Key takeaways
- A mainland company is licensed by the Department of Economy and Tourism (DET) in Dubai, or the equivalent Department of Economic Development in another emirate, and can trade anywhere inside and outside the UAE, including bidding for government contracts; a free zone company's default trading rights sit inside its own zone and abroad.
- Most mainland activities now allow 100% foreign ownership under Federal Decree-Law No. 32 of 2021, so a UAE national shareholder holding 51% is no longer required for most licences. A short list of strategic activities, such as defence, still needs Cabinet-level approval.
- Every free zone company already has 100% foreign ownership by design, so that reform mainly narrowed the gap rather than giving free zones a new advantage.
- Both structures pay UAE corporate tax, but not on the same basis: a mainland company pays 0% on taxable income up to AED 375,000 and 9% above it, while a Qualifying Free Zone Person pays 0% only on its qualifying income and a flat 9% on everything else, with no AED 375,000 exemption on that slice.
- Professional and civil licences on the mainland can still require a Local Service Agent, a UAE national paid a fixed fee with no ownership or profit share, purely to handle government liaison, even where full foreign ownership otherwise applies.
- The better fit depends on your buyers: selling directly to UAE mainland customers or chasing government work suits the mainland; trading internationally, holding IP or assets, or minimising overhead while scaling abroad suits a free zone.
What is the real difference between a mainland company and a free zone company?
A mainland company is registered with the licensing authority of the emirate itself (DET in Dubai) and can operate anywhere in the UAE and internationally, under one of the legal forms in the Commercial Companies Law: LLC, sole establishment, civil company, branch and others. A free zone company is registered with a specific free zone's own authority (SHAMS, IFZA, Meydan, DMCC, DIFC and so on) under that zone's own rules rather than the emirate's commercial companies framework.
The practical split shows up in who you can sell to without extra licensing, which government bodies you deal with day to day, and which legal forms are on the table. A mainland LLC can have several shareholders with normal company law protections; a free zone company's structure is set by that zone's own regulations, which vary from one free zone to the next.
| Feature | Mainland company | Free zone company |
|---|---|---|
| Licensing authority | DET (Dubai) or the emirate's DED | The free zone's own authority |
| Foreign ownership | Up to 100% for most activities; strategic activities excluded | 100% for all activities, by design |
| Selling to UAE mainland clients | Direct, no extra licence needed | Usually via distributor, dual licence or mainland branch |
| Selling internationally | Yes | Yes |
| Government contracts | Eligible | Not eligible directly |
| Local Service Agent | Sometimes, for professional/civil licences | Not required |
| Corporate tax on qualifying income | 0% up to AED 375,000, then 9% | 0% if a Qualifying Free Zone Person; 9% on non-qualifying income with no threshold |
Accurate as of 28 September 2026.
Who should register a mainland company instead of a free zone company?
Register on the mainland if you need to invoice UAE-based customers directly, open a shop, clinic or office on a public street or in a mall, bid for a government tender, or want the widest choice of office location and activity combinations. Most business activities on the mainland now permit 100% foreign ownership under Federal Decree-Law No. 32 of 2021, which replaced the previous requirement for a UAE national to hold 51% of most companies.
A short list of activities with what the law calls strategic impact, covering sectors such as defence, currency printing, and some security-related work, sits outside the general reform and still needs Cabinet-level approval. Separately, some professional and civil licences (typical of consultancies, IT services and similar single-owner professional firms) still work through a Local Service Agent: a UAE national paid a fixed annual fee, holding no shares and taking no profit, who exists only to liaise with government departments on the licence holder's behalf. Whether your specific activity needs one depends on how DET or the relevant DED classifies it, so check the activity code before assuming either way.
Who should register a free zone company instead of a mainland company?
Register in a free zone if you trade internationally rather than selling to UAE mainland customers, hold intellectual property or investment assets, run e-commerce shipped from outside the UAE, or want a licence and visas quickly at a lower up-front cost with a smaller office footprint. Free zone companies have carried 100% foreign ownership since before the mainland reform, so what varies by zone now is the visa quota per office type, whether audited financials are mandatory every year (DMCC requires them regardless of size; others don't), and how the zone treats companies that later want mainland trading rights.
Free zones also differ from each other in ways that matter more than the mainland/free zone label alone: DIFC and ADGM run their own common-law court systems and suit regulated financial activity; sector-specific zones (media, healthcare, logistics) bundle in the approvals those sectors need; general-purpose zones such as SHAMS, IFZA and Meydan suit consulting, trading and services businesses without a sector-specific requirement.
Can a free zone company sell to mainland clients, or take on mainland office space?
Not directly under most free zone licences. A free zone company's standard licence lets it trade within its own free zone and internationally; selling into the UAE mainland market usually means a mainland distributor or commercial agent, a dual licence where the free zone and DET have an arrangement for it, or a mainland branch alongside the free zone entity. The exact route depends on the free zone and the activity, so confirm it before promising delivery terms to a mainland buyer.
A mainland company faces no such restriction and can take office space anywhere in the emirate it's licensed in, though it still needs an Ejari-registered tenancy in most cases to hold its licence and visas.
What does it cost to set up and run each type of company?
There's no single verified cost that applies across mainland and free zone options, because the total depends on the specific activity, the authority or free zone chosen, how many visas you need, and whether you take a flexi desk, a shared office or dedicated space; published "package" prices from formation agents are a starting point, not a quote for your situation. What's consistent is the mix of cost items: initial approval and trade name reservation, the licence fee, Memorandum of Association drafting and notarisation for mainland LLCs, an establishment or immigration card, per-visa costs, and either Ejari registration or a free zone tenancy contract.
Ongoing costs also depend on structure rather than the mainland/free zone label alone: audit requirements vary by free zone and by legal form, licence renewal is annual either way, and neither route removes VAT or corporate tax registration once your company meets the relevant thresholds. If you'd rather not track licence renewal, visa expiry, tax and VAT dates by hand once you've decided, the free UAE compliance calendar turns a few questions about your company into a personalised list of these dates, as a PDF and calendar file.
Does UAE corporate tax treat mainland and free zone companies differently?
Yes, in how the 0% band is calculated, even though the headline 9% rate is the same. A mainland company, and a free zone company that isn't a Qualifying Free Zone Person, pays 0% corporate tax on taxable income up to AED 375,000 and 9% above that. A Qualifying Free Zone Person instead pays 0% only on income the corporate tax law and its free zone define as "qualifying income" (broadly, income from qualifying activities carried out with adequate substance in the zone, subject to a de minimis limit on non-qualifying revenue), and a flat 9% on any non-qualifying income with no AED 375,000 exemption on that portion.
Qualifying for that treatment takes ongoing work: maintaining adequate substance in the zone, staying under the de minimis threshold, and keeping transfer pricing documentation for related-party transactions current. A free zone company that fails those conditions in a given year is taxed as a standard taxable person for that year, at 9% above AED 375,000, the same as a mainland company.
Can I move from a free zone to the mainland later, or run both at once?
Yes to both, but neither is a formality. Moving involves converting the existing free zone entity where the free zone and DET allow it, or setting up a new mainland entity and winding down the free zone one, each with its own fees and processing time. Running both at once, keeping the free zone entity for international or IP-holding purposes and adding a mainland branch or company for local trading, is common and avoids relicensing the whole business, but it means two sets of renewal dates, two sets of accounts, and in some cases two VAT or corporate tax registrations.
AED 375,000: the taxable income threshold below which UAE corporate tax is 0% for a mainland company or a free zone company that isn't a Qualifying Free Zone Person; a Qualifying Free Zone Person's non-qualifying income doesn't get this threshold and is taxed at 9% from the first dirham. Source: Federal Decree-Law No. 47 of 2022, checked 28 September 2026.
What most guides don't tell you
- Whether a Local Service Agent is required comes down to how the specific activity code is classified, not to the general ownership reform; don't assume "100% ownership now applies" covers your exact activity without checking.
- A free zone licence that says you can "trade in the UAE" usually still means a mainland distributor or a dual licence, not invoicing a mainland client directly from the free zone entity; confirm this before promising delivery terms to a mainland buyer.
- Mandatory annual audit requirements differ free zone by free zone rather than following a simple mainland versus free zone split, so cost comparisons online often assume one particular free zone's rules.
- Every later amendment, whether adding a mainland branch, changing legal form or transferring shares, carries its own fee and processing time, so "we can switch later" isn't free optionality.
Which deadlines apply to your company?
Whichever structure you choose, mainland and free zone companies both face licence renewal, visa renewal, and corporate tax and VAT deadlines, just on slightly different clocks depending on the licensing authority. The free UAE compliance calendar lists these dates for your company once you answer a few questions, as a PDF and calendar file.
Frequently asked questions
How do I set up a company in the UAE as a foreigner? Choose a licensing authority (a specific emirate's mainland authority or a free zone), pick a legal form and business activity, reserve a trade name, submit the application with your passport and the authority's required documents, and pay the licence fee. A UAE residence visa isn't needed to register the company, only to later live and work under it, and a UAE national partner generally isn't required for either route.
What is the cheapest free zone to set up a company in the UAE in 2026? There's no single verified "cheapest" free zone, because packages change often and the total depends on your activity, visa count and office type more than the zone's base price. Compare like-for-like quotes (same activity, same visa count, same office type) from two or three free zones before deciding on price.
How much does it cost to open a company in Dubai, all in, including visas? This depends on mainland versus free zone, the activity, the number of visas, and the office type, so there's no verified all-in figure that applies generally. Get a written quote itemising the licence fee, establishment card, per-visa costs and office or Ejari cost for your specific setup.
Can I own 100% of a mainland company in the UAE now? Yes, for most business activities, following Federal Decree-Law No. 32 of 2021. A short list of strategic activities sits outside this and needs Cabinet-level approval, and some professional licences still work through a Local Service Agent who holds no shares and takes no profit.
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
- Full foreign ownership of commercial companies, U.AE
- Federal Decree-Law No. 32 of 2021 on Commercial Companies, UAE Legislation
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, Ministry of Finance
- Federal Tax Authority issues Corporate Tax guide on Free Zone Persons, tax.gov.ae
Last checked: 28 September 2026. General information, not tax or legal advice for your specific situation.