If you're setting up a company in Dubai, you've probably asked yourself this exact question: can a free zone business trade freely across the emirate, or is it locked inside its zone? For years, the answer was a firm "not without extra steps." But recent regulatory changes have reshaped this landscape significantly, and understanding the current rules is essential before you choose your license type. This guide breaks down what's actually allowed, what's changed recently, and how to navigate the process correctly.
The Traditional Rule: Free Zones Are Geographically Limited
Historically, free zone companies in the UAE have operated under a straightforward restriction. Businesses established within a free zone are typically restricted from conducting operations outside their designated zone, specifically on the mainland, unless they take additional formal steps.
This restriction exists because free zones operate under their own regulatory frameworks, separate from the mainland's Department of Economic Development (DED) or Department of Economy and Tourism (DET) rules. Each free zone authority - DMCC, IFZA, RAKEZ, DAFZA, and dozens of others - governs licensing, ownership, and permitted activities independently.
There's also a practical distinction depending on what your business sells. For companies trading in physical goods, the restriction is real and enforced - a free zone trading company generally cannot open retail shops or warehouses outside its zone, though it can supply mainland distributors. For service-based businesses, though, the line is much blurrier, since a service is often considered "supplied" within the zone even when staff occasionally meet mainland clients in person.
What's Changed: Dubai's New Resolution Opens the Door
This is where things get genuinely exciting for entrepreneurs weighing mainland versus free zone setups in 2026. The Dubai Executive Council issued Resolution No. 11 of 2025, creating a regulatory framework that allows free zone companies to conduct business activities outside their specific free zone - including on the mainland - within the Emirate of Dubai.
Under this framework, free zone companies now have two practical routes into the mainland market:
- A branch license - valid for one year and renewable, allowing a free zone company to establish a genuine presence within the emirate or continue operating from the free zone while serving mainland clients.
- A temporary permit - allowing specific activities for up to six months, useful for short-term projects or one-off contracts.
This resolution applies specifically to non-financial entities and is part of a much broader trend. It follows similar liberalization in Abu Dhabi, where regulations issued in February 2025 already permit firms registered in other emirates, including their free zones, to open branches in Abu Dhabi without needing physical premises in the first year - reflecting a wider push across the UAE toward removing barriers to interstate business activity.
One detail worth flagging for anyone planning ahead: within six months of the resolution, the Dubai Department of Economy and Tourism is expected to publish the specific list of economic activities that free zone entities will be permitted to carry out on the mainland - so the exact scope is still being finalized activity by activity.
Dual Licensing: The Established Alternative
Even before this new resolution, several dual licensing mechanisms already existed for free zone companies wanting mainland access. A handful of Dubai free zones - including DIFC, DAFZA, DMCC, and Dubai Design District (D3) - signed memorandums of understanding with the DET between 2017 and 2020, creating pathways for qualifying free zone entities to obtain dual licenses that let them operate in mainland Dubai.
Outside Dubai, Ras Al Khaimah offers its own well-established route. The RAKEZ Dual Licence combines commercial and professional activities under a single license, allowing entrepreneurs to operate seamlessly across both mainland UAE and the free zone, and it bundles a UAE free zone license together with a branch business license.
In practice, a dual license typically means:
- Securing initial approval from your free zone authority
- Applying to the relevant mainland Department of Economic Development (or DET in Dubai) to fulfill mainland licensing requirements
- Meeting any additional obligations - capital, premises, or local activity registration - required by the mainland authority
What About Tax Implications?
Here's a detail many entrepreneurs overlook when chasing mainland flexibility: doing business on the mainland can affect your free zone company's tax status. Many free zone companies enjoy a 0% corporate tax rate on qualifying income, but that benefit depends on meeting strict conditions - including a de minimis rule requiring at least 95% of revenue to remain "qualifying" income. Even modest, seemingly harmless mainland deals can quietly push a free zone company past that threshold and cancel its preferential 0% rate.
This is precisely why mainland expansion shouldn't be treated as a simple paperwork exercise. It has real consequences for your tax position, and getting the structure wrong can be costly.
So, Can You Do It? The Short Answer
Yes - but not automatically, and not without the right structure. A standard free zone license does not, by default, allow you to trade freely across mainland Dubai. You need one of the following:
- A branch license or temporary permit under Dubai's new Resolution No. 11 of 2025
- A dual license arrangement (available through specific free zones with MoUs, or through zones like RAKEZ)
- A mainland branch or subsidiary set up separately through the DET/DED
Simply holding a free zone trade license and assuming you can open a shop, sign mainland government contracts, or operate a mainland office is a mistake that trips up many new entrepreneurs - and one best avoided by getting professional guidance before you commit to a jurisdiction.
Why the Right Setup Strategy Matters From Day One
Given how fast this regulatory landscape is evolving, this is exactly the kind of decision where professional guidance pays for itself. Anyone researching How to Setup a Company in Dubai quickly discovers that the "mainland vs. free zone" decision isn't just about cost or paperwork - it's about long-term flexibility, tax exposure, and how far you want to scale.
This is where Takween Advisory adds real value. Rather than pushing entrepreneurs toward a one-size-fits-all license, Takween Advisory assesses your business model, target market, and growth plans before recommending mainland, free zone, or a dual-licensing structure - including guidance on Dubai's newly opened branch and permit routes. For founders who want to avoid the tax and compliance pitfalls that come with mixing mainland and free zone activity carelessly, working with an experienced advisory partner from the outset is one of the smartest early decisions you can make.
Frequently Asked Questions
1. Can a free zone company trade directly with mainland customers?
Not automatically. You'll typically need a mainland branch, a dual license, or - following Dubai's 2025 resolution - a branch license or temporary permit to legally conduct mainland activities.
2. What's the difference between a branch license and a temporary permit under the new Dubai resolution?
A branch license is valid for one year and renewable, suited to an ongoing mainland presence. A temporary permit covers specific activities for up to six months, better suited to short-term projects.
3. Does operating on the mainland affect my free zone company's 0% tax rate?
It can. Free zone companies must keep at least 95% of their revenue as "qualifying" income to retain the 0% corporate tax rate - mainland activity that pushes non-qualifying income above that threshold can jeopardize the benefit.
4. Is a dual license available in all UAE free zones?
No. Dual licensing has traditionally been limited to specific free zones with agreements in place, such as DIFC, DAFZA, DMCC, and D3 in Dubai, or through structures like the RAKEZ Dual Licence in Ras Al Khaimah. Availability varies by free zone and emirate.
5. Can free zone service companies work with mainland clients without a special license?
Often yes, informally - a service is generally treated as supplied within the free zone even if staff occasionally visit mainland clients. However, this varies by activity and shouldn't be assumed without checking your specific free zone's rules.
6. Do I need government approval to set up a mainland branch from a free zone company?
Yes. You'll need initial approval from your free zone authority, followed by an application to the relevant mainland Department of Economic Development or the DET, along with any required documentation and fees.
7. Is it better to just start with a mainland license instead of a free zone one?
It depends on your business model. Mainland companies offer unrestricted access to the entire UAE market, including government contracts and retail storefronts, without geographic limits - but free zones offer benefits like full foreign ownership, simplified incorporation, and potential tax advantages that may outweigh the mainland's broader access, depending on your industry.