Mainland vs free zone at a glance
A mainland company is licensed by an emirate's economic department, such as Dubai's Department of Economy and Tourism (DET), and sells directly to UAE customers. A free zone company is licensed by its free zone authority and is treated as outside the mainland: it trades freely in its zone and abroad, but needs a separate route to mainland customers.
| Factor | Mainland company | Free zone company |
|---|---|---|
| Selling to mainland customers | Direct | Through a distributor, a mainland branch or, in Dubai, a DET permit |
| Foreign ownership | Up to 100% for most activities | Up to 100% |
| Office | Physical premises; Dubai leases registered with Ejari | Flexi-desk to warehouse, as the package allows |
| Visas | MoHRE quota based on legal form, premises and projects | Quota set by package and office |
| Corporate tax | 0% up to AED 375,000, 9% above | Qualifying Free Zone Person: 0% on qualifying income, 9% on the rest |
| VAT | 5%; register above AED 375,000 | Same; special goods rules only in VAT designated zones |
| Customs duty | Due on imports | None while goods stay in the zone; due when they enter the mainland |
| Entry price | No single published package found | Published licences, for example AED 6,000 a year at RAKEZ |
Full processes: Dubai mainland company setup and UAE free zones.
Which should you choose: mainland or free zone?
Choose the mainland if most revenue will come from UAE businesses or consumers. Choose a free zone if you mainly trade with other free zone companies or abroad, need few visas, or run a qualifying activity such as manufacturing or logistics.
A mainland company usually fits if you
- sell to UAE consumers or need a shop, clinic or restaurant
- expect most invoices to go to mainland companies or government bodies
- plan a large local team, since mainland visa quotas grow with your premises
- have revenue of AED 3 million or less, so Small Business Relief can apply for tax periods ending on or before 31 December 2029
A free zone company usually fits if you
- serve other free zone companies, or overseas clients with no need for mainland customers
- import, store and re-export goods using duty-free storage in the zone
- carry out a qualifying activity and can meet the substance and audit conditions
- need one to three visas and a flexi-desk is enough to start
Decision checklist
- What share of revenue will come from mainland customers by year three?
- Are customers businesses or individuals? Sales to individuals are excluded from the 0% rate, apart from a few listed activities.
- Is your main activity on the qualifying activities list?
- How many visas will you need, and what office supports that quota?
- Will you bid for government work, and in which emirate?
Can a free zone company trade with the mainland?
Yes, but not directly by default. The UAE government portal says a free zone company that wants to sell locally must work through a licensed mainland distributor or establish a mainland branch or company.
Dubai: the DET permit and branch licences
Dubai Executive Council Resolution No. 11 of 2025, issued on 3 March 2025, lets a Dubai free zone company work outside its zone with a DET licence or permit. It excludes financial entities licensed in the Dubai International Financial Centre. The options are:
- a licence for a branch within the emirate, valid for one year and renewable
- a licence for a branch operating out of the free zone, at AED 10,000 a year
- a temporary permit for specific activities, valid for up to six months, at AED 5,000
Each needs the free zone authority's approval and, where relevant, the sector regulator's. Mainland work needs separate financial records, and existing free zone staff can be used.
DET launched the Free Zone Mainland Operating Permit on 8 October 2025 for free zone companies holding a Dubai Unified Licence, through the Invest in Dubai platform. At launch it covered non-regulated activities such as technology, consultancy, design, professional services and trading. DET says mainland revenue under the permit is taxed at 9%.
Check DET's current activity list before relying on the permit. It covers Dubai only.
Other emirates and government contracts
A licence covers the emirate or free zone that issued it, and operating in another emirate generally needs a further licence there. Abu Dhabi's economic department and Invest in Dubai both list a dual licence among their licence types.
For public work, the federal Ministry of Finance supplier register lists free zone companies among eligible suppliers, with yearly renewal. Emirate portals set their own rules: Ras Al Khaimah requires a UAE national to hold at least 15% of a supplier's shares. DET says its permit opens Dubai tenders previously reserved for mainland-licensed companies.
Mainland vs free zone cost in 2026
Many free zones publish entry prices: for example AED 6,000 a year at RAKEZ, AED 6,875 for SPC's Standard licence and AED 12,500 at Meydan. For a Dubai mainland licence we found no single published package price: the cost depends on the licence type and activities, and you must also rent real premises. Visas, medical tests and Emirates ID are extra on both routes unless a package says otherwise.
| Route | Published price (checked 22 Oct 2026) | What the authority says it covers |
|---|---|---|
| SPC Free Zone, Sharjah | Standard licence AED 6,875 a year; Publishing or E-commerce AED 5,750 | Up to 5 activity groups and a co-working lease; no visa |
| Shams, Sharjah | Media Package AED 5,760; Standard Package AED 6,885 a year | Licence, flexi desk and lease agreement; visas extra |
| RAKEZ Instant Licence Basic, Ras Al Khaimah | AED 6,000 a year | One shareholder, one activity and coworking access; no visa |
| Meydan Free Zone, Dubai | From AED 12,500 a year | Licence, flexi-desk and 3 activity groups; no visa, medical or Emirates ID |
| DMCC, Dubai | Basic Biz AED 35,484; Jump Start AED 43,780 | Licence and flexi-desk; Jump Start includes one residence visa |
| Dubai mainland, DET | No single published package found | Licence fees by type and activity, plus Ejari office, establishment card and visas |
| Dubai free zone company on the mainland | AED 5,000 per six-month permit, or AED 10,000 a year for a branch operating out of the zone | Paid to DET on top of the free zone licence |
Office rent is a key difference: a mainland company pays for premises that support its visa quota, while many free zone packages include a desk. A free zone company needing local sales should add a distributor's margin or DET's permit fee. See full fee tables for Meydan, SPC, Shams, RAKEZ and DMCC.
Corporate tax and VAT: mainland vs free zone
Mainland and free zone companies must both register for corporate tax and file within nine months of each tax period's end. A mainland company pays 0% on taxable income up to AED 375,000 and 9% above; a Qualifying Free Zone Person pays 0% on qualifying income and 9% on other taxable income.
Conditions for the 0% rate
Under Article 18 of the Corporate Tax Law and Ministerial Decision No. 229 of 2025, a Qualifying Free Zone Person must:
- keep adequate substance in the UAE
- earn qualifying income and not elect for the standard regime
- follow the arm's length principle and transfer pricing documentation rules
- keep non-qualifying revenue within 5% of total revenue or AED 5 million, whichever is lower
- prepare audited financial statements
Failing any condition removes the status for that tax period and the next four. Small Business Relief, for resident persons with revenue of AED 3 million or less, is not available to a Qualifying Free Zone Person.
Why your customers matter
Income from another free zone company that is the beneficial recipient is qualifying. Income from mainland or overseas customers is qualifying only for listed activities, such as manufacturing, processing, logistics, holding shares, headquarter services to related parties, or distribution of goods in or from a designated zone. General consultancy, marketing and IT services are not listed. Income of a mainland branch is taxed at 9% as a domestic permanent establishment and is left out of the de minimis test.
Worked example
A consultancy earns AED 4,000,000 of revenue and AED 1,000,000 of taxable profit.
| Scenario | Corporate tax |
|---|---|
| Mainland company | 9% of (AED 1,000,000 minus AED 375,000) = AED 56,250 |
| Free zone company, overseas clients | Consultancy income is non-qualifying and breaks the de minimis limit, so the standard regime applies: AED 56,250 |
| Free zone company, free zone clients | Qualifying income at 0%, if all other conditions are met |
For many service businesses a free zone saves no corporate tax. See our UAE corporate tax guide.
VAT and customs
VAT is 5% on both routes, with mandatory registration above AED 375,000 of taxable supplies and imports and voluntary registration above AED 187,500. A free zone is treated like the mainland for VAT unless it is a designated zone listed under Cabinet Decision No. 59 of 2017 and its amendments. Those zones have special rules for certain supplies of goods; the Federal Tax Authority says services there are taxed like services in the rest of the UAE. Goods stored in a free zone pay no customs duty until they enter the mainland, where Dubai's general tariff is 5% of the CIF value. See VAT registration.
Office, visas, ownership and banking
Office and visas
Every mainland business needs a physical address that meets the economic department's and municipality's rules, and in Dubai the lease must be registered with Ejari. MoHRE then sets the visa quota based on the company's legal form, premises, projects and business needs. In a free zone, the visa count depends on the package and office you buy, and the free zone authority handles work permits and residence visas. DMCC, for example, allows up to three visas on a flexi-desk. Mainland employers with 50 or more workers must also raise Emirati staff in skilled roles by 2% a year, towards 10% by 2026. See UAE investor visa.
Ownership and legal forms
Foreigners can own 100% of most mainland companies. Federal Decree-Law No. 26 of 2020 removed the 51% Emirati shareholder requirement, and Federal Decree-Law No. 32 of 2021 now governs commercial companies. Activities with strategic impact stay restricted, including security and defence, telecommunications, banking, finance and insurance, and commercial agencies. Free zones allow 100% foreign ownership through forms such as the LLC, FZCO, FZE and branch, depending on the zone.
Banking
Both routes can open UAE corporate accounts; each bank runs its own checks, so approval is never automatic. See corporate bank account.
Is offshore a third option?
Offshore suits you only if you will not do business in the UAE. An offshore company is set up in a free zone to do business only outside the UAE. In Jebel Ali Free Zone, offshore companies are registered only through approved registered agents. A UAE-incorporated company is a taxable person, so an offshore company must still register for corporate tax. See offshore companies.
When to switch, add a branch or run both
Add mainland access when mainland revenue threatens the de minimis limit, when tenders need a mainland licence, or when you need more visas than your package allows.
- Test demand with Dubai's six-month DET permit for AED 5,000.
- Add a DET branch licence, which has no separate legal personality from the free zone company.
- Form a separate mainland company, owned by you or by the free zone company.
- Migrate: Federal Decree-Law No. 20 of 2025 lets a company transfer its registration between the mainland and a free zone without liquidation, once the authorities concerned approve. Ask both authorities whether their transfer procedure is open to your company.
- Close the free zone company: pass a shareholder resolution, cancel visas, settle obligations and deregister with the Federal Tax Authority.
Running both keeps 0% on qualifying free zone income, while local profit is taxed in the mainland company or branch.
Setting up from India
Indian founders choose a route the same way, but documents and funding follow Indian rules.
- Documents: individual shareholders mainly need passport copies. Indian corporate documents and educational certificates go through notarisation where needed, state-level attestation, the Ministry of External Affairs and the UAE Embassy, then the UAE Ministry of Foreign Affairs. See attestation.
- FEMA overseas investment: an Indian resident investing in a UAE company makes overseas direct investment under the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022, through one designated authorised dealer bank. You obtain a Unique Identification Number before remitting and file an Annual Performance Report every year by 31 December.
- Funding limits: resident individuals can remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme; companies invest under the overseas investment rules instead.
- Which route: a company distributing goods from a designated zone to resellers may qualify for 0%; a services firm billing UAE clients usually gains little tax benefit from a free zone.
Read the full journey in business setup in Dubai from India.
How Ofin helps you choose and set up
Ofin's UAE desk helps you pick the jurisdiction first, then sets up the company so you avoid restructuring later. Ofin Legal has a 4.9 star Google rating and has served 5,000+ clients since 2019.
- comparing mainland, free zone and offshore routes for your activity, customers and visa needs
- company formation and trade licence in the mainland, free zones or offshore
- investor and employee visas, Emirates ID and PRO services
- corporate bank account support, VAT and corporate tax registration, and accounting
- document attestation, and advice on India and UAE tax and FEMA rules
Call or WhatsApp Ofin's UAE desk on +971 50 523 5779 with your activity, expected customers and visa count.
