Open a Company in Dubai

What Is a Free Zone in the UAE?

Free Zones are special economic areas in the UAE that offer attractive incentives to foreign investors. These zones allow full foreign ownership, simplified business setup, and various tax benefits.

There are over 40 Free Zones in Dubai alone, each focused on different sectors such as technology, logistics, media, healthcare, or finance.

Key Benefits:

  • Full (100%) foreign ownership

  • Exemption from Corporate Tax (for companies qualifying under Article 18 of the UAE Corporate Tax Law and Cabinet Decision No. 55 of 2023)

  • No need for a permanent office at launch — flexi-desk options are acceptable

  • Lower setup costs and faster incorporation

  • Straightforward administrative processes

Limitations and Recent Changes

Previously, Free Zone companies were not allowed to operate directly in the UAE Mainland unless they used a local agent or distributor. This is now changing under the new Corporate Tax Law (Federal Decree-Law No. 47 of 2022).

Free Zone companies can conduct business in the Mainland if:

  • They obtain a No Objection Certificate (NOC) from their Free Zone authority and from the Department of Economic Development (DED)

  • They accept that profits generated from Mainland activities will be taxed at the standard 9% Corporate Tax rate, thus losing the 0% Free Zone tax exemption for that portion of income

What Is a Mainland Company?

A Mainland company is registered with the DED of an emirate (e.g., Dubai or Abu Dhabi). These companies can operate throughout the entire UAE without geographic or sectoral restrictions, except in certain strategic or regulated areas.

Advantages:

  • Unrestricted access to the local UAE market

  • Freedom to work with both private and public sector clients

  • Stronger credibility with banks, government entities, and corporate clients

Disadvantages:

  • Higher setup and operating costs (physical office required)

  • Corporate Tax applies at 9% above AED 375,000 in annual profit

  • Some sectors may still require a local partner or agent

How to Choose: Free Zone or Mainland?

The right choice depends entirely on your business model and goals.

Choose a Free Zone if:

  • Your activities are focused on international trade, remote consulting, or online sales

  • Your customers are based outside the UAE or in other Free Zones

  • You want a cost-efficient and scalable way to start

  • You plan to expand into the Mainland later by applying for an NOC

Choose the Mainland if:

  • You intend to serve local UAE customers directly

  • You want to bid for government contracts or serve public institutions

  • You are in a regulated sector such as healthcare, energy, or infrastructure

  • You need full flexibility and public visibility in the local market

Conclusion

Free Zones and Mainland entities each serve different strategic needs. Free Zones offer cost efficiency and tax advantages, ideal for startups and international businesses. Mainland companies provide full market access and credibility for more established or locally active businesses.

Your decision should be guided by your target market, sector, and long-term expansion plan.

Need help evaluating the best option? Support is available to assist with Free Zone selection, DED licensing, or planning for NOC-based expansion.