Free zone vs mainland company in Dubai: how to choose the right setup

The short answer: start with your customers

Begin with one question: who will pay you, and where are they based? The answer usually points to the right structure faster than any list of pros and cons.

• A free zone is usually the better fit if most of your clients are outside the UAE or in free zones, if you sell online to international customers, or if you want to start with a flexi-desk rather than a leased office.
• The mainland is usually the better fit if you plan to open a shop or showroom, sell goods directly to customers across the UAE, or work mainly with the local market.
• Talk to an adviser first if you plan to sell services to mainland clients. Whether a free zone license covers this depends on the activity.

For consultancies, technology companies, trading businesses with overseas buyers and many other service companies, a free zone is often the simpler place to start. At DHCC Free Zone, a trade license starts from AED 12,500 a year, including a flexi-desk and up to 3 activity groups.

Ownership and legal structure

Free zones have always allowed 100% foreign ownership. Since 2021, many mainland activities also allow it, so ownership is no longer the deciding factor it once was. It still pays to check your specific activity, because the mainland rules depend on what you do.

Free zone companies

A free zone company is set up as a free zone entity and licensed by the free zone itself. At DHCC Free Zone, we issue the license directly, and the legal entity is an FZ-LLC, so your license reads "Your Company FZ-LLC". If you already own a company elsewhere, a branch may be possible. Our advisers can tell you whether a branch suits your plans.

Mainland companies

A mainland company in Dubai is licensed by the Department of Economy and Tourism (DET). The legal form and any ownership conditions depend on the activity you choose.

Rules that apply to both

• You must keep a register of your ultimate beneficial owners (UBOs), file it with the registrar and keep it up to date.
• You must register for corporate tax with the Federal Tax Authority and file an annual return.
• Some activities need approval from a regulator, such as the Dubai Health Authority (DHA) for healthcare or the Knowledge and Human Development Authority (KHDA) for education and training.

Where each type of company can do business

Market access is the biggest practical difference between the two routes, so check it before anything else.

Free zone companies

• Trade freely within the free zone and internationally.
• Selling goods directly into the UAE mainland usually needs a local distributor or extra permits.
• Whether you can provide services to mainland clients depends on the activity. Confirm this with an adviser before you sign contracts.

Mainland companies

• Trade directly with customers across the UAE, within the activities on the license.
• Can also trade internationally.

A simple test helps here. Write down where your first year of revenue will come from. If most of it comes from overseas clients, free zone companies or online sales abroad, a free zone license can cover what you need. If your plan depends on retail sales to UAE consumers, the mainland is usually the better fit.

Tip: Before you apply, list the activities you need in our business activities search. It shows the approving authority for each of our 2,000+ business activities, which helps your adviser answer the mainland question for your case.

Office space and setup requirements

Office rules shape both your costs and your first-year commitments.

• Free zone: you can usually start with a flexi-desk, which gives your company a registered address without a full office lease. At DHCC Free Zone, a flexi-desk is included in the license package, and you can move to a fixed desk or an office as your business grows. See our office space options.
• Mainland: you need a physical office with a registered lease, known as Ejari. Rent depends on the location and size of the office, and the lease is a commitment you take on alongside the license.

How applying works with us

1. Choose your business activities.
2. See your setup cost, line by line.
3. Upload your documents.
4. Sign and pay online.

You can apply online, but some visa steps happen in person in the UAE, such as the medical fitness test and Emirates ID biometrics. Our start a business page walks through each step.

Costs, visas and corporate tax compared

Setup costs are easier to compare when you split them into parts: the license, the office, visas and ongoing services.

License and office

At DHCC Free Zone, a trade license starts from AED 12,500 a year, including a flexi-desk and up to 3 activity groups. Multi-year licenses of 2 or 3 years save 15% on the license fee. On the mainland, you pay DET license fees plus rent for your office, and both depend on your activity and location. Our cost calculator shows a free zone package line by line.

Visas

Free zone and mainland companies can both sponsor residence visas for owners and employees, and visa holders can sponsor their families if they meet the salary or income requirement. With us, an investor visa is AED 4,000 plus a visa allocation of AED 1,850 a year, and you need an establishment card at AED 2,000 a year once you hold any visa. These figures are indicative until confirmed.

Corporate tax and VAT

Corporate tax applies to both. Under the standard regime, the rate is 0% on taxable income up to AED 375,000 and 9% above that. A free zone company that meets the conditions to be a Qualifying Free Zone Person can pay 0% on qualifying income and 9% on non-qualifying income, but this is not automatic. VAT at 5% applies to both once you reach the registration threshold. For your own case, speak to a registered tax agent or adviser, and read our guide to UAE corporate tax for free zone companies.

Free zone and mainland side by side

This table sums up the main points. Rules can change, so check the details for your activity with an adviser.

How to decide: a quick checklist

Work through these steps in order. Keep your answers short; they are the brief your adviser will need.

1. List your first customers and where they are based.
2. Write down what you sell: goods, services or both.
3. Check whether your activities need a regulator's approval.
4. Decide whether you need a physical office now or whether a flexi-desk is enough.
5. Count the residence visas you need in your first year.
6. Estimate your total setup cost.
7. Ask an adviser to confirm anything that depends on your activity, such as serving mainland clients.

If most of your business will come from outside the UAE mainland, a free zone company is usually the simpler place to start. When you are ready, talk to our advisers about your activities and get a setup cost you can plan around.