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Setting Up a Company in Dubai: Mainland, Freezone, and Tax Structure Explained
Inquiries about setting up a company in Dubai have increased noticeably in 2026. The ability for foreigners to hold 100% ownership, a relatively streamlined incorporation process, and a wide range of Free Zone options have made Dubai a particularly attractive destination for businesses in IT, fintech, and digital assets. Mainland, Freezone, Offshore — What Is the Difference? Dubai company structures fall into three main categories. A Mainland company is essentially a standard operating entity that can trade directly in the local UAE market. A Free Zone company offers 100% foreign ownership, packaged licensing options, and bundled office and visa arrangements — making it the most popular choice among Korean businesses. An Offshore company is generally used for holding structures, investment vehicles, or asset management purposes rather than local operations, and is typically only considered when the purpose is clearly defined. Type Key Features Best For Mainland Direct access to UAE local market; local sponsor may be required depending on industry Local retail, F&B, service businesses Freezone 100% foreign ownership, tax benefits, straightforward visa processing IT, trading, consulting — most popular among Korean companies Offshore No local operations permitted; used for holding and asset management Holding companies, investment vehicles, asset management The 9% Corporate Tax Era — Are Free Zones Still Tax-Efficient? The old assumption that Dubai means zero corporate tax no longer tells the full story. The UAE has introduced a federal corporate tax of 9%, which applies in principle to all Dubai-registered companies. However, Free Zone entities that meet certain conditions may still qualify for a 0% tax rate on specific categories of income. The key point is that Free Zone status does not automatically guarantee a 0% rate. The outcome depends on which Free Zone is selected, where the revenue is generated and from which clients, and where the actual staff and office are located. This is why tax structuring should be part of the incorporation process from the outset, not an afterthought. What to Check Before Choosing a Free Zone Selecting a Free Zone based solely on cost can create serious complications down the line — particularly when it comes to license renewals and opening a corporate bank account. Industry fit: For crypto and Web3 businesses, a Free Zone with a well-developed regulatory sandbox (such as those aligned with VARA) is essential. Operational substance: Consider the office requirements, the number of visas needed, and how demanding ongoing compliance will be in practice. Scalability: Whether the business is service-based or trade-focused will determine which type of license is appropriate — and the right answer varies significantly between the two. Why Crypto and Web3 Projects Choose Dubai Establishing a Dubai entity goes beyond simply setting up an overseas company. It is closer to building a global base of operations — a hub through which to engage international partners, exchanges, and investors. In practice, a common structure involves a Korean entity handling development and operations, while the Dubai entity serves as the contracting and relationship hub for global counterparties. How the token issuance vehicle is structured will significantly affect the regulatory, tax, and governance picture, making early-stage design essential. Decent Law Firm's International Practice Team Decent Law Firm's international practice team provides integrated structural design that accounts for international tax, foreign exchange regulations, and digital asset compliance — drawing on hands-on experience with Dubai Free Zones, local banks, and regulatory authorities. This is not a filing service. We work with clients to design a structure across Korea, the UAE, and other jurisdictions that minimizes risk and maximizes utility. If you are considering a Dubai entity — even at the early idea stage — please reach out, and we will map out the options that fit your situation.
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How Foreign Workers Can Receive Severance Pay and Strategic response
Can Foreign Workers Receive Severance Pay? Retirement benefits are governed by Article 8(1) of the Act on the Guarantee of Employees’ Retirement Benefits. The Supreme Court has held that foreign workers are equally subject to the provisions of the Labor Standards Act regarding severance pay and the Minimum Wage Act regarding wage guarantees (Supreme Court Decision 2006Da53627, Dec. 7, 2006). Therefore, foreign workers are entitled to severance pay under the same standards as Korean nationals if the following conditions are met: Continuous employment of at least one year Average weekly prescribed working hours of at least 15 hours over a four-week period Qualification as a “worker” under the Labor Standards Act Regardless of visa type—such as E-9 (non-professional employment), E-7 (specific activities), or F-series visas—if the individual worked under the direction and supervision of an employer, severance pay entitlement applies. Despite this, some employers argue that “foreigners are excluded” or “fixed-term contract workers are not entitled.” In most cases, such claims lack legal basis. Severance pay for foreign workers is not optional; it is a mandatory statutory right that cannot be arbitrarily excluded. Common Disputes Involving Foreign Workers’ Severance Pay In practice, the following dispute types frequently arise: 1. Non-payment after departure from Korea A worker’s departure from Korea does not eliminate the employer’s obligation to pay severance. Under Article 9(1) of the Act on the Guarantee of Employees’ Retirement Benefits, an employer must pay severance within 14 days from the date the cause for payment arises. Violation may result in criminal penalties (Article 44(1)). 2. Settlement disputes involving E-9 workers under the Employment Permit System Some employers claim that payment through the “departure guarantee insurance” (mandatory departure insurance) constitutes full settlement. However, merely asserting that the matter was settled through departure insurance does not extinguish the severance obligation. The actual insurance payout must be compared with the statutory severance calculation to determine whether any shortfall exists. 3. Disputes over disguised subcontracting or freelancer status Some employers deny worker status based on the absence of social insurance enrollment. In such cases, worker status is determined based on substance over form, considering factors such as supervision and control, working structure, and wage payment methods. These issues should not be treated lightly. Delayed 대응 may make recovery of rights significantly more difficult. Legal Procedures When Severance Pay Is Unpaid If severance pay is not paid, the following steps may be taken: Filing a complaint with the Ministry of Employment and Labor Determination of unpaid wages Applying for a payment order or filing a civil lawsuit Simultaneously filing a criminal complaint, if appropriate Employers must pay severance within 14 days of the occurrence of the payment obligation (Article 9(1)). Failure to do so is punishable by up to three years of imprisonment or a fine of up to KRW 30 million (Article 44(1)). For workers planning to leave Korea, it is particularly important to secure evidence and file a complaint before departure. Missing the appropriate timing may significantly hinder actual recovery. For those facing unpaid severance as foreign workers, understanding these procedures can provide meaningful practical assistance.
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Re-Notice of Proposed Amendments to the Enforcement Decree of the Amended Trade Union Act: Changes to the Criteria for Separating Bargaining Units
Background and Key Changes of the Re-Notice The Ministry of Employment and Labor initially issued a notice of proposed amendments to the Enforcement Decree, with the public comment period running until January 5, 2026. During this process, various opinions were raised by both management and labor groups. Reflecting these views, the Ministry prepared a revised draft of the amended Enforcement Decree and announced that a re-notice period would be conducted from January 21 to February 6, 2026. Under the original draft, the criteria for separating bargaining units among unions within a principal contractor and between principal contractor and subcontractor unions were assessed under the same standards. Four factors were presented: significant differences in working conditions, employment type, bargaining practices, and the relationship between labor unions. By contrast, the revised draft represents a significant change in that it further specifies the intent of the amended Trade Union Act by distinguishing between (i) common criteria applicable to all cases and (ii) criteria to be applied with priority in principal contractor–subcontractor bargaining situations. Dual-Track and More Specific Criteria for Separating Bargaining Units The core feature of the revised draft is the introduction of a dual-track framework for determining bargaining unit separation. It distinguishes between (i) common criteria generally applicable to bargaining unit separation (Article 14-11(3) of the Enforcement Decree) and (ii) criteria to be applied on a priority basis in bargaining between principal contractor and subcontractor labor unions (Article 14-11(4) of the Enforcement Decree). For separation of bargaining units among labor unions within a principal contractor, the common criteria—largely similar to the existing framework—continue to apply. While the revised draft provides more detailed explanations regarding differences in working conditions, employment types, and bargaining practices, and adds “equivalent grounds,” the fundamental analytical framework does not differ substantially from the prior approach. However, a separate set of criteria has been newly introduced for bargaining between principal contractor and subcontractor labor unions. Where a subcontractor labor union demands bargaining with a principal contractor, the revised draft expressly provides that “interests between labor unions” and the “potential for conflicts between labor unions” should be considered with priority over the common criteria. This clarification institutionalizes the principle that bargaining unit separation may be permitted even where conflicts of interest exist due to differences in upper-level union affiliations. Such differentiation is generally viewed as a mechanism to prevent confusion in labor-management relations within principal contractors under the amended Trade Union Act framework. Implications and Key Considerations for Companies While maintaining the principle of single bargaining channel unification, the revised draft places greater emphasis on inter-union interests when determining bargaining unit separation, thereby expanding the possibility for subcontractor labor unions to engage in independent bargaining with principal contractors. This also implies that bargaining unit separation may occur not only between principal contractor and subcontractor unions, but also among subcontractor labor unions themselves. Accordingly, companies should recognize that bargaining demands from subcontractor labor unions may materialize as tangible management risks and prepare accordingly. In particular, given the introduction of the broad and flexible standard of “equivalent grounds,” the practical impact may grow depending on how the Labor Relations Commission interprets and applies the amended Enforcement Decree in the future. For corporate officers and HR professionals experiencing uncertainty over these developments, it is crucial to emphasize that early response and strategic planning are of paramount importance. Decent Law Firm’s Support for Responding to the Amended Trade Union Act Decent Law Firm provides practice-focused advisory services on issues arising from the amended Trade Union Act, including changes in bargaining structures, principal contractor–subcontractor labor relations, and disputes concerning bargaining unit separation. Through comprehensive, situation-specific support—ranging from legal review at the bargaining demand stage to representation in Labor Relations Commission proceedings and strategic planning for labor-management relations—we assist companies in managing legal uncertainty and risk. In an evolving labor environment, accurately understanding legal standards and responding proactively is essential to maintaining stable corporate management. We therefore recommend seeking legal advice sooner rather than later.
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Key Issues in Stock Option Disputes
A Stock Option Lawyer’s Perspective Stock option disputes often turn on the exact wording of the agreement and how the terms were explained at the time of grant. In practice, a single clause—or the absence of one—can lead to disputes worth millions of dollars. Stock options usually begin as an “incentive for talent.” However, when variables such as failed IPOs, resignation or termination, or changes in company valuation arise, stock options quickly become one of the most contentious legal issues in corporate disputes. 1. Why Do Stock Option Disputes Keep Occurring? At their core, stock options are based on future value appreciation. The company promises significant rewards if it grows, and employees commit their efforts based on that expectation. Disputes arise when those expectations diverge. Growth may stall, valuations may decline, or unexpected resignation or dismissal may occur. At that point, one party often claims, “This was not the condition we agreed to.” Common causes of stock option disputes include: Vague or ambiguous contract language open to multiple interpretations Key terms explained verbally but not documented in writing or email No clear rules governing exercisability upon resignation or termination These gaps allow each party to interpret the agreement in their own favor, frequently leading to litigation. 2. Lessons from the Flex Case: Cash-Settled vs. Equity-Settled Stock Options A widely discussed case in the Korean startup ecosystem involving Flex, an HR technology company, highlights the importance of specificity in stock option agreements. The central issue was whether the options were: Equity-settled (physical delivery): Shares are issued upon exercise, or Cash-settled (difference settlement): Only the difference between the exercise price and fair market value is paid in cash Korean law explicitly allows cash-settled structures. Under Article 340-2 of the Korean Commercial Act and Article 16-3 of the Special Act on Venture Business Promotion, companies may compensate the exercise gain in cash or treasury shares equivalent to the price difference. Key legal issues a stock option lawyer examines in such cases: Explicit contractual language: Does the agreement clearly permit cash settlement? If not, courts may presume physical share delivery. Procedural clarity: Are the exercise method and payment mechanics clearly defined? Duty to explain: Did the company adequately explain the structure and risks (including tax implications), and is there documentary evidence such as emails or briefing materials? 3. Tax Risk: Why “Tax Bombs” Occur Tax issues can be as damaging as legal disputes. In many cases, tax authorities impose substantial additional assessments years after the exercise. Valuation disputes: Stock option gains are generally taxed as employment income. For private companies, determining “fair market value” is critical. Even if tax was initially paid based on a low valuation, later discovery of third-party transaction prices may lead to reassessment and retroactive taxation. Loss of tax benefits: Failure to meet venture company tax exemption or deferral requirements in advance may result in losing valuable tax incentives altogether. Without proactive tax planning, compensation can quickly turn into a liability. 4. Group Structures and M&A Complications Legal complexity increases significantly in holding company, subsidiary, or M&A scenarios. Cost allocation issues: When a parent company grants stock options to subsidiary employees, determining who bears the cost—and whether it is tax-deductible—requires careful structuring and internal agreements. IPO failure or M&A scenarios: Many employees rely on “exercisable upon IPO” clauses. If the IPO is canceled or the company is acquired, options may become worthless unless the contract clearly addresses acceleration, succession, or cash compensation. A well-drafted agreement must include a clear exit strategy covering changes in control, failed listings, and acquisition scenarios. 5. Stock Option Lawyers Start with Preventive Design Stock options are not merely an HR matter—they are a core corporate legal issue. Decent Law Firm’s corporate law team advises not only on dispute resolution, but also on preventive legal structuring. Our approach includes: Compliance review: Articles of incorporation, shareholder resolutions, statutory procedures, and registrations Precision drafting: Clear distinction between cash-settled and equity-settled options; detailed rules for voluntary resignation, involuntary termination, and disciplinary actions Contingency planning: Treatment of options in M&A, IPO cancellation, or control changes Tax risk management: Advance analysis of taxation timing and valuation risks Dispute resolution: Legal opinions, contract interpretation, and litigation support in damages claims A well-structured stock option plan and clear explanatory materials serve as proof of a company’s credibility to both talent and investors. With extensive experience from large corporations and in-house legal teams, Decent Law Firm understands internal decision-making structures and real-world business dynamics. For complex stock option issues, Decent Law Firm’s corporate law team provides clear, defensible standards.
