Free zone companies in the UAE can now operate in the mainland under specific legal frameworks introduced by Dubai, Abu Dhabi, and other emirates. With branch licenses, temporary permits, or dual licensing, businesses can expand onshore without losing free-zone tax benefits, provided they follow VAT, corporate tax, and compliance rules.
Understanding Mainland Access for Free Zone Businesses
When setting up a company in the UAE, entrepreneurs usually choose between Mainland and Free Zone jurisdictions.
Free zones offer 100 % foreign ownership, easy company formation, and tax advantages, making them ideal for startups and international founders. However, many business owners eventually ask:
“Can my Free Zone company do business in the UAE mainland?”
The short answer: Yes — but with the right permissions and structure.
Operating in the mainland means selling products or services directly to UAE consumers, opening offices, or working with mainland clients. Thanks to recent reforms in Dubai, Abu Dhabi, and the Northern Emirates, freezone entities now have clear legal pathways to expand without creating a new mainland company.
Why 2025 Marked a Turning Point for Free Zone-Mainland Trade
Until recently, Free Zone companies couldn’t operate directly in the mainland without a local distributor or agent.
That changed in 2025, when new executive resolutions and economic reforms introduced more flexible options for expansion.
Dubai’s 2025 Resolution
Dubai’s Executive Council Resolution No. 11 of 2025 created a major breakthrough. It allows Free Zone companies to carry out mainland activities through:
- Branch Licences – open a mainland branch under your Free Zone company name.
- Remote Branch Operations – operate directly from your Free Zone HQ.
- Temporary Permits – conduct onshore projects or campaigns for six months.
Each model retains 100 % ownership and requires no local sponsor. Fees range from AED 5 000 – 10 000 per year.
For reference, visit the Dubai Department of Economy and Tourism (DET) official site: https://det.gov.ae.
Abu Dhabi’s Dual-Licensing Approach
The Abu Dhabi Department of Economic Development (ADDED) offers dual licensing, allowing Free Zone companies from other emirates to open branches in Abu Dhabi with a one-year waiver on office-space requirements.
Source: https://added.gov.ae
Northern Emirates Simplifying Access
- RAKEZ (Ras Al Khaimah Economic Zone) provides a dual-licence package combining a Free Zone licence with a RAK DED branch – https://rakez.com.
- SHAMS (Sharjah Media City Free Zone) and Hamriyah Free Zone Authority support mainland extensions, subject to activity approval — https://shams.ae
Together, these frameworks opened the UAE’s 10 million-person domestic market to Free Zone businesses seeking scalability.
Legal Ways a Free Zone Company Can Operate in the Mainland
1. Establishing a Mainland Branch
Apply for a branch licence through the Department of Economic Development (DED/DET).
This branch remains connected to your Free Zone parent company but can:
- Sign contracts with mainland clients.
- Lease mainland office space.
- Hire staff for mainland projects.
Visit your emirate’s economic department (e.g. https://det.gov.ae, https://ded.ajman.ae) for current requirements.
2. Using Temporary or Project Permits
For short-term work, events, exhibitions, or pilot projects, a temporary permit (valid 6 months) offers flexibility without long commitments.
3. Appointing a Mainland Distributor or Agent
A mainland distributor handles imports, customs, and VAT filings, though margins and client control may shrink.
4. Setting Up a Separate Mainland Entity
Certain regulated sectors (banking, healthcare, insurance) still require a mainland LLC. Your Free Zone company can act as the investor.
Compliance Checklist Before You Begin
| Requirement | Authority Involved | Purpose |
|---|---|---|
| No Objection Certificate (NOC) | Free Zone Authority | Approves onshore expansion |
| DED / DET Application | Mainland Economic Dept | Issues branch / permit |
| Activity Alignment | Both Authorities | Ensures activity codes match |
| Separate Accounting | Federal Tax Authority (FTA) | Distinguishes free zone vs mainland income |
| VAT Registration | FTA – https://tax.gov.ae | Mandatory for taxable mainland sales |
| Customs Compliance | UAE Customs Authority | Applies 5 % duty on imports |
| HR Adjustments | MOHRE – https://mohre.gov.ae | Updates contracts and insurance coverage |
Key points:
- Keep two financial ledgers (Free Zone vs Mainland).
- File VAT returns quarterly via FTA.
- Update employee insurance and labour contracts if they work onshore.
Tax Rules When Trading Onshore
Corporate Tax
Under the UAE Corporate Tax Law (9 %), Qualifying Free Zone Persons (QFZPs) enjoy 0 % on qualifying income, but mainland-sourced profits are taxed at 9 %.
VAT
All mainland supplies attract 5 % VAT per the Federal Decree-Law No. 8 of 2017 on VAT, see FTA guidelines at https://tax.gov.ae/en/vat.
Customs
Goods entering the mainland from Free Zones are treated as imports with a 5 % customs duty unless exempt.
Costs, Timelines, and Documentation
- Branch Licence: AED 10 000 / year
- Temporary Permit: AED 5 000 – 6 000
- Processing Time: 1 – 4 weeks depending on emirate
- Documents: Free Zone Trade Licence, Certificate of Incorporation, MOA, Board Resolution, Shareholder Passports, NOC
More details:
- Dubai DET – https://det.gov.ae
- ADDED – https://added.gov.ae
- RAKEZ – https://rakez.com
Smart Strategies for Different Business Models
Consultancy & Professional Services
Use a branch licence to serve both corporate and government clients under one legal umbrella.
E-Commerce Startups
Fulfil orders from Free Zone warehouses while registering for VAT for mainland deliveries — https://tax.gov.ae.
Trading Companies
Combine distributor networks for retail with branch offices for B2B, balancing control and reach.
Event & Media Firms
Start with six-month temporary permits to test demand before investing in a branch.
Common Mistakes to Avoid
- Operating Without Authorisation – Violations may lead to fines or licence suspension (DET rules https://det.gov.ae).
- Mixing Free Zone and Mainland Income – Keep separate books to retain 0 % tax status.
- Ignoring Emirate-Specific Rules – Each DED has unique requirements.
- Duplicating Entities Unnecessarily – Evaluate consolidation options with professional advice.
Snapshot: Mainland Access Options by Emirate
| Emirate | Access Model | Highlights |
|---|---|---|
| Dubai | Branch / Remote Branch / Temporary Permit | No sponsor needed – https://det.gov.ae |
| Abu Dhabi | Dual Licence / Branch | 1-year office waiver – https://added.gov.ae |
| Ras Al Khaimah | Dual Licence Package | https://rakez.com – fast approvals |
| Sharjah | SHAMS / Hamriyah Mainland Extension | https://shams.ae |
Future Outlook: The Free Zone–Mainland Divide Is Narrowing
The UAE is gradually integrating its business ecosystems.
Future reforms will likely:
- Standardise dual-licensing rules federally.
- Expand onshore activity lists.
- Strengthen tax audits and HR documentation.
Such initiatives align with the UAE Economic Agenda ‘D33’ — https://dubai.ae/en/d33, reinforcing the nation’s goal of becoming a top global business hub.
FAQs
Can a Free Zone company sell to mainland customers?
Yes, via a branch licence or temporary permit issued by DED/DET.
Do I need a local sponsor?
No – 100 % foreign ownership is allowed under current rules (https://det.gov.ae).
Is a mainland office mandatory?
Not always – some emirates permit remote operations from Free Zone HQ.
What taxes apply onshore?
9 % corporate tax and 5 % VAT on mainland profits – FTA guidance https://tax.gov.ae.
Can one licence cover all emirates?
No – separate approvals are required from each economic department.
Your Next Step: Expand with Confidence
At Startup Works, we help founders and global entrepreneurs expand from Free Zone to Mainland, legally, seamlessly, and cost-effectively.
From choosing the right licence to handling VAT, corporate tax, and DED approvals, our consultants ensure a compliant, fast, and transparent process.
Book a free consultation for Business setup service in Dubai to unlock your next stage of growth in the UAE.
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