Free zone or mainland: the decision in plain terms

The free zone versus mainland question has a simple answer for most people and a genuinely difficult one for a minority. Here is how to tell which you are.

The one restriction that decides it

A free zone company's natural market is its own zone and the rest of the world. It can trade internationally without limit and deal with other free zone companies, but access to the UAE mainland market is regulated. The federal portal lists the usual routes as a licensed mainland distributor, a mainland branch or a mainland company (u.ae, "Running a business in a free zone", page updated 28 September 2026).

If your customers are outside the UAE — which describes most people reading this — the restriction is irrelevant and free zone is the obvious answer.

If your customers are in the UAE, this restriction is the whole decision, and since 2025 the answer depends on the emirate.

What changed in Dubai in 2025

Dubai Executive Council Resolution No. 11 of 2025, issued on 3 March 2025, lets the Department of Economy and Tourism (DET) authorise a Dubai free zone company to work outside its zone, in Dubai, through a branch licence (valid one year; AED 10,000 a year for a branch operating out of the free zone) or a permit for specific activities (valid up to six months; AED 5,000). Financial establishments licensed in the DIFC are excluded.

The permit went live on 8 October 2025 (Dubai Media Office and DET). It is open to free zone companies holding a Dubai Unified Licence, through the Invest in Dubai platform, and its first phase covers non-regulated activities: technology, consultancy, design, professional services and trading. Revenue earned on the mainland is subject to 9% corporate tax and must be kept in separate accounts.

Two limits matter. The route is Dubai only: work in another emirate still needs that emirate's own licence (Article 3(c) of the resolution). And the free zone 0% does not follow the company onto the mainland, because consulting, technology and most services are not Qualifying Activities for mainland customers. The guide "Serving UAE mainland clients from a Dubai free zone: the 2025 permit and the 9% rate" sets out both in detail.

What changed on ownership

Mainland used to require a 51% Emirati shareholder, which was the historical reason everyone chose free zones. That requirement has been removed for most activities, so full foreign ownership is now available on the mainland too.

This has narrowed the gap considerably and a lot of online advice has not caught up. Compare on current rules, not on the pre-2021 position.

Where mainland wins

Selling to UAE consumers and businesses directly. Bidding for government contracts. Opening retail premises anywhere in the emirate. Certain professional activities that free zones cannot license. Unrestricted office location rather than being confined to a designated zone.

Where free zone wins

Lower cost, in most cases materially. Faster incorporation. 0% corporate tax on qualifying income, subject to substance. Simpler administration. Sector-specific infrastructure where it matters — ports, airports, media clusters. And for most zones, the ability to incorporate without flying in.

Which one fits you

If you invoice clients abroad, free zone. The restriction that makes mainland necessary does not apply to you, and you would be paying more for a capability you will never use.

If you serve Dubai mainland customers occasionally alongside clients abroad, a Dubai free zone company with the 2025 permit now covers it, with 9% on the mainland income.

If most of your revenue will come from UAE mainland customers, or from customers outside Dubai, mainland is still the answer, and the people telling you a free zone licence alone is fine are either mistaken or hoping you will not find out until later.

The hybrid

Some businesses genuinely need both: a free zone entity for international revenue and a mainland entity or branch for local sales. That is more expensive and more administration, and it is occasionally the right answer. If someone proposes it, ask them to explain precisely which revenue flows through which entity and why — if they cannot, they are overselling.

Choosing your free zone

If free zone is your answer, two zones are the ones we put forward. Meydan FZ suits consultants, service businesses, online operators and first-time founders: a central Dubai address and a fast licensing route. Dubai South suits logistics, e-commerce fulfilment, aviation services and trading, next to Al Maktoum International and Expo City. The calculator shows the cost of either.