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Mainland vs freezone comes down to one question: where are your customers? A free zone company trades freely inside its zone and abroad. To sell into the UAE market it needs a licensed mainland distributor, a mainland branch or company, or in Dubai a DET permit. A mainland company can trade across the UAE from day one. Ownership rarely decides it now, because most mainland companies can be 100% foreign owned. New to this? The first-time founder guide to creating a company in Dubai shows where this choice fits.
What is the difference between a free zone and a mainland company?
| Free zone company | Mainland company | |
|---|---|---|
| Licensed by | The free zone authority | The emirate's economic department |
| Where it can trade | Inside its free zone and abroad | Anywhere in the UAE and abroad |
| Selling to UAE customers | Through a mainland distributor, a mainland branch or a permit | Directly |
| Foreign ownership | 100% allowed | 100% allowed for most companies |
| Company forms | FZ-LLC, FZCO, FZE, PJSC or branch, by zone | Mainland forms under the emirate's rules |
| Customs | 0% duty on goods imported into the zone. Duty applies when goods move to the mainland | Duty applies on import |
| Corporate tax | 0% up to AED 375,000, 9% above. 0% on qualifying income for a Qualifying Free Zone Person | 0% up to AED 375,000, 9% above |
| VAT | 5%. Goods inside a designated zone can be treated as outside the UAE | 5% |
| Typical start | Fixed packages, often with a flexi desk or co-working seat | Depends on the emirate, activity and office |
Source: u.ae pages on running a business in a free zone and on full foreign ownership, the FTA, and the Abu Dhabi Department of Economic Development, checked .
Can a free zone company do business on the mainland?
The u.ae portal puts it plainly. Free zone companies sit outside the mainland jurisdiction. They trade freely inside the free zone and abroad. Direct sales into the UAE market are generally not allowed without mainland licences or approvals.
Abu Dhabi's economic department frames the same choice from the other side. It says the mainland gives the flexibility to do business throughout the UAE, while free zones offer 100% foreign ownership, full repatriation of capital and profits, tax exemptions and dual licensing options.
So a consultant billing clients in Europe, an online shop shipping abroad or a trader re-exporting through Jebel Ali fits a free zone well. A restaurant, a shop, a building contractor or a firm that wins work from UAE companies and government bodies usually needs a mainland licence, or a free zone company plus a mainland route.
Can foreigners own 100% of a mainland company?
Ownership used to be the headline reason to pick a free zone. Since early , most mainland companies can be fully foreign owned, according to the government portal, and free zone companies can be too. The word "most" matters: check your activity with the licensing body before you rely on it.
How can a Dubai free zone company work on the mainland?
Dubai has opened a direct path for free zone companies. Executive Council Resolution No. 11 of , issued on 3 March, lets a free zone establishment work in mainland Dubai with a licence or permit from the Department of Economy and Tourism (DET). There are three routes:
- A licence for a branch in the emirate, at AED 10,000 a year.
- A licence for a branch that operates out of the free zone.
- A temporary permit for specific activities, at AED 5,000 for up to 6 months.
The conditions in the resolution:
- The free zone's licensing authority must approve it.
- The free zone licence must be valid.
- The company keeps separate financial records for its mainland work.
- It may use its existing free zone staff.
- Financial firms in DIFC are excluded.
Dubai's Media Office announced the service in as the Free Zone Mainland Operating Permit.
Can one company hold a free zone and a mainland licence?
Several zones offer a mainland licence next to the free zone one. Ask each zone what activities its dual licence covers.
- Dubai CommerCity lists a Dual Licence with DET.
- SRTIP and SPC Free Zone offer dual licences with the Sharjah mainland.
- Creative City Fujairah offers dual licensing with Fujairah Municipality.
- KEZAD runs domestic economic zones, which are mainland land, next to its free zone areas.
- Dubai Design District says a mainland licence is also possible inside d3.
- RAKEZ issues non-free zone LLC and individual establishment licences as well as FZ-LLCs.
Dubai Industrial City is a useful warning. It looks like a free zone, but its own FAQ says it is not one, and Dubai's economy department licenses companies there as mainland firms.
Do free zone and mainland companies pay the same tax?
Corporate tax applies to both. The rate is 0% up to AED 375,000 of taxable income and 9% above that. A free zone company can pay 0% on qualifying income if it is a Qualifying Free Zone Person and meets the FTA's conditions. Other taxable income is taxed at 9%. The FTA publishes no list of corporate tax free zones and tells companies to confirm their status with their zone.
Small business relief covers revenue of AED 3,000,000 or less, for tax periods ending on or before . Every company, free zone or mainland, must register for corporate tax within 3 months of incorporation. Registration is free. Missing the deadline costs AED 10,000.
VAT is 5% everywhere. Registration is mandatory once taxable supplies pass AED 375,000 a year and voluntary from AED 187,500. Only a designated zone changes the picture, and only for goods: they can be treated as outside the UAE for VAT if the conditions are met. Services inside a designated zone are taxed like services anywhere else. Many free zones, DMCC, Meydan and IFZA among them, are not designated zones. The list of UAE free zones shows which are.
Both mainland and commercial free zone companies must keep a register of their beneficial owners.
Mainland guides
- Mainland business setup in Dubai: the steps and licence choice.
- DET (formerly DED) trade licence, professional licence and e-trader licence.
- LLC formation in Dubai and mainland licence cost.
- Sharjah mainland licence and Ajman mainland licence.
Choose a free zone if
- Most of your clients are abroad, or are other free zone companies.
- You trade goods through a port or airport and re-export them.
- You want a fixed package price with a flexi desk and one or two visas.
- You want to set up remotely. Many zones, such as Meydan and RAKEZ, describe fully online setup.
- You may need the 0% rate on qualifying income and can meet the conditions.
Choose the mainland if
- Most of your revenue will come from UAE consumers or UAE companies.
- You need a shop, a restaurant or other premises outside a free zone.
- You want to hire many staff and lease a full office.
If you sit in between, a free zone company with a Dubai permit or a dual licence is often the middle route. For free zone prices, start with the cheapest free zone in UAE or the Dubai free zones hub.
Ask before you choose
Write who your customers are, what you sell and how many visas you need in the form on this page. We pass it to a licensed setup partner or a free zone that fits, and you get a reply on which licence suits and what it costs. UAEFreeZoneDirectory.com is an independent directory. It does not issue licences.
Sources
- u.ae, running a business in a free zone (where free zone companies can trade, customs): https://u.ae/en/information-and-services/business/Doing-business/doing-business-in-free-zones/running-a-business-in-a-free-zone-
- u.ae, full foreign ownership of commercial companies: https://u.ae/en/information-and-services/business/Doing-business/doing-business-on-the-mainland/full-foreign-ownership-of-commercial-companies
- u.ae, starting a business in a free zone (legal forms): https://u.ae/en/information-and-services/business/Doing-business/doing-business-in-free-zones/starting-a-business-in-a-free-zone
- Abu Dhabi Department of Economic Development, mainland and free zones: https://www.added.gov.ae/en/grow/competitive-landscape/mainland-and-freezones
- Dubai Legislation Portal, Executive Council Resolution No. 11: dlp.dubai.gov.ae resolution text (PDF)
- Dubai Media Office, Free Zone Mainland Operating Permit: mediaoffice.ae announcement
- Federal Tax Authority, corporate tax registration: https://tax.gov.ae/en/services/corporate.tax.registration.aspx
- Ministry of Finance, corporate tax: https://mof.gov.ae/en/public-finance/tax/corporate-tax/
- Dubai Industrial City FAQ: https://dubaiindustrialcity.ae/en/connect/faqs
