trade. If they want to sell goods or offer services in the mainland (outside their free zone), they must appoint a UAE-licensed distributor or commercial agent to act on their behalf. This rule is in place to maintain regulatory control and tax structure, as free zones have different legal and tax systems compared to the mainland.
Office requirements
To register a mainland business, it is required to rent or own a physical office space that complies with the rules set by ADDED. These rules are in place to confirm that the business has a real presence and can carry out its licensed activities. The office space must meet minimum size requirements, often based on the type of business and the number of employees or visas needed.
In free zones, office requirements are generally more flexible. Many free zones offer different options, such as flexi-desks, shared offices, private offices, or virtual office packages. These options make it easier for small businesses and startups to begin operations with lower costs. The flexibility comes from the free zone authority itself, which allows businesses to operate even from shared spaces as long as they meet the minimum requirements for licensing and visa eligibility.
Target market differences
Businesses set up in the mainland can sell products and offer services directly to customers anywhere in the UAE. They can also take part in government tenders and supply contracts, which are often limited to businesses with a mainland licence. The reason they can operate freely is because they are licensed by ADDED, which gives them permission to trade in all areas within Abu Dhabi and the wider UAE without needing intermediaries.
In contrast, free zone businesses are mostly limited to dealing with clients located inside the same free zone or outside the UAE. If a free zone company wants to sell goods or offer services to the mainland market, it must appoint a mainland-licensed distributor or agent. This third party handles the sales, import, and legal requirements needed to operate within the mainland. This process protects the different legal and tax systems between free zones and the mainland.
Regulatory differences
Mainland businesses are governed by the Abu Dhabi Department of Economic Development (ADDED). ADDED is responsible for reviewing and approving the company’s business activity, trade name, office location, and number of employees. It also monitors compliance with labour, health, and safety standards. These rules are in place to ensure that businesses are properly licensed, operate legally, and support the local economy.
Free zone businesses, on the other hand, are regulated by the authority of the free zone where they are registered. For example, companies in Abu Dhabi Global Market (ADGM) follow ADGM's laws and procedures, while those in KIZAD or twofour54 are managed by their own zone-specific authorities. These authorities control how companies are registered, what licence types are available, how many visas they can get, and what office space is required. Most free zone authorities also offer business support services such as visa processing, legal guidance, and workspace planning. These services are designed to help businesses operate smoothly within the zone.
What Is a Freezone Visa in Abu Dhabi
A free zone visa in Abu Dhabi is a type of residence visa given to people who start a business in one of the emirate’s free zones. It is usually available to business owners, partners, and employees of companies that are registered in a free zone. To apply for this visa, the business must first be approved and licensed by the free zone authority. After that, the company can apply for a visa under its trade licence.
Each free zone sets its own rules on the number of visas a company can get. The number often depends on the type of office space the business rents. For example, companies with only a shared desk may be allowed one or two visas, while those with larger offices can apply for more. The visa process usually includes a medical test, Emirates ID registration, and entry permit approval.
How Much Is a Free Zone License in Abu Dhabi
The cost of a free zone licence in Abu Dhabi can vary based on the free zone, the type of business activity, and the office space chosen. On average, the total cost to set up a business in a free zone can range from AED 10,000 to AED 30,000 or more. Some free zones offer lower-cost packages for small or single-owner businesses, especially those using shared or virtual offices.
Typical fees include the business licence, registration fee, and charges for visa quotas. Other possible costs are name approval, office rent, and legal documents. Some free zones offer bundled packages that include the licence, office space, and visa processing in one price. It is important to check with the chosen free zone for an exact breakdown of fees and available options.
Benefits of Setting Up in a Free Zone
Setting up a business in a free zone offers several advantages, especially for foreign investors. These zones are designed to support business growth and attract international companies. Below are the main benefits of choosing a free zone in Abu Dhabi.
100% Foreign Ownership
Free zones allow foreign investors to fully own their business without needing a local partner. This gives the owner full control over decisions, profits, and business operations. It also makes it easier to manage the company from outside the UAE if needed.
Tax Exemptions
Most free zones offer full or partial exemption from corporate and personal income taxes for a set number of years. This helps reduce overall costs and can make the business more profitable. Some zones also offer extensions on these tax breaks.
Customs Benefits
Goods imported into a free zone are usually exempt from customs duties, as long as they are not moved into the UAE mainland. This is useful for trading companies and manufacturers that bring in raw materials or export finished products overseas.
Simplified Setup Process
Setting up a company in a free zone is usually faster and simpler than in the mainland. Many free zones offer support with paperwork, visa processing, and office setup. This helps businesses get started quickly with fewer delays.
Sector-Specific Advantages
Each free zone is designed for certain industries, such as media, finance, logistics, or technology. These zones offer licences, office space, and services that fit the needs of those industries. This focus helps businesses connect with others in the same field and access the right support.
Steps to Set-Up a Business in an Abu Dhabi Free Zone
Step 1. Choose a free zone
Start by selecting a free zone that fits your business activity. For example, twofour54 is ideal for media and creative work, KIZAD focuses on manufacturing and logistics, Masdar City supports clean energy and tech, while ADGM is built for finance and legal services. Each free zone supports specific industries and offers different facilities, costs, and visa options. Choosing the right one ensures your business is set up in a suitable environment.
Step 2. Choose legal structure
Next, decide on the legal structure of your company. Common options include:
Free Zone Establishment (FZE) – a single-owner company
Free Zone Company (FZC) – owned by two or more shareholders
Branch Office – for companies already operating outside the free zone or overseas
The legal structure affects ownership, liability, and how your business is managed. Each free zone authority provides guidelines on which structures are available.
Step 3. Submit application
After selecting the structure, you must fill out a business licence application form provided by the free zone authority. You will also need to submit required documents such as:
Passport copies of all shareholders and managers
Chosen trade name (must follow naming rules)
Business plan or a short activity description
Passport-sized photos
Proof of address (in some cases)
Some free zones allow online applications, while others may require an in-person visit to complete the process.
Step 4. Obtain license
Once your application is reviewed and approved, the free zone authority will issue your trade licence. This document officially allows your business to operate within the free zone based on the activity you selected. The licence is valid for one year and must be renewed annually. You may also receive a Certificate of Incorporation and Memorandum of Association, depending on the structure.
Step 5. Apply for visas
With your trade licence, you can now apply for residence visas for yourself, your business partners, and employees. The number of visas you can request depends on the type and size of office space you have leased. For example, a flexi-desk may allow one or two visas, while a larger office may allow five or more. The visa process includes entry permit issuance, medical tests, Emirates ID registration, and stamping of the visa in the passport.
Step 6. Set up office (physical or flexi-desk)
The final step is to choose and set up your office space. Free zones offer a variety of options, such as:
Private office – for full-time use by your team
Shared office – a desk or small area shared with others
Flexi-desk – a part-time desk in a common working area
The office you choose must meet the minimum space requirements set by the free zone. The size also affects your visa quota. Some free zones may include office space in the licence package, while others charge a separate rent.