How Free Zone Companies Can Legally Operate in Mainland UAE

Can a free zone company work in mainland UAE? The answer is yes, but only if you take the right path, basically, under the latest rules, a free-zone company can conduct business on the mainland if it obtains the required approvals and meets all required standards. In this article, you’ll learn the key differences between jurisdictions, what’s changed under the UAE free zone new business policy 2025, how to make the move legally & what limitations still apply.

1. Introduction

Imagine you’ve set up a business inside a free zone in the UAE and you’re eyeing clients beyond the mainland. The question is, can a free zone company work in mainland UAE? The answer is becoming much clearer now, thanks to recent reforms. Historically, free zones and the mainland were separate worlds they’ve different regulators, different scopes, different limitations. But things have shifted. This article explains exactly what’s allowed under the new regime, how to act & what you need to check if you’re considering the expansion.

2. Difference Between Free Zone and Mainland Jurisdictions

Before we dive into the “what now” of free zone-to-mainland trade, let’s clarify how the two operate.

Free Zone

• It is run by a Free Zone Authority rather than the local Department of Economic Development (DED) or equivalent.
  
• Often allows 100% foreign ownership and offers incentives (tax breaks, repatriation of profits).
  
• Geographically limited, essentially the licence covers activities within the zone or outside the UAE, not necessarily within mainland UAE.
  

Mainland

• Licensed by the DED (or equivalent economic department in each emirate) and regulated by general commercial, labour and trade law.
  
• Traditionally allows you to operate across the UAE market and within the local jurisdiction and bid for local contracts.
  
• May require a local partner or Emirati sponsor, depending on activity and emirate (though reforms are changing that).
  

Quick Comparison: Free zone vs mainland UAE

Feature	Free Zone	Mainland
Ownership	Usually 100% foreign allowed	In many sectors, 100% but historically local partner may be required
Scope	Within zone + outside UAE	Broad UAE market access, local contracts
Regulator	Free Zone Authority	DED (or equivalent)
Cost / incentives	Incentives, simpler space	May have higher overhead, but full market access
Local trade limitations	Yes, unless additional steps taken	No major geog. limitations

So when you ask can a free zone company work in mainland UAE, it’s crucial to understand: yes, but the standard free-zone licence alone likely won’t cut it. You’ll need to invoke specific legal routes.

3. The New Policy Update (UAE free zone new business policy 2025)

What’s changed is significant. The newly issued Dubai Executive Council Resolution No. 11 of 2025 allows free zone businesses within Dubai to operate on the mainland under certain licences/permits from the Dubai Department of Economy & Tourism (DET).

Key highlights:

• Free-zone entities (outside the Dubai International Financial Centre) can apply to DET for:
  

A licence to set up a branch of the free-zone company in the mainland.

A licence to set up a branch headquartered in the free zone but operating on the mainland.

A temporary permit to carry out a specified activity on the mainland (valid up to 6 months).

• Requirement to maintain separate financial records for free zone operations vs mainland operations.
  
• Mainland operations may be subject to corporate tax (the 0 % free-zone rate may not apply) for income generated onshore.
  
• The list of permitted activities will be issued by DET within six months of the resolution.
  

What this really means is the lines between free zone and mainland are becoming more flexible through legal routes. But the freedom isn’t total: you still need to follow the rules.

4. Can a Free Zone Company Work in the Mainland UAE?

The apt answer is yes but with conditions. 

What’s allowed

• A free-zone company can do business with mainland clients if it obtains the correct licence or permit for mainland operations
  
• Some activities can be carried out in the mainland through an agent or distributor arrangement without converting your structure fully. (This is a more traditional route outside of the new resolution)
  
• Under the new framework in Dubai, the free zone company retains its free-zone base but adds a branch/permit to operate onshore
  

What you must check

• You must get approval from DET (or the relevant onshore body) and any other authority for the specific activity
  
• Maintain separate accounts for the free-zone portion and the mainland portion of your business
  
• Comply with mainland laws like labour, trade, visas & tax
  

In short,  a free-zone company working in mainland UAE is now viable under the updated regime if you follow the legal route.

5. Legal Routes for Free Zone Companies to Operate in Mainland

Here are your main options if you’re asking how a free zone company’s mainland operations UAE can be structured.

Route 1: Establish a branch or subsidiary on the mainland

• Apply to DED/DET (or local equivalent) for a license
  
• Free zone company remains parent; branch follows mainland license requirements
  
• You’ll need to meet mainland trade license requirements (office, regulatory approvals, etc)
  

Route 2: Work through a mainland distributor or agent

• Free-zone entity remains in zone; it enters into an agency or distribution agreement with a mainland entity
  
• Less capital and structural overhead, but you don’t fully operate in the mainland as your own licensed business
  

Route 3: Dual license UAE free zone

• Some free zones offer a dual licence model (free zone + mainland), allowing you to operate on both
  

Route 4: Temporary permit for specific activity

• As per Resolution No. 11 of 2025, you can apply for a temporary mainland permit valid up to six months.
  

Step-by-step pointers

• Identify your business activity and check if the mainland branch/permit covers it.
  
• Obtain NOC from the free zone authority (for the branch) if required.
  
• Apply for the mainland licence/permit via DET or local equivalent.
  
• Ensure you comply with DED approval for free zone companies branching into mainland business.
  
• Set up office space (if required), register legally, maintain records.
  
• Set up separate financial records for the mainland side.
  

Estimated cost table

Route	Approximate cost	Notes
Branch licence (mainland)	~ AED 10,000 per year	For branch of free zone entity in Dubai
Temporary permit (six months)	~ AED 5,000	For specific activity only
Dual licence option	Varies by free zone	Check with relevant zone and their pricing

6. Benefits of the New Flexibility

Here’s what the updated rules bring:

• Access to the larger mainland UAE market, meaning you can reach clients you couldn’t before
  
• You can retain your free zone base (with its advantages) while expanding into the mainland
  
• More options for scaling and growth without fully abandoning your original setup
  
• For foreign investors and companies, the path to hybrid operations is clearer
  

7. What Free Zone Companies Still Cannot Do

Even under the new policy update, there are limitations:

• You can’t just operate in the mainland under your free zone licence without getting the proper mainland branch/permit
  
• Some regulated sectors (financial services, education & healthcare) still require special approvals and may face stricter rules
  
• The free-zone tax benefits may not cover your mainland operations; those might be taxed under standard rules
  
• The list of permitted activities for mainland operations may be limited and is still being defined in some cases

8. How to Expand Legally from Free Zone to Mainland

Here’s how you can do it step-by-step:

• Review your current licence and business activities in the free zone.
  
• Determine whether your intended mainland activity is on the permitted list.
  
• Apply for the required mainland licence or permit via the local authority (e.g., DET in Dubai).
  
• Secure any needed DED approval for free zone companies entering mainland trade.
  
• Set up the required office premises (if mandated) and register employees under mainland labour rules.
  
• Update your accounting system so that mainland operations are recorded separately.
  
• Ensure compliance with mainland trade license requirements including VAT, local labour law, etc.
  
• If needed, consult with a business-setup advisor. Arnifi Business Setup Consultant can guide you through the process, handle paperwork and help you avoid missteps.

9. FAQs

Q1. Can a free zone company invoice mainland clients?
Yes, but only if it holds a valid mainland licence or permit.

Q2. Do I need a local partner to trade in the mainland from a free-zone base?
Not always, many business activities now allow full foreign ownership.

Q3. Which free zones offer dual licences for both free zone and mainland operations?
Free zones like RAKEZ and some others in Dubai offer dual licence options.

Q4. Is there any extra cost involved to expand into the mainland?
Yes, additional fees apply for licences, permits & compliance.

10. Conclusion

So, can a free zone company work in mainland UAE? Yes, it’s now possible under the updated UAE business framework that allows cross-jurisdiction operations with the right approvals. The key is knowing which route fits your business like branch setup, dual licence, or agent partnership & staying fully compliant with DED and other authorities. Many companies are already taking advantage of this flexibility to grow their mainland presence without giving up free zone benefits. If you’re planning to do the same, get expert help. Arnifi Business Setup Consultant handles everything from licence applications to legal coordination, helping your free zone company expand into the mainland easily. Reach out today & let’s make your business expansion simple and compliant.