The UAE’s Free Zones are preferred places for many entrepreneurs and foreign investors to establish companies because of the multiple benefits, like full foreign ownership, tax breaks, and easy processes. However, a frequently asked question is: Is a Free Zone company allowed to penetrate the UAE mainland market? The answer has been changing recently due to the new regulations and is now leaning more towards the affirmative side, but with certain restrictions and compliance measures.
This guide provides a complete guide on how a free zone company do business in the mainland, and how Udyamita Helpline can smooth the transition.
Mainland expansion doesn’t have to be complicated. With the right licensing strategy and compliant documentation, Free Zone companies can seamlessly unlock new opportunities across the UAE mainland.
— Shashank Nigam, CMO, Udyamita Helpline
Can A Free Zone Company Do Business in the Mainland?
Yes, but only under approved licensing routes. Under UAE regulations, a Free Zone company cannot directly conduct business in the mainland without obtaining the correct permits. However, thanks to progressive reforms, Free Zone entities now have multiple legal pathways to access the mainland market.
How Can a Free Zone Company Do Business In The Mainland UAE?
Here are the following ways in which a free zone company can do business in the Mainland:
1. Mainland Branch License
A Free Zone company can open a branch office in the mainland. This allows the business to:
- Offer services to mainland clients
- Sign contracts
- Hire staff under mainland labour rules
- Operate commercially within mainland boundaries
The branch must be officially licensed under the mainland authority (such as DET in Dubai).
2. Dual License / Activity-Specific Permit
Some Free Zones allow companies to apply for a dual license or a mainland operation permit. This is mainly for service-based activities such as:
- Consultancy
- IT services
- Marketing
- E-commerce
- Media & creative services
This permit allows you to operate onshore without fully relocating your company.
3. Work with a Mainland Distributor or Agent
Free Zone companies selling physical goods can legally trade in the mainland by appointing a local mainland distributor, agent, or LLC. The distributor handles customs clearance, mainland logistics, and compliance.
4. Form a Mainland LLC or Joint Venture
This option is ideal for companies wanting full access to:
- Retail operations
- Government tenders
- Regulated industries
A mainland LLC gives the business full legal freedom to operate anywhere in the UAE.
Note: Ready to expand into the mainland UAE? Contact Udyamita Helpline at advisor@udyamitahelpline.com for quick, expert assistance.
Compliance & Restrictions You Must Follow
Even with a branch or permit, Free Zone companies must follow mainland regulations:
- Separate Accounting: Free Zone and mainland revenues must be recorded separately.
- VAT Compliance: Supply of goods or services within the mainland is subject to a 5% VAT rate.
- Corporate Tax Rules: Mainland-sourced income may be subject to UAE Corporate Tax (9%) depending on the qualifying status.
- Customs Duty: Goods moved from Free Zones to the mainland incur 5% customs duty.
- Activity Restrictions: Some activities – banking, insurance, telecom, and certain medical services – may require additional approvals or remain restricted.
Why a Free Zone Company Should Enter the Mainland Market
Expanding into the mainland makes sense if your business intends to:
- Sell directly to UAE customers
- Offer services locally
- Open a physical shop, studio, or office
- Access government tenders
- Build a presence in Dubai, Abu Dhabi, or other emirates
- Scale fast and tap into the larger domestic market
This hybrid model allows businesses to enjoy Free Zone benefits while gaining mainland access.
How Udyamita Helpline Can Help Free Zone Companies In Doing Business In The Mainland UAE?
Setting up mainland operations from a Free Zone involves legal, administrative, and compliance steps. Udyamita Helpline acts as your end-to-end business setup partner and ensures a seamless process. Here is what we offer:
1. Mainland Licensing Guidance
They help you choose between:
- Branch license
- Dual license
- Activity permit
- New Mainland LLC
2. Complete Documentation & Approvals
All applications, legal paperwork, contracts, and government filings are handled by experts.
3. Compliance Support
Assistance with:
- Corporate tax
- VAT registration
- Customs clearance
- Labour & immigration procedures
4. Cost Calculation & Optimisation
They compare Free Zone vs mainland fees and help you build the most cost-efficient structure.
5. End-to-End Setup Execution
From choosing the right activity to bank account support, PRO services, and ongoing compliance, everything is managed for you.
Conclusion
Free Zone companies can do business in the mainland UAE – but only by following the correct licensing procedures. Whether through a branch license, dual license, distributor partnership, or mainland LLC, businesses now have more flexibility than ever.
However, compliance rules, taxes, accounting, and documentation can be complex.
This is where Udyamita Helpline becomes essential – helping businesses navigate regulations smoothly and enter the mainland market with confidence.
FAQs
Can a Free Zone company sell directly to mainland customers?
No, not without a mainland branch license, dual license, or authorised distributor.
Do Free Zone companies need to pay corporate tax when operating in the mainland?
Yes. Mainland-source income may be subject to 9% corporate tax, depending on activity.
Can a Free Zone company open an office in the mainland?
Yes, but only after obtaining a branch license or permitted onshore operations approval.
Do Free Zone companies need a local sponsor to operate in the mainland?
Only if the activity requires it. Many sectors allow 100% foreign ownership.
