Quick takeaway: Free Zones deliver unrivalled tax savings and 100% foreign ownership for globally focused businesses, while Mainland licences give you total access to lucrative onshore UAE customers. Read on to find out which path maps to your vision.
📋 Table of Contents
- Understanding UAE Business Jurisdictions
- Ownership & Legal Control
- Trading Scope & Market Access
- Taxation & Financial Benefits
- Capital Requirements & Cost Breakdown
- Visa Quotas & Talent Mobility
- Compliance & Reporting Obligations
- Case Study: Tech Start-Up vs. Retail Chain
- Decision Matrix: Five Questions to Ask
- Switching Paths: Converting a Free Zone Entity to Mainland
- FAQ – Your Top 5 Questions Answered
- Conclusion & Next Steps
Understanding UAE Business Jurisdictions
What is a UAE Free Zone company?
A Free Zone company is incorporated within one of 40+ specially designated economic clusters—such as DMCC, JAFZA, RAKEZ or SHAMS—each designed to attract foreign investment by offering:
- 100% foreign ownership with no local sponsor
- 0% corporate income tax and customs duty exemptions
- Streamlined immigration and licensing processes
- Sector-specific infrastructure (for example, Dubai Internet City for tech firms)
What is a UAE Mainland company?
A Mainland company—licensed by the Department of Economy & Tourism (DET) or the relevant emirate's DED—can trade freely anywhere inside the UAE and bid on government contracts. As of 2021, most commercial and industrial activities now allow 100% foreign ownership, removing the historic 51% local partner barrier.
Ownership & Legal Control
| FACTOR | FREE ZONE | MAINLAND |
|---|---|---|
| Foreign Ownership | 100% for all activities | 100% for most commercial & industrial activities (some strategic sectors still require local shareholding) |
| Legal Forms | FZ LLC, FZ Establishment, branch of foreign company | LLC, Sole Establishment, Civil Company, Branch |
| Governance | Regulated by Free Zone authority | Regulated by Federal & Emirate laws, DET/DED |
Why it matters: If absolute control and repatriation of profits is critical and your client base is outside the UAE, Free Zone wins. If you need full UAE market penetration—say, opening multiple retail outlets—Mainland is the stronger play.
Trading Scope & Market Access
- Free Zone: Can trade within the zone and internationally. Direct sales to mainland customers require a locally appointed distributor or paying 5% customs duty when goods enter onshore.
- Mainland: Can sell goods and services throughout all seven emirates with no territorial restriction, bid for federal or municipal tenders, and open branches in any emirate.
💡 Pro Tip: Many companies run a dual structure: a Free Zone entity for global export + a Mainland branch to invoice local customers. Evolve can implement both under one roof.
Taxation & Financial Benefits
| TAX TYPE | FREE ZONE | MAINLAND |
|---|---|---|
| Corporate Tax (from 2023) | 0% for Qualifying Free Zone Persons, 9% on non-qualifying mainland-sourced profits | 9% on net profits above AED 375,000 |
| Customs Duty | 0% inside the zone; 5% when importing to mainland | 5% on most imports |
| VAT | 5% on taxable supplies; registration mandatory at AED 375k turnover | Same |
Free Zones still hold an edge for export-heavy or IP-driven models that meet the Federal Tax Authority's "Qualifying Free Zone Person" criteria for 0% corporate tax.
Capital Requirements & Cost Breakdown
| COST ELEMENT | TYPICAL FREE ZONE (DMCC) | TYPICAL MAINLAND (DUBAI LLC) |
|---|---|---|
| Licence & Registration | AED 12k–25k first year | AED 15k–22k first year (licence fee ≈5% of office rent) |
| Office / Flexi Desk | Flexi desk from AED 6k; serviced office from AED 18k | Minimum 200 sq ft office required; rents vary by district |
| Visa Package | 2–3 visas included with flexi desk; +AED 3k per extra visa | Visas linked to office size; average AED 3k per visa |
| Annual Renewal | Licence renewal AED 8k–12k | Licence renewal AED 8k–15k + Ejari renewal |
"Can I start without an office?"
- Free Zone: Yes—virtual/flexi options exist.
- Mainland: Generally no—a physical space (Ejari) is mandatory.
Visa Quotas & Talent Mobility
Free Zones allocate visas based on the package you purchase (flexi desk often 2–3 visas). Mainland rules tie visas to office size: roughly 1 visa per 9 m² of leased space, giving scaling companies more flexibility when they rent larger premises.
Both jurisdictions allow the shareholder (Investor Visa) to sponsor family members once personal income thresholds are met.
Compliance & Reporting Obligations
Free Zone:
- Annual licence renewal with zone authority
- Audited financials in some zones (e.g. DMCC)
- Economic Substance Reporting, Ultimate Beneficial Owner filing
Mainland:
- Licence renewal via DET/DED + tenancy contract renewal
- Mandatory corporate tax filings from FY 2024
- Payroll registration in WPS for employees
- Additional municipality approvals for certain activities
While Free Zones streamline government touch points into a single portal, Mainland firms interact with multiple authorities but gain broader operational rights.
Case Study: Tech Start-Up vs. Retail Chain
| SCENARIO | IDEAL JURISDICTION | WHY |
|---|---|---|
| FinTech SaaS Startup targeting global clients, primarily exporting digital services | Free Zone (e.g. DMCC or DIFC) | 0% CT on qualifying income, 100% ownership, easy IP registration, flexi desk to minimise overhead |
| Fashion Retail Chain opening stores in Dubai Mall and Abu Dhabi | Mainland LLC | Full UAE trading rights, ability to lease retail space, participate in public tenders, unlimited visa quotas linked to store size |
Decision Matrix: Five Questions to Ask
- Where are my primary customers located?
- Do I need to trade directly with UAE consumers or government bodies?
- Is minimising tax exposure more important than local market access?
- How many visas will I require in Year 1 and Year 3?
- Do I plan to raise investment or exit? (Some investors prefer Mainland LLC structures for scalability.)
Score each answer—if you lean heavily toward global trade, low tax, and minimal onshore presence, Free Zone wins. If UAE market penetration and storefronts are non-negotiable, Mainland is your route.
Switching Paths: Can You Convert Later?
Yes.
- Free Zone to Mainland: You can establish a Mainland subsidiary or branch to hold onshore licences and invoices.
- Mainland to Free Zone: Less common, but possible by closing the onshore entity and reincorporating in a zone—Evolve handles the entire termination and migration process.
FAQ – Your Top 5 Questions Answered
Yes, in designated areas and subject to each emirate's property laws.
Yes, if you qualify as a "Qualifying Free Zone Person" (QFZP) and do not earn mainland-sourced income.
Free Zone: 3–10 working days. Mainland: 7–14 working days, depending on name approvals and initial approvals.
No, most activities now allow 100% foreign ownership without an LSA.
Yes, but some banks may request proof of physical operations; Evolve's banking desk will advise the best-fit bank for your profile.
Conclusion & Next Steps
Free Zone vs. Mainland—it's not a one-size-fits-all decision. Your ideal jurisdiction hinges on your customer geography, tax appetite, and future expansion plans. Free Zones deliver unmatched tax efficiency and straightforward compliance for export-driven, digital, and services businesses. Mainland companies unlock the UAE's high-spending domestic market, letting you open retail outlets, bid on government projects, and hire unlimited staff.
Evolve Consultancy has helped 100+ entrepreneurs choose and launch the right UAE structure—handling licences, visas, banking, and ongoing compliance.