In short
- A mainland company sells across the UAE and, since 2021, can be 100% foreign-owned for most activities.
- A Dubai free-zone company can work on the mainland under a DET permit: AED 5,000 for six months.
- Formation with us starts at $7,000 in a free zone and $8,000 on the mainland, before VAT.
- Since October 2025 a company can move between a free zone and the mainland without liquidation.
In this guide
Free zone vs mainland: the differences in one table
A mainland company is licensed by the economic department of its emirate, in Dubai the Department of Economy and Tourism (DET). A free-zone company is licensed by the authority of its zone. The steps and documents for both are on company formation in the UAE.
| Point | Free zone | Mainland |
|---|---|---|
| Where it sells | In its zone and abroad; on the mainland through a distributor, a branch or a permit | Anywhere in the UAE and abroad |
| Government contracts | No | Yes |
| Foreign ownership | 100% | 100% for most activities |
| Office | A flexi-desk in the zone | A lease registered in Ejari, Dubai's tenancy register |
| Residence visas | By license package | By office size |
| License issued in | 1 to 5 working days | 1 to 2 weeks |
| Corporate tax | 0% on qualifying income for a qualifying company; otherwise as on the mainland | 0% up to AED 375,000 of taxable income, 9% above |
| Formation with us, before VAT | from $7,000 | from $8,000 |
Where each company can sell
A mainland company invoices any customer in the UAE, opens a shop, a restaurant or a clinic, and bids for government and semi-government tenders. Since 2021 a foreigner can own 100% of it for most activities: Federal Decree-Law No. 26 of 2020 removed the rule of an Emirati majority shareholder. Activities of strategic impact, such as defence, telecommunications, banking and insurance, keep their own conditions.
A free-zone company is 100% foreign-owned and trades inside its zone and outside the UAE. To sell on the mainland it works through a licensed mainland distributor or sets up a mainland branch or company. For a consultant with clients abroad, an online seller or a holding company the zone is enough.
Can a free-zone company work on the mainland?
In Dubai it can, with the consent of DET. Executive Council Resolution No. 11 of 2025, issued on 3 March 2025, lets a company of a Dubai free zone work outside its zone. It leaves out financial firms licensed in DIFC. DET offers three routes:
- a permit for named activities, valid for up to six months, at AED 5,000
- a license for a branch that works from the company's premises in the free zone, valid for a year, at AED 10,000 a year
- a license for a branch on the mainland, valid for a year
DET announced the permit on 8 October 2025 as the Free Zone Mainland Operating Permit. It covers activities that need no regulator's approval: technology, consultancy, design, professional services and trading. A company that holds a Dubai Unified License applies online on the Invest in Dubai platform, renews every six months for the same AED 5,000 and uses the staff it already has.
The free-zone 0% rate does not cover income from mainland work under the permit: it falls under the 9% corporate tax, and the company keeps separate financial records for it.
The disadvantages of a free-zone company: what it cannot do
A free zone trades reach for a lower cost. These are the limits to weigh before you choose:
- Mainland customers. Regular sales inside the UAE need a distributor, a branch or, in Dubai, the DET permit.
- Government work. Tenders ask for a mainland license.
- Activities. The license takes its activities from the zone's own list.
- Visas. The package or the desk sets the number: six on a Meydan license, one for every 9 square metres of a DMCC office.
- Goods. Stock carries no customs duty while it stays in the zone, and 5% is due when it moves to the mainland.
- Banks. A company with a shared desk and no staff answers more questions than one with an office.
Corporate tax: the same rates, one exception
Both companies pay 0% on taxable income up to AED 375,000 and 9% above. Both can elect Small Business Relief and pay no tax while revenue stays at AED 3 million or less, for tax periods ending by 31 December 2029. VAT is the same too: 5%, with registration required once taxable supplies pass AED 375,000 in 12 months.
The exception is a Qualifying Free Zone Person (QFZP), which pays 0% on qualifying income and 9% on the rest. Qualifying income comes from other free-zone companies, or from listed activities such as manufacturing, trading in qualifying commodities, logistics, distribution from a designated zone and holding shares. Other revenue may reach 5% of the total or AED 5 million, whichever is lower. Past that limit the company is taxed at the standard rates for five tax periods.
For a qualifying company, sales made through a mainland branch are taxed at 9% and stay out of the 5% test. They do not put the 0% on the rest at risk. Mainland sales invoiced from the zone itself count as other revenue, unless the activity is on the list.
A design studio with taxable income of AED 900,000 from clients in Dubai and abroad pays the same on either route: 9% on AED 525,000, which is AED 47,250. Its clients are outside free zones and design is not a listed activity, so a free-zone license does not lower the tax. The test is set out in who counts as a Qualifying Free Zone Person.
We do this for you Company formation in the UAE from $7,000
What a free-zone and a mainland company cost
| Cost | Free zone | Mainland |
|---|---|---|
| Formation with us, before VAT | from $7,000 | from $8,000 |
| License fee of the authority, a year | from AED 3,999; AED 12,500 with a flexi-desk in Meydan, DUQE or Dubai South | AED 12,000–15,000 |
| Office | The flexi-desk in the license package | A leased office, from AED 15,000 a year |
| Residence visa, each | from AED 3,000 | from AED 3,000 |
| Accounting with us | from $350 a month | from $350 a month |
Our formation price covers the company and its license. Visas, the tax registration and the bank application go into the same quote.
Take a consultancy with a founder and one employee. In Meydan Free Zone the zone's fees for the first year come to AED 30,200: the license, two visa places, the establishment card, two visas, two medical tests and Emirates IDs. On the Dubai mainland the lowest published figures give AED 35,740. The trade name and initial approval cost AED 740, the license AED 12,000, the office AED 15,000, the establishment card AED 2,000 and two visas AED 6,000.
The office explains the gap. A mainland license needs an office under a registered lease, and the number of visas follows the floor space. We find the office and fix its rent in your quote. Zone tariffs line by line are in what a Dubai free zone license costs.
Setup time, visas and staff on each route
| Step | Free zone | Mainland |
|---|---|---|
| Trade name and activities | 1 to 2 working days | 1 to 2 days |
| Approval and memorandum | Signed online with the lease, 1 to 2 working days | DET's initial approval, 2 to 4 days; the memorandum is notarised |
| Office | Flexi-desk in the package | Lease registered in Ejari, 2 to 5 days with the license |
| License, from the application | 1 to 5 working days | 1 to 2 weeks |
| Establishment card and visas | 1 to 3 weeks later | 1 to 3 weeks later |
| Tax registration and bank account | 2 to 4 weeks | 2 to 4 weeks |
The residence visa is the same on both routes: a federal visa for two years, and its holder lives in any emirate. The difference is the count and the paperwork. A free-zone company sponsors as many people as its package or desk allows, and the zone authority handles the visas. A mainland company gets visas in proportion to its office, registers its staff with the labour ministry and pays them through the Wage Protection System: payroll in the UAE.
The documents are the same on both routes: a passport copy, a photo and proof of address from the last three months for each owner and director. A company that becomes a shareholder adds its certificate of incorporation, its memorandum and a board resolution, attested. Neither route sets a minimum share capital for most activities.
The yearly audit differs. A mainland LLC has its accounts audited every year under the Commercial Companies Law. A free-zone company is audited where its zone asks for it, and always when it claims the 0% rate.
Can you move from a free zone to the mainland later?
Yes, in three ways. The lightest is to add mainland reach to the free-zone company: the Dubai permit, or a branch. The Commercial Companies Law allows a branch wherever the zone's own rules let its companies work outside the zone.
The second is to move the company itself. Under Article 15 bis of the law, as last updated on 1 October 2025, a company can transfer its registration from a free zone to the mainland authority, or back. It keeps its legal personality, so its contracts and its history stay with it. Both registers must allow the transfer and both authorities approve it.
The third is a second company: a mainland LLC beside the free-zone one, each with its own license and books. Some zones also issue a dual license with the mainland authority of their emirate: DAFZA in Dubai, SPC Free Zone in Sharjah and Masdar City in Abu Dhabi.
Which route fits: five cases
- A shop, a restaurant, a clinic or a building contractor: mainland, whose license lets you serve customers at your premises and theirs. We do the business setup in Dubai mainland.
- A supplier to government bodies: mainland, because tenders ask for a mainland license.
- A consultant, an agency or a software company with clients abroad: free zone, for the lower license fee and the flexi-desk. We handle the free zone company setup in Dubai and the UAE.
- An importer that re-exports: a free zone with a warehouse. Distribution from a designated zone can earn qualifying income.
- A Dubai free-zone company with its first mainland clients: the DET permit, then a branch once the work is permanent.
If a free zone fits, which free zone to choose in the UAE is the next question. We set up both routes, and the prices and steps for each are on the page about setting up a company in the UAE.
