Free zone or mainland — the decision that fixes everything else.
It determines who you may sell to, what office you need, how many visas you get and whether 0 % corporate tax is reachable at all.
A free zone is worth it if you work mostly internationally: cheaper to set up, no dedicated office needed, 0 % corporate tax on qualifying income where substance is met. Mainland is worth it when selling to customers inside the UAE: more expensive, Ejari tenancy contract mandatory, 9 % on taxable profit above AED 375,000. As of 09/2026.
A free zone is a separate economic zone with its own registrar and activity catalogue; mainland refers to a licence from the emirate’s economic department, allowing unrestricted access to the local UAE market.
Updated: 01/09/2026
Twelve criteria side by side
| Criterion | Free zone | Mainland |
|---|---|---|
| 1 — Ownership | 100 % foreign, always | 100 % in nearly all activities since 2020 |
| 2 — Selling to UAE customers | only via distributor, agent or mainland branch | directly, without an intermediate step |
| 3 — Public tenders | generally excluded | permitted |
| 4 — Office | flexi-desk or shared desk usually sufficient | Ejari tenancy contract mandatory, space determines visa count |
| 5 — Setup cost | lower, licence and registered address | higher, plus Ejari tenancy contract and establishment card |
| 6 — Duration | typically a few working days | one to three weeks |
| 7 — Visa quota | package-based, usually 1–6 without extra space | depends on office space, open-ended |
| 8 — Corporate tax | 0 % on qualifying income with substance met, otherwise 9 % | 9 % above AED 375,000 taxable profit, 0 % below |
| 9 — VAT | 5 %, registration above AED 375,000 taxable turnover — designated zones have special rules for goods | 5 %, same threshold |
| 10 — Accounting & audit | annual accounts, audit depending on zone | annual accounts, audit depending on legal form |
| 11 — Bankability | good with established zones, harder with cheap zones without substance | usually good, because local nexus is visible |
| 12 — Moving or switching | zone change possible, licence reissued | additional licence or branch is usual, instead of dissolving |
As of 09/2026. The first estimate calculates the cost range for both options; the quote states the binding price.
The decision logic in plain language
Question one: who pays your invoices? If your clients sit in Europe, the US or Asia and you use the UAE as a base, the free zone is the cheaper and faster route. If your clients sit in Dubai, Abu Dhabi or Sharjah — retail customers, shops, authorities, construction — you need mainland.
Question two: how many people are moving with you? Mainland visas depend on office space, free zone visas on the package booked. From around six people the cost advantage often tips to mainland, because the office is needed anyway.
Question three: are you aiming for 0 % corporate tax? Then a free zone is a precondition, not a guarantee. Qualifying income only arises from certain activities and customer groups — revenue from private customers in the UAE mainland generally does not count.
And question four: what happens in three years? If you start internationally today and want to sell locally later, a free zone plus a later mainland branch usually beats an early switch of the entire structure.
0 % or 9 % — what it actually depends on
The zero rate for Qualifying Free Zone Persons is not automatic. It is tested annually and can fall away retroactively.
Adequate substance
Core income-generating activities must happen in the free zone: qualified staff, premises, operating expenditure, decisions taken locally. Outsourcing within the zone is possible if supervision remains demonstrable.
Qualifying income
Income from transactions with other free zone persons and from specified qualifying activities. Revenue from UAE mainland customers and income from property outside the zone generally does not count.
De-minimis threshold
Non-qualifying revenue must not exceed 5 % of total revenue or AED 5m — whichever is lower. Breach it and 9 % applies to the entire taxable profit, for five years.
Formal obligations
Audited financial statements, transfer pricing documentation and a timely corporate tax return. Without them the status falls even with perfect substance.
Which choice typically fits when
Free zone fits
Consulting, IT and software, online services, international trading without local warehousing, content and media, holding functions.
Mainland fits
Hospitality, retail, construction and contracting, real estate brokerage, facility management, services to private customers in the UAE.
Both together fit
International core business with a growing local share: free zone as the main company, mainland branch for market access.
Neither fits
Pure shareholding structures without operations — a holding in RAK ICC, DIFC or ADGM is the cleaner vehicle for that.
First estimate: what will your structure cost?
A cost range in 60 seconds, based on our current price list. Not an offer — a starting point for the conversation.
- 1Choose an activity — from 55 options or describe your own
- 2Free zone, mainland or "not sure yet"
- 3Visas yes or no, and how many
- 4Estimate with breakdown — instantly and by email
What will your company do?
Choose the main activity. Yours missing? Choose "Other".
Frequently asked questions
May a free zone company sell to customers in Dubai?
Not directly. Business in the UAE mainland requires a distributor, an agent or your own mainland branch. Selling directly anyway risks fines — and the revenue would not count as qualifying income in any case.
Is mainland more expensive than a free zone?
At setup yes, noticeably. In operation it depends on the office: if you rent premises anyway, the difference evens out quickly. If a flexi-desk is enough, the free zone stays cheaper. You can run both options against each other in the first estimate.
Do I really get 0 % tax in a free zone?
0 % applies to qualifying income, not to everything. It requires adequate substance in the zone, compliance with the de-minimis threshold of 5 % or AED 5m, and audited accounts. Otherwise the regular 9 % applies.
What exactly is the de-minimis threshold?
Non-qualifying revenue must not exceed 5 % of total revenue or AED 5m — the lower figure counts. Exceeding it costs the QFZP status for the current and the following four tax years.
Which free zone is the best?
The one whose activity catalogue covers your work, whose visa quota is sufficient and which your bank accepts. IFZA and Meydan are the standard for services, DMCC where reputation matters, RAKEZ for industry, DIFC and ADGM for finance and foundations.
Do I need an Emirati sponsor on the mainland?
In nearly all activities, no. Since the 2020 companies law reform, 100 % foreign ownership is the rule; only a few strategic sectors still require local participation.
Can I switch later?
Yes. The usual route is to keep the free zone company and add a mainland licence or branch. A full switch means a new licence, a new establishment card and transferring all visas.
How does the choice affect banking?
More than most expect. Banks look at substance, activity and local nexus. A cheap zone without an office and without local clients leads to rejections more often than an established zone or a mainland licence.
Exit Palm does not provide legal or tax advice. For legal and tax questions we work with licensed partners in Germany and the UAE. All information without warranty, as of the date shown.
Free zone or mainland — what carries your business in three years?
We run both options against your activity, visa needs and client base. 15 minutes, free of charge.