Setting up a company in Dubai: free zone or mainland

The question that starts almost every conversation is the same: free zone or mainland? It is a good question, but it is not the first one. Before that, we need to know what you are going to do here, with whom and from where. Once that is clear, the jurisdiction almost decides itself.

The essential difference

• Free zone company. It is registered in a free zone and regulated by that zone’s authority. It is designed to operate within the zone itself and with clients outside the Emirates.
• Mainland company. It holds its licence from the economic department of an emirate and can operate in the local market with fewer limitations.

For years the line between the two was quite rigid, and today it is somewhat less so. In Dubai, Executive Council Resolution 11 of 2025 allows many free zone companies to operate on the mainland through a specific permit. It has conditions and does not cover every activity, so it does not remove the decision, but it does open options that did not exist before.

The five questions I work through with you

1. Where are your clients and how will you serve them?

• Mainland. This is usually the natural route if you are going to sell mainly in the Emirati market, or contract with government bodies or large local companies.
• Free zone. It may be a better fit if your clients are outside the Emirates or in the zone itself.
• Consultancy and remote services. A free zone can also work for companies whose services are delivered remotely and do not require their staff to travel physically to mainland territory.

2. What exactly will your activity be?

Licences are granted for specific activities, and they should be described properly from the start so that the licence does not need changing a few months later:

1. Some activities are regulated and need additional approvals.
2. Others are only available in certain zones.
3. An activity can be valid in a free zone and still not qualify for the preferential Corporate Tax regime. I explain this in the note on QFZP.

3. Who will run the company, and from where?

This is the question most often forgotten and the one that can have the greatest consequences back home. If the important decisions are still taken from abroad, the Emirati company may be considered resident there, however correct its licence may be.

4. Do you need staff, an office and visas?

• The number of visas is usually tied to the licence and the space you rent.
• A shared space may be enough to start with, but it may fall short if the plan includes hiring several people.
• On the mainland, a physical address with a registered contract is normally required.

5. What do you want to happen in five years?

New partners, the sale of the business or a move into other markets shape today’s structure. Changing vehicle or jurisdiction later is possible, but it always costs more than having planned for it.

Quick comparison

	Free zone	Mainland
Local market	Limited, unless through a distributor, additional licence or permit	Direct access
Foreign ownership	100%	100% in most activities, with exceptions
Address	Office or space in the zone	Physical office with a registered contract
Corporate Tax	Subject to it, with a preferential regime only if QFZP is met	General regime
Regulator	The zone’s authority	The emirate’s economic department

And if what you need is not to trade, but to hold shares or organise a group? Then the conversation changes and we talk about holdings and SPVs, in jurisdictions such as DMCC, ADGM, DIFC or RAK ICC.

What changes for the parent company back home

A company in the Emirates is not analysed from the Emirates alone. If there is a company or shareholder resident in another country behind it, at least four points should be reviewed:

1. Effective management. If the company is in fact run from abroad, it may be tax resident there.
2. Transfer pricing. Transactions between related companies must be at market value and capable of justification on both sides.
3. Controlled foreign company rules. Certain income of the subsidiary may have to be attributed to the shareholder back home.
4. Dividends. Their treatment back home depends on requirements that need checking before any distribution.

The rules vary widely from one country to another. That is why this review is done before incorporation, in coordination with your adviser back home.

After the licence

Obtaining the licence is only the beginning. Next come, among others:

1. Corporate Tax registration.
2. Beneficial owner registration.
3. The establishment card.
4. Visas.
5. The bank account.
6. VAT, where applicable.

These are the steps that show whether the structure was built to last.

If you are thinking of setting up here, on the setting up in the UAE page I explain how I work, and on the compliance and administration page what comes next.