Key takeaways
- A UAE free zone company cannot trade on the mainland under its free zone licence alone: the UAE government portal says it needs approval from its free zone authority and a licence from the emirate's economic department first.
- In Dubai, Executive Council Resolution No. 11 of 2025 lets free zone companies operate on the mainland through an onshore branch with free zone headquarters (AED 10,000 a year) or a temporary permit (AED 5,000 for up to six months), as of October 2026.
- The Dubai Free Zone Mainland Operating Permit, announced on 8 October 2025, is open to free zone companies holding a Dubai Unified Licence and covers non-regulated activities such as technology, consultancy, design, professional services and trading.
- A UAE free zone company keeps 0% corporate tax on qualifying income only if its non-qualifying revenue stays at or below the lower of 5% of total revenue or AED 5,000,000 in the tax period.
- The Dubai resolution covers Dubai free zones and the Dubai mainland only; companies licensed or selling elsewhere follow the licensing rules of the emirate concerned.
Can a free zone company do business with mainland clients in the UAE?
Not on its free zone licence alone. The UAE government portal states that a company registered in a free zone is not permitted to carry out business on the mainland, and that a company wanting to do so must obtain initial approval from its free zone authority and then meet the licensing requirements of the economic department in the relevant emirate (u.ae, checked October 2026).
Dubai has made an exception since March 2025. Executive Council Resolution No. 11 of 2025, published on 3 March 2025, lets Dubai free zone companies operate on the mainland through defined licence types, with the Department of Economy and Tourism (DET) approving. It excludes financial entities licensed in the Dubai International Financial Centre (DIFC).
The resolution also gave companies already trading on the mainland a one-year transition, extendable by one year with the DET Director General's approval, according to law-firm summaries. That window ended in March 2026 unless DET granted an extension, so regularise now.
What are the ways a Dubai free zone company can operate on the mainland?
A Dubai free zone company has three routes under Resolution No. 11 of 2025: a standard onshore branch, an onshore branch with headquarters kept in the free zone (a dual licence), or a temporary activity permit.
| Route | What it is | Fee | Validity | Source |
|---|---|---|---|---|
| Standard branch | Branch of the free zone company licensed onshore under existing branch rules | Not confirmed | Not confirmed | CMS summary of Resolution No. 11 of 2025 |
| Branch with free zone headquarters | Mainland branch while the company stays headquartered in the free zone | AED 10,000 (issue and renewal) | One year | Reed Smith, CMS, KPMG summaries |
| Temporary activity permit | Short-term permission to practise some activities onshore | AED 5,000 (issue and renewal) | Up to six months | Reed Smith, CMS, KPMG summaries |
Fees as of October 2026. All routes need DET approval and prior approval from the free zone licensing authority; regulated activities also need the relevant regulator's approval. Separate financial records for mainland operations are mandatory.
How do I get the Dubai free zone mainland operating permit?
The permit is applied for online through the Invest in Dubai platform, costs AED 5,000 for six months and renews at the same price. It was launched on 8 October 2025 by the Dubai Business Registration and Licensing Corporation and the Dubai Free Zones Council, and only free zone companies holding a Dubai Unified Licence (DUL) can apply.
- Confirm you hold a Dubai Unified Licence and that your activity is non-regulated (the first phase covers technology, consultancy, design, professional services and trading).
- Get the approval your free zone licensing authority requires; the resolution makes this a precondition.
- Submit the application on the Invest in Dubai platform (investindubai.gov.ae) and pay the AED 5,000 fee.
- Set up separate accounting records for mainland revenue and costs from day one.
- Diarise the six-month renewal; the permit lapses after six months unless renewed.
The Dubai announcement says free zone companies can use their existing staff for mainland work without hiring new employees.
How does mainland business affect a free zone company's corporate tax?
Selling on the mainland can move income out of the 0% bracket. A Qualifying Free Zone Person (QFZP) pays 0% only on qualifying income, and Cabinet Decision No. 100 of 2023 says that income from non-free zone persons qualifies only if it comes from a qualifying activity that isn't an excluded activity, and only if it isn't attributable to a domestic permanent establishment.
The same decision defines a domestic permanent establishment as a place of business or other presence of the free zone company outside the free zone but inside the UAE, so a mainland branch is the obvious example. The Dubai announcement says mainland-related revenues attract 9% corporate tax.
| Rule | Figure or test | Source |
|---|---|---|
| Qualifying income from mainland customers | Only from a qualifying activity that is not an excluded activity | Cabinet Decision No. 100 of 2023, Article 3 |
| De minimis limit on non-qualifying revenue | The lower of 5% of total revenue or AED 5,000,000 in the tax period | Ministerial Decision No. 265 of 2023, Article 3 |
| Excluded activities (examples) | Transactions with natural persons (with exceptions), banking, insurance, ownership of immovable property | Ministerial Decision No. 265 of 2023, Article 2 |
| Opting out of QFZP status | Status lost for the tax period of the election and the four that follow | FTA Corporate Tax Guide on Free Zone Persons (CTGFZP1) |
| Standard rate above threshold | 9% on taxable income above AED 375,000 | UAE government portal, checked October 2026 |
Ministerial Decision No. 229 of 2025 revised the activity lists again, so check the current list.
5% or AED 5,000,000: the lower of the two is the most non-qualifying revenue a QFZP can earn in a tax period without the de minimis test failing. Source: Ministerial Decision No. 265 of 2023, Article 3, checked 04 October 2026.
Say a free zone company bills AED 20m a year, and AED 2m of it is non-qualifying mainland revenue. Five per cent of AED 20m is AED 1m, lower than AED 5m, so the limit is AED 1m and the AED 2m breaches it. This is a hypothetical, not a tax opinion.
If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
Does VAT change when a free zone company sells to the mainland?
Yes, whenever the free zone is not a designated zone for VAT, because the FTA treats such a zone like any other part of the UAE. A company in a non-designated free zone follows ordinary VAT rules: the standard rate is 5%, and mandatory registration applies once taxable supplies and imports pass AED 375,000 a year (UAE government portal, checked October 2026).
If the free zone is a designated zone, goods moved into the mainland are treated as imported into the UAE, and the importer pays import VAT (FTA Designated Zones VAT Guide VATGDZ1, section 3.5.1). Services are taxed under the general place-of-supply rules whichever side of the boundary the supplier sits on. Whether your zone is designated is set by Cabinet decision, so confirm it before quoting prices.
What if my free zone is outside Dubai?
The Dubai resolution does not help you. It applies to Dubai free zones, and a free zone company wanting to work outside Dubai must obtain the licences the other emirate requires.
Abu Dhabi launched its own dual licence initiative in November 2018 for companies headquartered in Abu Dhabi and based in an Abu Dhabi free zone, with a free zone non-objection certificate required (Gulf News report; eligibility may have changed since). For Sharjah free zones such as SHAMS, we could not verify a published equivalent from an official source, so ask your free zone authority and the Sharjah economic department for the current route in writing.
What most guides don't tell you
- The permit is a licence, not a tax solution. The AED 5,000 fee is a licensing cost; one large mainland contract can still breach the de minimis limit.
- Consultancy is not on the qualifying activities list. A free zone firm selling services mainly to mainland clients was probably never going to be a QFZP, so the permit mostly changes legality, not the tax rate. Check against your own facts.
- Separate records are a legal condition, not a tidy-up. The resolution requires distinct financial records for mainland operations. Splitting a single ledger at year end invites errors, so tag mainland invoices from the first sale.
- The announcement and the law say different things on tax. The Dubai press release gives a flat 9% on mainland revenue; the FTA rules turn on qualifying income, domestic permanent establishment and the de minimis test. Whether a temporary permit creates a domestic permanent establishment is not addressed in the FTA guide we reviewed, so get a written view before assuming either way.
Which deadlines apply to your company?
A mainland permit adds a six-month renewal on top of VAT, corporate tax and licence dates, and missing any of them costs money. The free UAE compliance calendar maps the dates that apply to your company, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
Can I trade across the GCC with a UAE free zone licence?
The sources we checked cover the UAE only. Each GCC country sets its own licensing, customs and tax rules, so confirm with the authority in the country you plan to sell into.
Can a free zone company open a branch on the mainland?
Yes, in Dubai. Resolution No. 11 of 2025 allows an onshore branch of a free zone company, including one headquartered in the free zone at AED 10,000 a year, subject to DET and free zone approval. Outside Dubai, the licensing rules of the relevant emirate apply.
What is a dual licence in Dubai?
A dual licence lets a free zone company run a mainland branch while keeping its headquarters in the free zone. Under Resolution No. 11 of 2025 the branch licence costs AED 10,000 and is valid for one year.
How do I move my company from a free zone to the mainland?
Moving is a different process from operating on the mainland: it normally means obtaining a mainland licence from the relevant economic department and closing or cancelling the free zone licence. We could not verify one official procedure that fits every free zone, so ask both authorities for their steps before you cancel anything.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- UAE government portal: Running a business in a free zone
- UAE government portal: Value added tax
- UAE government portal: Corporate tax
- Dubai Media Office: Dubai launches Free Zone Mainland Operating Permit (8 October 2025)
- Ministry of Finance: Cabinet Decision No. 100 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Person
- Ministry of Finance: Ministerial Decision No. 265 of 2023 on Qualifying Activities and Excluded Activities
- Ministry of Finance: Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities
- FTA: Designated Zones VAT Guide VATGDZ1 (July 2018)
- FTA: Corporate Tax Guide on Free Zone Persons, CTGFZP1 (26 May 2024), as summarised by DLA Piper and Deloitte
- Dubai Executive Council Resolution No. 11 of 2025, as summarised by Reed Smith, KPMG and CMS
- Gulf News: Abu Dhabi DED launches first phase of Dual Licenses Initiative
Last checked: 04 October 2026
This is general information, not tax or legal advice for your specific situation.