Perspective

Can a Free Zone Company Work in Mainland Dubai? What the New Permit Means

Dubai now has a defined route for free zone companies to work on the mainland. What the official sources say it covers, what it costs, and what it can do to your corporate tax position.

By Imran Mirza·Founder & CEO, XILLION Group UAE
22 October 2026
9 min read
Imran Mirza, Founder & CEO of XILLION Group UAE, beside the headline "Free zone or mainland? The permit that bridges Dubai."

A free zone licence has always come with a catch. The UAE government portal says a free zone company can trade inside its zone and internationally, but that direct sales in the mainland are generally not permitted unless the company holds the required mainland licences or approvals. That is where many free zone owners get stuck, usually when the first real customer turns out to be a few kilometres outside the zone.

I was born and raised in the UAE, and I have 18+ years of working life here, including nearly seven years at Barclays and ADCB working with business clients and account opening, and 12 years in business setup. This piece sticks to what the authorities have published and says where the limits are. Rules and fees change, so check the current official pages before you act.

What changed in Dubai

Executive Council Resolution No. 11 of 2025, published in the Official Gazette on 3 March 2025, regulates how free zone companies licensed in Dubai can carry out activities outside their zone but within the emirate. KPMG's summary lists a temporary permit for specific activities for up to six months, a branch licence in the emirate, and a branch licence for working outside the zone while the company stays in it. CMS and Reed Smith describe the same structure, and both note that the resolution leaves out financial entities in the DIFC.

It covers Dubai only. Operating in another emirate needs licences from the authorities there.

The permit most owners ask about came later. On 8 October 2025 the Dubai Business Registration and Licensing Corporation, part of the Department of Economy and Tourism, launched the Free Zone Mainland Operating Permit with the Dubai Free Zones Council. The Department's announcement gives a validity of six months, renewable for the same fee of AED 5,000. The Dubai Media Office adds that eligible companies must hold a Dubai Unified Licence and apply online through the Invest in Dubai platform. Gulf News and Entrepreneur Middle East report that the first phase covers non-regulated activities such as technology, consultancy, design, professional services and trading, with regulated sectors planned for later, and Zawya's copy of the release gives no timeline for that second phase.

For comparison, KPMG and Middle East Briefing give AED 10,000 a year for a branch licence. These are launch-time figures. Fees, activity lists and phases move, so confirm them on the Department of Economy and Tourism and Invest in Dubai pages on the day you apply.

Which route suits which business

This is my view, not an official position. A temporary permit suits a defined piece of work, such as a project for one mainland client. A branch suits a business whose customers are mostly on the mainland, because it is built to last. And if most of your revenue will come from the mainland, it is fair to ask whether a free zone was the right base in the first place, since mainland companies can also be fully foreign owned for most activities, with a published list of restricted ones.

The tax question

Two things are easy to mix up here: a licence and a tax status. The permit is a licensing permission from Dubai. It does not decide your corporate tax treatment, and it does not guarantee that a company keeps 0% treatment.

The Dubai announcement says that mainland activity under the permit is subject to 9% corporate tax on the related revenue and that separate financial records must be kept, and Entrepreneur Middle East reports the same. I read that as a signal to track mainland activity separately, not as a full answer on any one company's tax position. That position comes from the federal law.

Article 18 of the Corporate Tax Law sets the conditions for a Qualifying Free Zone Person: adequate substance in the UAE, Qualifying Income, no election to be taxed at the standard rates, and the further requirements the article lists. The Ministry of Finance confirms that such a company can benefit from 0% on its Qualifying Income, and the law taxes the rest of its taxable income at 9%. So the 0% applies only to qualifying income, and only while the statutory conditions are met.

What counts as Qualifying Income is set out in Cabinet Decision No. 100 of 2023. It includes income from transactions with other free zone persons, income from non-free zone persons only for qualifying activities, and other income that passes a de minimis test. Ministerial Decision No. 229 of 2025 sets that test: non-qualifying revenue must not exceed 5% of total revenue or AED 5,000,000, whichever is lower. Middle East Briefing's summary walks through the decision in plain terms.

If a condition is missed, the law says the company ceases to be a Qualifying Free Zone Person from the beginning of that tax period, unless the Minister prescribes otherwise. The Federal Tax Authority has published a corporate tax guide on free zone persons, and Deloitte's note on the Cabinet Decision is useful commentary.

Put plainly, mainland revenue is not automatically all taxed at 9%, and it is not automatically safe either. Whether a particular sale counts as qualifying depends on the activity, the customer and the decisions' own lists. A mainland permit does not make an activity qualifying, and it gives no assurance of qualifying status.

For companies outside the 0% regime for qualifying income, the corporate tax rate is 0% on taxable income up to AED 375,000 and 9% above it, as the government portal also states.

My practical advice is to model it before the first mainland invoice. Take the planned mainland revenue as a share of total revenue, set it against the 5% and AED 5 million limits, and ask your tax adviser whether each activity is qualifying. I cannot answer that for you from the outside, and no article can.

Two smaller points

VAT is charged at a standard rate of 5%. How it applies to your free zone company and to goods or services moving between the zone and the mainland is a separate question, so check it with the Federal Tax Authority or your adviser before you invoice. On ownership, free zone companies can be fully owned by foreign investors.

Where I land

I would not call the permit a shortcut. It gives a legal route to mainland customers, and it comes with a cost in fees, records and possibly tax. For some companies that is a good trade. For others the cleaner answer is a mainland licence or a branch from the start. Which is right depends on your activity, your customers and your numbers, and it is worth settling before you sign a lease or a licence, not after.

Rules can change, in Dubai as elsewhere, so read the current official pages and take advice. If it would help to talk through your own case, contact us. We are here. Approvals, licences and bank accounts are decided by the authorities and the banks, and nobody can promise them.

Frequently Asked Questions

Can a free zone company operate in mainland Dubai?
Yes, through a route the authorities have defined. Executive Council Resolution No. 11 of 2025 covers free zone companies licensed in Dubai, and the Free Zone Mainland Operating Permit launched on 8 October 2025 lets eligible companies work on the mainland. The UAE government portal says direct mainland sales are generally not permitted without the required licences or approvals. Everything is subject to authority approval, so check the current Department of Economy and Tourism requirements.
How much does the Free Zone Mainland Operating Permit cost and how long does it last?
The Dubai Department of Economy and Tourism announcement gives a validity of six months, renewable for the same fee of AED 5,000. KPMG and Middle East Briefing give AED 10,000 a year for a branch licence. These are launch-time figures and can change, so confirm them on the official pages on the day you apply.
Who can apply for the permit and how?
The Dubai Media Office says eligible free zone companies holding a Dubai Unified Licence apply online through the Invest in Dubai platform. Press reports say the first phase covers non-regulated activities such as technology, consultancy, design, professional services and trading, with regulated sectors planned for later. The resolution leaves out financial entities in the DIFC.
Does working on the mainland affect a free zone company's corporate tax?
It can, and the permit does not decide the outcome. The Dubai announcement says mainland activity under the permit is subject to 9% corporate tax on the related revenue and that separate financial records must be kept. Separately, under the Corporate Tax Law a Qualifying Free Zone Person pays 0% only on Qualifying Income, and only while the statutory conditions are met; the rest of its taxable income is taxed at 9%. Whether a sale counts as Qualifying Income depends on the activity and the customer, as set out in Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025, which includes a de minimis test of 5% of total revenue or AED 5,000,000, whichever is lower. A permit does not guarantee qualifying status, so take tax advice before you start.
Does the Dubai permit allow a free zone company to work in other emirates?
No. The resolution covers Dubai only. A company planning to operate in another emirate needs licences and permits from the competent authorities there, according to KPMG's summary of the resolution.
Should I choose a free zone or a mainland licence if my customers are in Dubai?
It depends on your activity, your customers and your numbers, and no answer can be guaranteed. Mainland companies can be fully foreign owned for most activities, while a free zone company needs the permit or a branch to work on the mainland. Compare the fees, records and tax effects of both routes before you commit, and take professional advice.

Sources

All pages accessed 22 October 2026.

Dubai resolution and permit (official releases and professional summaries)

Corporate tax (official and professional)

Ownership and VAT (official)

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Imran Mirza, XILLION Group UAE
Imran Mirza
Imran Mirza is the Founder and CEO of XILLION Group UAE. He has 18+ years in the UAE, including 7 years at Barclays and ADCB working with business clients and account opening, and 12 years in business setup. He writes about company formation, Golden Visas, corporate tax and banking.
This article is for general information only and is not legal, tax or immigration advice. Visas and residency are subject to authority approval, and rules can change. Your tax position in your home country depends on its own laws, so speak to a qualified adviser there before you act.