Can a free zone company do business in mainland Dubai?

A free zone licence lets you trade inside your free zone and with the rest of the world. It does not, by itself, let you sell to customers on the UAE mainland. For that you work through a licensed mainland distributor, open a mainland branch or company, or, in Dubai, use one of the licences and permits the Department of Economy and Tourism (DET) introduced in 2025.

The Dubai route is new, so it is worth understanding properly. Under Executive Council Resolution No. 11 of 2025, a company licensed in a Dubai free zone can work on the Dubai mainland once it holds a DET branch licence or permit. DET launched the permit in October 2025. This guide covers the general rule, the routes that work, what the permit involves and what mainland income does to the 0% corporate tax rate.

What the general rule says

The UAE government portal puts it plainly. Free zone companies are treated as outside the mainland's jurisdiction. They can trade freely within their free zone and internationally, but to sell goods or services locally they must work through a licensed mainland distributor or set up a mainland branch or company. Direct sales on the mainland are generally not allowed without the required mainland licences or approvals.

For goods, the line is fairly clear. Goods can sit in a free zone without customs duty while they wait to be re-exported. Once they move into the mainland market, they become subject to UAE customs duty and are cleared like any other import.

Services are where people go wrong. A consultancy that sends staff to work at a client's office in Business Bay is operating on the mainland. A software company that delivers code remotely to a mainland client is in a greyer area, and free zones have not always read that the same way. Now that Dubai has a clear route, the safer course is to ask your free zone in writing or use one of the options below, rather than copy what other companies seem to get away with.

Five ways to serve mainland customers

The distributor route needs no extra licence on your side, but you give up margin and the direct customer relationship. A separate mainland company has no trading restrictions, but it is a second company to run, with its own premises, accounts, renewals and corporate tax registration. Our guide to setting up on the Dubai mainland explains what that involves.

How Dubai's permit and branch licences work

Resolution No. 11 of 2025 applies to companies licensed in a free zone in Dubai that want to work outside it, within Dubai. It does not apply to financial firms licensed in the Dubai International Financial Centre (DIFC). It gives DET three instruments:

• A branch licence within the emirate. A branch located on the mainland. Valid for one year and renewable.
• A branch licence operating out of the free zone. The branch runs from your existing free zone premises. Valid for one year, renewable, with an official fee of AED 10,000 a year as of October 2026.
• A temporary permit. For specific activities, valid for up to six months, with a fee of AED 5,000 for each issue or renewal.

A branch has no separate legal personality. It is part of your free zone company, which stays responsible for everything the branch does. Whichever instrument you hold, you must keep separate financial records for mainland work, follow the federal and local rules that apply to the activity, and accept audits and inspections by DET and your free zone.

The temporary permit goes by the name Free Zone Mainland Operating Permit. According to the Dubai Media Office announcement, you apply online through the Invest in Dubai platform, and your company must hold a Dubai Unified Licence, the common business identifier Dubai issues to mainland and free zone companies. The first phase covers non-regulated activities such as technology, consultancy, design, professional services and trading, with regulated sectors planned later. Your existing free zone staff can work on mainland activities covered by your licence or permit and keep their free zone employment arrangements.

Three limits matter before you plan around this:

• Dubai only. Work in Abu Dhabi, Sharjah or any other emirate needs licences from that emirate's authorities.
• Dubai free zones only. A company licensed in a Sharjah or Ras Al Khaimah free zone cannot use it.
• Existing operators had a deadline. Companies already working outside their free zone when the resolution took effect in 2025 were given one year to comply, which DET's Director General can extend once. If you have been serving mainland clients informally, do not wait to find out whether an extension covers you.

Before you apply

1. Check that your activity appears on DET's list, and whether it falls under a permit or a branch licence.
2. Ask your free zone authority for its approval, which DET requires.
3. Check whether the government body that supervises your activity must also approve it.
4. Prepare your memorandum of association and free zone trade licence for the application.
5. Set up separate books for mainland income before you send the first invoice.
6. Put the renewal date in the diary. A lapsed permit puts you back where you started.

What mainland income does to your 0% tax rate

This is general information, not legal or tax advice. The qualifying income rules are detailed, so have a registered tax agent look at your own figures.

A free zone company pays 0% corporate tax only on qualifying income, and only while it meets every condition to be a Qualifying Free Zone Person. Mainland work tests that in two ways.

First, income from mainland customers is usually not qualifying income. Under Cabinet Decision No. 100 of 2023, income from transactions with people and companies outside the free zones qualifies only when it comes from a qualifying activity. Ministerial Decision No. 229 of 2025 lists those activities, including manufacturing, processing, trading of qualifying commodities, logistics services and distribution of goods from a designated zone. Consultancy, design and most professional services are not on the list, and transactions with individuals are excluded activities, with a few exceptions.

Second, non-qualifying revenue counts towards the de minimis limit: the lower of 5% of total revenue or AED 5 million. Go over it and the company stops being a Qualifying Free Zone Person from the start of that tax period and for the four tax periods after it.

The decision treats a domestic permanent establishment, meaning a branch or other presence outside the free zone, differently. Its income is taxed at 9%, and its revenue is left out of the de minimis calculation. The Dubai Media Office announcement also says mainland revenues under the permit are taxed at 9%.

Say your free zone studio designs interiors only for other free zone companies and earns AED 1.2 million a year, all of it qualifying income. You then take a AED 90,000 project for a mainland developer and invoice it from the free zone. Five per cent of AED 1.29 million is AED 64,500, so that one project puts you over the limit, and the 0% rate is gone for five tax periods.

If the same project runs through a DET branch that counts as a domestic permanent establishment, with its own books, the branch's profit is taxed at 9% and the AED 90,000 stays out of the de minimis test. Whether a short permit creates a permanent establishment depends on the facts, so get advice before you pick the route. Our guide to free zone qualifying income covers the conditions in more detail.

Common mistakes

• Invoicing mainland clients from the free zone and hoping. It can breach your licence terms and your tax conditions at the same time.
• Assuming the permit covers the whole UAE. It covers mainland Dubai only.
• Letting a permit lapse. It lasts up to six months, and the fee applies again at each renewal.
• Keeping one set of books. The resolution requires separate records for mainland activity, and the tax rules make them essential anyway.
• Treating a distributor contract as a formality. The contract decides who holds the stock, who clears customs and who carries the customer risk.

Which route fits your business

If mainland work is occasional and your activity is on DET's list, the temporary permit is the lightest option. If mainland clients bring in regular revenue, a branch licence gives you a more stable footing, and running it from your free zone office avoids a second lease. If the mainland is your main market, a mainland company is usually simpler than stretching a free zone structure to fit.

If you have not set up yet, this decision belongs at the start. Compare free zone and mainland companies first, then use our checklist on how to choose a UAE free zone, since only a Dubai free zone gives you access to the Dubai permit. You can also compare zones on our free zones page.

If you already trade from a free zone and want a second opinion on the right route for your mainland work, book a free consultation.

Sources

• Dubai Legal Portal: Executive Council Resolution No. 11 of 2025 on free zone establishments' activities
• Dubai Media Office: Dubai launches Free Zone Mainland Operating Permit (October 2025)
• UAE Government portal: Running a business in a free zone
• Ministry of Finance: Cabinet Decision No. 100 of 2023 on qualifying income
• Ministry of Finance: Ministerial Decision No. 229 of 2025 on qualifying and excluded activities