The short answer
Mainland usually fits if most of your customers are in the UAE, or customers need to visit your shop or office.
A free zone usually fits if you trade mainly with clients abroad or with other free zone companies, or you import, store and re-export goods.
Plenty of businesses could go either way. Then the right answer depends on your exact activity, the office you need and whether a free zone’s tax benefit would really apply to you.
What each one is
A mainland company is licensed by the emirate’s economic department. In Dubai that is the Department of Economy and Tourism (DET).
A free zone company is licensed by the authority that runs its free zone, under that zone’s own rules. Dubai has many free zones, and each one decides which business activities and company types it accepts.
Sources: u.ae: Steps to start a business on the mainland; u.ae: Starting a business in a free zone
Side by side
| Compared | Mainland | Free zone |
|---|---|---|
| Who licenses you | Dubai’s Department of Economy and Tourism | The free zone’s own authority |
| Foreign ownership | Up to 100% for most activities, since the Commercial Companies Law changed in 2021. A short list of strategic activities (for example banking, insurance, telecoms and defence) has extra rules. | 100% foreign ownership |
| Selling to customers in the UAE | Sell directly in the UAE market | Through a licensed mainland distributor, or by opening a mainland branch or company. Direct sales on the mainland are generally not allowed without approvals. |
| Goods and customs | Standard UAE customs rules | 0% customs duty on goods brought into the zone and on goods re-exported from it. Duty applies when goods move into the mainland. |
| Office | Every mainland business needs a physical address. In Dubai, the lease is registered with Ejari. | Each free zone offers its own office options. Some also offer warehouses and land. |
| Company types | General or limited partnership, LLC, public or private joint stock company | LLC, Free Zone Company (FZ Co), Free Zone Establishment (FZE), PJSC or a branch, depending on the zone |
| Corporate tax | 0% on taxable income up to AED 375,000, 9% above it. Small Business Relief may apply if revenue is AED 3 million or less. | A Qualifying Free Zone Person pays 0% on qualifying income and 9% on other taxable income, if it meets the conditions below. |
Sources: u.ae: Steps to start a business on the mainland; u.ae: Full foreign ownership of commercial companies; u.ae: Starting a business in a free zone; u.ae: Running a business in a free zone; u.ae: Corporate tax (CT); Federal Tax Authority: Free Zone Persons Corporate Tax guide (PDF)
Four questions that decide it
1. Who are your customers?
If you sell to people and businesses across the UAE, a mainland licence lets you deal with them directly. A free zone company needs a mainland distributor, or a mainland branch, to sell to them.
2. Do customers need to visit you?
A shop, clinic, restaurant or showroom that serves the public usually points to the mainland. If your work is done online, by phone or abroad, a free zone office may be all you need.
3. Do you import, store or re-export goods?
Goods brought into a free zone pay no customs duty while they stay there or leave again for another country. That can make a real difference to a trading business that re-exports.
4. Will the free zone tax benefit actually apply to you?
The 0% rate for free zone companies covers qualifying income only, and it comes with conditions. The company must:
- do its core income-earning work in the free zone, with enough staff, assets and spending there
- earn qualifying income, and keep other income under 5% of total revenue or AED 5 million, whichever is lower
- follow transfer pricing rules, and prepare audited financial statements every year, whatever its size
- not choose to be taxed under the standard rules
A Qualifying Free Zone Person also doesn’t get the 0% band on the first AED 375,000, and can’t use Small Business Relief. If it misses a condition, it is taxed at the standard rates instead. So if most of your income would come from mainland customers, have this checked before you choose.
Sources: u.ae: Running a business in a free zone; Federal Tax Authority: Free Zone Persons Corporate Tax guide (PDF); Federal Tax Authority: Small Business Relief
What stays the same
- Ownership. For most activities you can own 100% of your company in either one.
- Corporate tax registration. Every company subject to corporate tax must register with the Federal Tax Authority, mainland or free zone, even if it owes nothing. See our corporate tax guide.
- Paperwork. Both need passports, a trade name and, for documents from abroad, attestation. See the documents checklist.
Sources: u.ae: Full foreign ownership of commercial companies; Federal Tax Authority: Corporate Tax registration service
Every business is a little different. Ask about yours.
Tell us what you do and who you sell to. We reply within one business day with the right next step and the full price before we start.
Sources
Every rule, amount and deadline above comes from these official pages, checked on 4 November 2026. Rules change: we check your case against the latest before you act. This guide is general information, not legal or tax advice.
- u.ae: Steps to start a business on the mainland
- u.ae: Full foreign ownership of commercial companies
- u.ae: Starting a business in a free zone
- u.ae: Running a business in a free zone
- u.ae: Corporate tax (CT)
- Federal Tax Authority: Corporate Tax registration service
- Federal Tax Authority: Free Zone Persons Corporate Tax guide (PDF)
- Federal Tax Authority: Small Business Relief