India
A company established in a UAE free zone can operate in the mainland, provided it meets specific legal and regulatory requirements. To trade or deliver services within the mainland, the business must obtain the necessary permit or licence from the Department of Economic Development (DED) in the respective emirate. Additionally, the company must keep separate accounting records for mainland-generated income and ensure full compliance with VAT and corporate tax regulations.
Over the past few years, authorities in Dubai, Abu Dhabi, and other emirates have introduced clearer procedures for free zone entities wishing to expand their presence in the mainland market. However, some industries—particularly those subject to special regulation—may still have limitations or require prior approval from relevant government departments.
Bridging Free Zones and Mainland UAE for Business Growth
Businesses in the UAE can be registered either in mainland jurisdictions or free zones, each offering different benefits and operational rules. Mainland licenses are issued by the emirate’s Department of Economy and Tourism, while free zone authorities manage their own licenses with separate regulations.
Free zone companies enjoy advantages such as full foreign ownership, tax exemptions, and streamlined import/export procedures. However, a key restriction is that they cannot serve mainland clients or conduct on-site business without obtaining the necessary approvals or permits.
Trading in the mainland encompasses more than just selling products. It involves activities like setting up an office, providing services directly to clients, and participating in government contracts or tenders. For startups, SMEs, and multinational corporations, accessing the UAE domestic market of over 10 million people is often a critical factor for growth and long-term business success.
Mainland Access for Free Zone Companies: Legal Pathways
Dubai’s 2025 Resolution on Mainland Operations
In March 2025, the Dubai Executive Council introduced Resolution No. 11 of 2025, creating new opportunities for free zone companies to operate on the mainland without establishing a separate entity. Businesses now have several options:
- Branch Licence – establish a mainland branch with a physical office.
- Branch Operated from Free Zone HQ – work on the mainland without opening a new office.
- Temporary Permit – obtain a six-month approval for pilot projects or specific assignments.
Costs are competitive, with branch licences starting at AED 10,000 per year and temporary permits at AED 5,000. No local shareholder or sponsor is required, and existing free zone employees can continue working on mainland projects under their current visas. Companies already conducting mainland trade must regularize their status by March 2026.
Abu Dhabi’s Dual Licensing Flexibility
The Abu Dhabi Department of Economic Development (ADDED) has long supported dual licensing for free zone companies. In 2025, it further simplified the process, allowing companies from other emirates to open branches in Abu Dhabi with a one-year office space waiver. This enables businesses to test the mainland market affordably before committing to full-scale operations.
Opportunities in the Northern Emirates
Other emirates also provide options for mainland expansion:
- Sharjah free zones, including SHAMS and Hamriyah, support mainland extensions, although approvals depend on the nature of business activities.
- RAKEZ offers a dual license package combining a free zone licence with a RAK DED branch.
Restricted Sectors
Despite these new pathways, certain sectors remain off-limits. These include banking, insurance, telecommunications, and healthcare. Additionally, financial free zones such as DIFC and ADGM are not covered under Dubai’s 2025 framework.
Legal Methods for Free Zone Companies to Operate in the Mainland
Free zone companies have multiple avenues to conduct business legally in the UAE mainland. The choice depends on the business activity, duration, and long-term strategy.
Setting Up a Separate Mainland Entity
For businesses targeting government tenders, large-scale contracts, or regulated sectors not eligible for branch licenses or temporary permits, forming a completely separate mainland company may be the most suitable solution. This approach ensures full compliance and provides unrestricted access to all onshore business opportunities.
Establishing a Mainland Branch
One of the most straightforward options is to open a mainland branch with the local Department of Economic Development. The branch remains part of the parent free zone company, maintaining the original ownership structure. This setup allows the company to directly contract with mainland clients, bid for projects, and engage in regular business operations without forming a separate entity.
Using Temporary Permits
For short-term or trial projects, temporary permits are ideal. These permits cover events, exhibitions, or pilot initiatives, typically valid for six months. This option allows companies to test the mainland market before committing to a full branch licence, reducing initial costs and administrative requirements.
Working Through a Distributor or Agent
Some free zone companies choose to operate via a mainland distributor or agent. This method simplifies logistics, import processes, and local compliance. However, it can limit profit margins and reduce direct control over customers, as the distributor manages resale and distribution activities.
Key Compliance Steps for Free Zone Companies Entering the Mainland
Free zone companies looking to operate onshore in the UAE shall follow specific procedures to ensure legality and smooth operations. Compliance spans licensing, accounting, tax, and human resources.
Obtain Free Zone Approval
Start by getting a No Objection Certificate (NOC) from your free zone authority. This confirms that the company is in good standing and permitted to conduct business outside the free zone. Without this clearance, mainland authorities will not process your application.
Apply for Mainland Permissions
After obtaining the NOC, submit your application to the Department of Economic Development (DED) or Department of Economy and Tourism (DET). Key documents include:
- Incorporation papers from the free zone
- Existing trade licence
- Board resolution approving expansion
Approval results in either a branch license or a temporary permit, enabling legal mainland operations.
Ensure Activity Compatibility
The business activities listed on the free zone license shall match the approved mainland activity codes. Any discrepancy can delay approvals or limit the company’s permitted operations onshore.
Maintain Separate Accounts
Free zone companies operating in the mainland must keep independent financial records for onshore revenue. This is essential for corporate tax filings, VAT compliance, and auditing purposes.
VAT Registration and Tax Compliance
Companies conducting mainland sales must register for VAT if turnover exceeds AED 375,000. Proper registration and reporting are critical to avoid penalties and ensure compliance with UAE tax regulations.
Customs and Goods Movement
Goods transported from free zones to the mainland are treated as imports and may incur a 5% customs duty, unless specific exemptions apply. Accurate documentation and record-keeping are crucial for smooth operations.
HR and Labour Compliance
Employees from the free zone can work on mainland projects, but employment contracts and insurance coverage must reflect onshore activities. Larger branches may also be required to register additional staff under mainland labour regulations.
Tax and Compliance Requirements for Free Zone Companies Operating in the Mainland
Expanding a free zone company into the UAE mainland introduces specific financial and regulatory obligations. Proper understanding of these rules is essential to operate legally and avoid penalties.
VAT Compliance
All transactions with mainland customers are subject to 5% VAT. Companies must ensure VAT-compliant invoicing and timely filing of quarterly returns. This applies to both goods and services delivered onshore, making accurate bookkeeping essential.
Corporate Tax Considerations
While Qualifying Free Zone Persons (QFZPs) enjoy a 0% corporate tax on their qualifying income, profits earned from mainland activities are taxed at 9%. Companies must monitor thresholds carefully: exceeding 5% of revenue or AED 5 million in mainland-sourced income may result in losing free zone tax benefits.
Customs Duty
When goods are transported from a free zone into the mainland, they are treated as imports and typically incur a 5% customs duty, unless exemptions apply. In most cases, the mainland client serves as the importer of record, but proper documentation is critical to ensure smooth clearance.
Costs, Timeline, and Required Documentation for Mainland Expansion
Expanding a free zone company into the mainland involves clear fees, timelines, and document requirements. Understanding these elements helps businesses plan efficiently.
Government Fees
The annual branch license fee in Dubai is generally AED 10,000, while a temporary permit costs around AED 5,000 per year. Fees in Abu Dhabi and northern emirates are comparable, making it affordable for companies to test the market before committing to long-term operations.
Processing Timelines
Temporary permits are usually approved within 1–2 weeks, making them ideal for short-term projects, pilot campaigns, or events. Branch licenses require more time, typically 2–4 weeks, depending on the business activity, documentation accuracy, and any required inspections.
Documents Required
Authorities generally request:
- Free zone trade licence
- Certificate of incorporation
- Board resolution authorising onshore expansion
- Manager appointment letter
- Audited financial statements (for older companies or where applicable)
Having these documents in order ensures faster approvals and smooth onboarding into mainland operations.
Common Pitfalls to Avoid When Entering the Mainland UAE
Trading Without Proper Authorization
Engaging in mainland business activities without securing the required branch license or permit can lead to penalties, fines, or even the cancellation of your existing free zone license. Always obtain official approval before offering services or selling goods onshore.
Risking Free Zone Tax Incentives
Free zone companies must maintain separate accounting for mainland operations and adhere to minimum thresholds. Neglecting this can result in losing 0% corporate tax benefits on qualifying income.
Assuming One Permit Covers All Emirates
A license or permit issued in one emirate does not automatically grant permission to operate elsewhere. Dubai approvals, for example, do not extend to Abu Dhabi, Sharjah, or the northern emirates.
Maintaining Redundant Entities
Operating duplicate free zone and mainland companies without a strategic reason can increase costs and complicate compliance. Reviewing consolidation opportunities can simplify operations and reduce administrative burdens.
Effective Mainland Strategies for Different Business Models
Free zone companies can tailor their approach to mainland operations depending on their business type, objectives, and market needs.
Professional and Consulting Services
Consultancies and service-oriented firms often opt for a branch license linked to their free zone headquarters. This setup allows them to legally serve corporate and government clients without the expense of establishing a new office, while maintaining centralized management and compliance.
E-Commerce Businesses
E-commerce operators frequently manage mainland deliveries from their free zone warehouses while registering for VAT. This method keeps operational costs low, ensures compliance with tax regulations, and provides seamless access to UAE consumers.
Trading and Distribution Companies
Trading companies often use a hybrid approach—employing local distributors for retail coverage while handling B2B sales directly through branch offices. This strategy allows them to maintain control over pricing and client relationships while expanding market reach.
Event and Temporary Project Firms
Businesses running short-term events, exhibitions, or pilot projects typically rely on six-month temporary permits. This flexible solution enables them to assess market demand, complete projects, and determine whether a longer-term branch license is necessary before committing resources.
Mainland Expansion Options Across UAE Emirates
Abu Dhabi
Abu Dhabi allows free zone companies to operate onshore through dual licenses or branch setups. Since 2025, firms from other emirates can open mainland branches with a one-year office space exemption, making it easier to test the market before committing fully.
Dubai
In Dubai, companies can choose between three options: establishing a branch with a dedicated mainland office, operating a branch from the free zone headquarters, or obtaining a temporary six-month permit for projects or pilot activities. Note that financial free zones, such as DIFC, are excluded from this framework.
Ras Al Khaimah
RAKEZ provides a dual-license solution, combining a free zone license with a RAK DED branch. This allows businesses to access the mainland market without forming a completely separate entity.
Sharjah
Sharjah’s free zones, including SHAMS and Hamriyah, permit mainland expansion, though approvals are specific to the business activity. Companies must ensure their mainland operations comply with regulatory guidelines for their sector.
The Future of Mainland Access for Free Zone Companies
The gap between free zones and mainland operations is steadily closing. In the coming years, companies can anticipate:
- Expanded activity permissions, allowing more sectors to benefit from dual licensing.
- Increased standardisation of regulations across all emirates, potentially moving toward a federal framework.
- Enhanced compliance oversight, particularly for corporate tax reporting and employee records.
These developments reinforce the UAE’s position as a premier destination for foreign investment while providing free zone businesses with more flexibility and opportunities to operate seamlessly onshore.
Expand Your Free Zone Business into the UAE Mainland with AB Nexis
Free zone companies now have clear pathways to operate in the UAE mainland, opening up new growth opportunities. Dubai, Abu Dhabi, and other emirates provide structured frameworks that allow businesses to expand efficiently while remaining fully compliant with local regulations.
Operating onshore means corporate tax and VAT apply to mainland-sourced income, but companies can still enjoy the benefits of their free zone setup. This combination allows businesses to access a larger market while maintaining operational advantages.
AB Nexis guides businesses through the entire process, from securing the necessary approvals and licences to ensuring tax and employment compliance. Our team’s expertise makes mainland expansion smooth, cost-effective, and strategically aligned with your business goals. Grow your business across the UAE with confidence—partner with AB Nexis today.
FAQs: Free Zone Companies Expanding to the Mainland UAE
Is a Mainland Office Always Required?
Not necessarily. In Dubai, a branch can operate directly from the free zone headquarters. Abu Dhabi offers a temporary one-year waiver on office space, allowing companies to test the market before committing to a physical location.
Can a Free Zone Company Sell to Mainland Clients?
Yes. By obtaining a branch licence or temporary permit, free zone businesses can legally deliver services, sign contracts, and sell products to mainland customers.
Do I Need a Local Sponsor to Operate Onshore?
No. Free zone companies retain 100% foreign ownership when expanding into the mainland, and Dubai regulations no longer mandate a UAE national or local service agent for these operations.
Which Taxes Apply to Mainland Operations?
Mainland income is subject to corporate tax (9%) and VAT (5%). Income from free zone qualifying activities remains tax-free if compliance requirements are maintained.
Should I Still Rely on a Distributor?
Distributors can handle logistics and customs, but they reduce profit margins and limit control. Many businesses now prefer branch licences for greater authority over operations.
Can One Licence Cover Multiple Emirates?
No. Each emirate requires separate approval if your company plans to operate beyond its original jurisdiction.
I Already Have a Mainland Company. Can I Merge It With My Free Zone Business?
Merging or consolidating is possible, but it depends on existing licenses, contracts, and corporate structures. Professional guidance is recommended to ensure compliance and smooth integration.
How Long Does It Take to Get Approval for Mainland Operations?
The approval timeline varies: temporary permits are usually processed within 1–2 weeks, while full branch licences take 2–4 weeks depending on activity type and inspections.
Can a Free Zone Company Hire Staff for Mainland Projects?
Yes. Free zone employees can work on mainland projects, but contracts and insurance may need updates to comply with mainland employment regulations.
Do I Need Separate Accounting for Mainland Revenue?
Yes. Financial records for mainland operations must be maintained separately to ensure accurate VAT and corporate tax reporting.
Are All Free Zone Activities Allowed in the Mainland?
No. Certain sectors like banking, insurance, telecoms, and healthcare remain restricted and cannot operate onshore without special approvals.
Can I Apply for a Temporary Permit Multiple Times?
Yes. Temporary six-month permits can be renewed or reapplied for consecutive projects, offering flexibility for short-term mainland operations.
Will VAT Registration Be Required?
Yes. Any taxable supply sold to mainland customers requires VAT registration if turnover exceeds AED 375,000.
What Documents Are Needed to Expand Into the Mainland?
Typically, you’ll need your free zone trade licence, certificate of incorporation, board resolution authorising expansion, manager appointment letter, and, in some cases, audited financial statements.
Does Expanding Affect Free Zone Tax Benefits?
Mainland income is taxed separately. Free zone benefits like 0% corporate tax still apply to qualifying free zone revenue, provided conditions are met.
