Free Zone vs Mainland Company: What You Can and Cannot Do in Each

Choosing the wrong licence can leave you with a company that cannot carry out the work your customers expect. Before you compare formation quotes, establish where you will sell, who will buy and which permissions the business needs.

This is general information. Your CPA and counsel confirm the details for your case.

Ownership is not the same as permission to trade

You may still hear that a mainland company always requires a majority Emirati shareholder. That is an outdated starting point. Federal Decree-Law 26 of 2020 removed the general Emirati ownership requirement for onshore companies, with strategic activities still subject to ownership controls. The decree entered into force on 2 January 2021, while the ownership amendment had a separate commencement six months after publication. Your activity remains central to the answer. ¹

Foreign ownership does not settle licensing, premises or tax treatment. Put those decisions on separate lines in your plan. A company you can own outright may still need particular permissions to perform the work you intend to invoice.

Where your customers are changes the comparison

DMCC's 2026 guidance describes mainland companies licensed by Dubai's Department of Economy and Tourism as able to trade throughout the UAE and pursue government contracts. It describes free zone companies as trading within their zone and internationally, with mainland access through arrangements such as a distributor, branch, separate licence or DET permit. ²

That distinction matters if your sales plan assumes direct mainland operations. Write down what happens after the customer signs: where your team works, where goods move, where you deliver the service and which entity invoices. A list of customer countries alone does not describe your operating model.

Premises also belong in the comparison. DMCC's 2026 guidance describes registered mainland premises, an Ejari lease registration and a minimum office size of 100 square feet, rather than a virtual office. Confirm the requirements for your chosen activity before signing a lease. ²

A mainland route can exist without abandoning your free zone company

CMS's account of Dubai Resolution 11 of 2025, issued on 3 March 2025, describes routes for free zone businesses to operate onshore through branches, dual licensing or temporary permits, subject to DET approval. The temporary permit route lasts up to six months. Financial institutions in DIFC fall outside that framework. ³

Treat this as a route to examine against your actual activity. A general description of a permit does not establish that your company qualifies for it. Ask the licensing authority to confirm the available permission, permitted activities, duration and current fee before you budget for mainland expansion.

You do not need an invented formation price to make progress. Obtain an itemised quote for the route you can actually use. Request the licence, premises, approvals and renewal costs separately, with USD billing or a stated conversion basis where relevant. Confirm current figures before comparing totals.

Mainland access does not carry a blanket 0% tax result

The FTA's 2024 free zone guidance distinguishes domestic permanent-establishment income from qualifying free zone income. Income attributable to a mainland branch does not receive the Qualifying Free Zone Person's 0% treatment; the standard 9% treatment applies unless another exemption applies. ^{3, 4}

Customer type also matters. Transactions with natural persons are excluded activities for qualifying-income purposes, subject to narrow exceptions. Selling directly to consumers therefore needs a different analysis from assuming every receipt qualifies because the seller holds a free zone licence. ⁵

Model the revenue by activity and delivery route before choosing the structure. A single headline tax rate cannot tell you the result for a business combining international work, mainland operations and consumer sales.

What this means for you

The useful comparison is between two complete operating plans. Each should show the permission to trade, premises, customer relationships, tax treatment and running costs. Choose the plan that supports the business you intend to run, with its constraints visible before incorporation.

Common mistakes that distort the decision

• Treating 100% foreign ownership as proof that every activity is permitted.
• Choosing a free zone package before explaining the mainland work you intend to perform.
• Assuming a mainland branch keeps the same tax treatment as qualifying free zone income.
• Comparing a licence-only quote with a quote that includes premises and approvals.
• Leaving consumer revenue out of the qualifying-income analysis.

What to do this month

• Map your first expected contracts. Identify the customer, delivery location, activity, invoicing company and any mainland work. Use the same description for each licensing enquiry so the answers are comparable.
• Get written confirmation of the licence or permit route. Include the activities you expect to add, rather than relying on a broad sales description that may not cover the work.
• Build a complete cost sheet. Separate formation, premises, approvals and renewal. Request current figures and record what each quote excludes before choosing on price.
• Prepare a revenue map for your CPA. Separate consumer sales, mainland branch income and other activities so the tax analysis follows the planned business rather than the package name.

Where FNC fits

Your structure should connect the licence to banking and residency needs. Once the operating permissions and tax base are clear, you can decide which entity signs contracts, what banking support the business needs and whether the owners require UAE residency. Bring FNC your customer map and competing quotes. That gives your free expert review a practical starting point: a business to organise, with the decisions and missing confirmations in view.