Can a Free Zone Company Conduct Business in the Dubai Mainland?

Executive Council Resolution No. 11 of 2025 established a clearer legal framework for Free Zone establishments seeking to conduct activities outside their zones and within Dubai.

The Resolution applies to Free Zone establishments operating outside their designated zones, with an exception for financial institutions licensed in the Dubai International Financial Centre, which remain subject to their specialised framework.

Under the Resolution, a Dubai Free Zone establishment may operate outside its Free Zone after obtaining the necessary licence or permit from DET. Dubai Legislation Portal

The available permissions can include:

Branch licences issued under the framework are generally valid for one year and may be renewed, subject to the applicable conditions.

The Resolution does not mean every Free Zone company can automatically perform every activity in mainland Dubai. DET and the relevant Free Zone authority determine activity eligibility, licensing conditions and coordination requirements.

Dubai introduced the Free Zone Mainland Operating Permit as an implementation route supporting eligible Free Zone businesses that want to operate in mainland Dubai.

According to the official Dubai announcement, the initial phase covers certain non-regulated activities, including areas such as:

Eligibility depends on the approved activity and participating licensing framework. A company should not rely only on a broad activity category. Its exact licensed activity must be checked.

The current fee and conditions should be reconfirmed before applying. Government of Dubai Media Office

Does Every Dubai Free Zone Company Qualify?

Eligibility can depend on:

A company established in another emirate's Free Zone should not assume that Dubai's local permit framework applies to it in the same manner.

A Sharjah, Ras Al Khaimah, Ajman or Abu Dhabi Free Zone company intending to operate physically in Dubai must examine the requirements imposed by Dubai's competent authorities and its own Free Zone.

What Does "Doing Business in the Mainland" Mean?

By contrast, receiving an occasional enquiry from a mainland customer may not by itself establish a permanent mainland operation. The complete transaction and delivery model must be examined.

Can a Free Zone Company Invoice Mainland Customers?

Many Free Zone businesses enter contracts with UAE mainland customers. However, the ability to issue an invoice does not automatically prove that the underlying activity is lawfully conducted.

The company should verify:

An invoice is an accounting document, not a substitute for an operating licence.

A Free Zone consultancy may be able to serve mainland businesses, especially where services are delivered remotely or from the Free Zone. The precise position depends on the activity and manner of delivery.

Eligible consultancy activities may fall within the Free Zone Mainland Operating Permit framework. The exact activity must be verified before relying on the permit.

Can a Free Zone Technology Company Operate on the Mainland?

Technology was included among the non-regulated sectors covered in the initial operating-permit rollout. Nevertheless, "technology" can include very different activities:

Regulated financial technology, telecommunications, payment services, virtual assets or cybersecurity activities may require external approval that a general mainland operating permit does not replace.

The company must verify the exact activity rather than relying on the wider technology label.

Yes, but the trading, customs and product-delivery model must be structured correctly.

Possible routes include:

Important questions include:

Who owns the goods at import?

Who acts as importer of record?

Where is inventory stored?

Where does customs clearance occur?

Who invoices the customer?

Who carries product liability?

Is the product regulated?

Is product registration required?

Is the company selling wholesale, retail or online?

A service permit should not be used to conduct product trading unless trading is expressly included.

A Free Zone and the UAE mainland can be treated differently for customs purposes.

The mainland buyer, distributor, importer or Free Zone company may undertake different responsibilities depending on the arrangement.

Not every Free Zone is a VAT Designated Zone, and even a Designated Zone is treated as outside the UAE only for limited VAT purposes relating to certain goods. It is not generally outside the UAE for Corporate Tax, company law, services or all VAT transactions.

Does a Free Zone Company Always Need a Mainland Distributor?

A mainland distributor remains one possible route, but it is no longer the only general solution for eligible Dubai Free Zone businesses.

A distributor may still be appropriate where:

The distribution agreement should address territory, exclusivity, pricing, sales targets, product registration, intellectual property, stock, termination and customer ownership.

A Free Zone company may potentially establish a branch in mainland Dubai through DET, subject to eligibility and approval.

The branch remains connected to the Free Zone parent rather than becoming a separately owned company.

Executive Council Resolution No. 11 of 2025 also provides for a licence involving a branch whose headquarters remains in the Free Zone.

This can allow the company to retain its core Free Zone establishment while obtaining a recognised mainland operating presence.

The permitted activities, premises, workforce and renewal conditions must be confirmed for the specific application.

This structure can be useful where:

A specific-activity permit may be more proportionate where the Free Zone company does not need a full mainland branch.

It can suit businesses that need to:

The company must continue to hold and renew its underlying Free Zone licence.

Certain Dubai Free Zones have historically offered dual-licensing or cooperation arrangements with mainland authorities.

These arrangements can allow eligible companies to conduct approved mainland activities without abandoning their Free Zone establishment.

The conditions vary according to:

The newer Dubai-wide framework should be considered alongside any existing Free Zone-specific dual-licensing programme.

When Is a Separate Mainland LLC Better?

A separate mainland LLC has its own:

This creates additional cost but may provide a cleaner long-term structure.

Which Route Is Better for Occasional Mainland Work?

A full branch or mainland LLC may be excessive for limited market testing.

However, repeatedly renewing short-duration permits while maintaining permanent mainland operations may not be the most efficient or compliant long-term model.

Which Route Is Better for Permanent Mainland Operations?

The company should plan for the structure it expects to need within the next several years rather than only its immediate first contract.

Which Activities May Require External Approval?

A DET licence or permit does not replace the approval of a competent sector regulator.

Additional approval may apply to:

A Free Zone company should identify every relevant regulator before advertising, contracting or beginning mainland work.

A Free Zone licence alone generally does not authorise the company to open and operate a mainland retail shop.

A retail business may need:

Depending on the model, a mainland branch or separate mainland LLC may be more suitable than a limited operating permit.

A Free Zone company should not lease and operate a mainland warehouse solely under its Free Zone licence unless the required mainland authorisation has been obtained.

Warehouse operations can involve:

A logistics provider can store goods on the company's behalf, but ownership, customs status and responsibility should be documented.

Under the Free Zone Mainland Operating Permit framework, eligible companies can use their existing employees for authorised mainland operations without necessarily recruiting a separate mainland workforce.

This does not provide unlimited permission for staff to work anywhere or conduct activities beyond the permit.

The company should maintain:

A mainland customer's site-access approval does not replace the employer's business-licensing obligations.

Mainland business can materially affect a Free Zone company's Corporate Tax position.

A Free Zone Person is not automatically entitled to the 0% Corporate Tax rate. It must satisfy all conditions required to be a Qualifying Free Zone Person.

Where a Qualifying Free Zone Person operates through a Domestic Permanent Establishment outside the Free Zone, the profits attributable to that Permanent Establishment can be subject to the 9% Corporate Tax rate.

The official mainland-permit announcement also emphasises that businesses must maintain separate financial records for their mainland operations. The Corporate Tax charge is determined on taxable income under the applicable legislation—not simply by applying 9% to gross sales receipts without calculating taxable profit.

Does Mainland Revenue Automatically Destroy Free Zone Tax Status?

A Free Zone company may have mainland-related income without automatically losing Qualifying Free Zone Person status, but the income must be analysed correctly.

The company should determine whether the income is:

The answer depends on:

A mainland permit should therefore be reviewed before—not after—the company prepares its Corporate Tax return.

Executive Council Resolution No. 11 of 2025 requires establishments operating outside their Free Zones to maintain separate financial records for those activities.

The company should be able to identify:

A separate bank account may not always be legally required, but separate cost centres, ledgers and supporting records can be essential.

The accounting system should be configured before mainland operations begin.

For a UAE-resident business, mandatory VAT registration generally applies where taxable supplies and imports exceed AED 375,000 over the preceding 12 months or are expected to exceed that amount in the next 30 days.

Voluntary registration may be available above AED 187,500, subject to the conditions. Federal Tax Authority VAT Registration

Certain Free Zones are treated as Designated Zones for limited VAT purposes.

This special treatment mainly concerns specific supplies of goods and requires compliance with the relevant conditions. It does not mean:

A company must distinguish between:

If the group establishes a separate mainland company, transactions between the Free Zone and mainland entities may be Related Party transactions.

Examples include:

The group should document:

Creating a mainland subsidiary does not allow the group to move profits arbitrarily into the Free Zone.

The bank may request:

If the company originally described itself as conducting only international business, a sudden increase in mainland activity may trigger additional due diligence.

The company should update the bank accurately rather than allowing its transaction profile to become inconsistent with the information supplied during onboarding.

Some tenders require a mainland licence, specific activity, operating history or local classification.

A Free Zone Mainland Operating Permit may improve access to certain commercial opportunities, but it should not be assumed to satisfy every tender.

The procuring entity may request:

Tender conditions should be reviewed before selecting the operating route.

Using a distributor does not necessarily mean the distributor must be appointed as a registered commercial agent.

The parties should distinguish between:

A registered commercial-agency relationship can have different legal consequences from an ordinary private distribution contract.

The agreement should address:

Specialist legal advice should be obtained before granting exclusive or registered rights.

A Free Zone company may sell online, but e-commerce does not eliminate licensing, tax or customs requirements.

The company should determine:

Selling through Amazon, Noon, social media or a proprietary website does not automatically convert a Free Zone licence into a mainland licence.

What If the Company Conducts Mainland Business Without Approval?

Operating outside the permitted scope can create:

The appropriate solution is not to disguise mainland transactions as international sales. The business should regularise its operating structure.

Identify customers, locations, contracts, goods, employees and premises.

Confirm whether the activity and Free Zone qualify for the operating-permit route.

Determine whether the operation creates non-qualifying income or a Domestic Permanent Establishment.

Secure any no-objection certificate, resolution or supporting document required.

Submit the permit or branch application with the necessary supporting records.

Review the structure before each licence, permit and tax-reporting deadline.

The total cost can include:

The official operating permit was launched at AED 5,000 for six months, renewable for the same period and fee. This amount should be reconfirmed and should not be treated as the entire operational cost.

The licence is issued under a particular Free Zone framework. Mainland operations may require DET approval.

Mainland operations can create taxable income at 9% and affect Qualifying Free Zone Person analysis.

Separate financial records are required for authorised mainland operations.

Not every Free Zone is a Designated Zone, and Designated Zone treatment is limited.

A Free Zone licence alone may not authorise a mainland shop, office or warehouse.

Employee deployment must correspond with the authorised activity and permit.

DET permission does not replace the relevant healthcare, education, financial, real-estate or other regulator.

Where legal advice, commercial-agency analysis or regulated-sector approval is required, KPM Global can coordinate with the appropriate specialist.

Yes, provided it uses a legally permitted route, such as a DET operating permit, mainland branch, approved dual licence, distributor or separate mainland company.

No. A Free Zone licence does not automatically authorise unrestricted operations outside the zone.

3. What changed in 2025?

Executive Council Resolution No. 11 of 2025 created a wider framework through which eligible Dubai Free Zone establishments can obtain DET licences or permits for operations outside their zones.

It is a DET operating permission for eligible Free Zone businesses to conduct approved activities in mainland Dubai while retaining their Free Zone establishment.

The permit was launched with a six-month validity and the possibility of renewal for further six-month periods.

The launch fee was AED 5,000 per six-month period. The current fee and any additional authority charges should be verified before applying.

No. Eligibility depends on the Free Zone, activity, DET rules, regulatory status and required approvals.

The initial framework covers eligible non-regulated activities in fields such as technology, consultancy, design, professional services and trading. The exact approved activity list must be checked.

Potentially, yes. The company must also confirm that its activity and method of performance comply with the licensing and permit requirements.

Yes, through an appropriate permit, branch, distributor, importer or mainland-company arrangement. Customs and product rules also apply.

Not in every case. It remains one option, particularly for businesses that do not qualify for direct mainland permission or want an established local sales channel.

Potentially, subject to DET and Free Zone authority approval and the eligibility of its activities.

A Free Zone licence alone is normally insufficient. Retail premises and activities require the appropriate mainland permissions and other approvals.

The company should obtain the required mainland operating authorisation before maintaining a mainland office for regular business operations.

The company may require a branch, permit or separate mainland structure, together with warehouse, Municipality, Civil Defence and customs approvals.

The operating-permit framework allows eligible companies to use existing staff for authorised mainland activities. The work must remain within the permit and employment rules.

Not automatically. Mainland operations can generate Taxable Income subject to the 9% Corporate Tax rate and may create a Domestic Permanent Establishment.

Not necessarily, but the activity and revenue must be assessed under the Free Zone Corporate Tax rules, including the Domestic Permanent Establishment and de minimis provisions.

Yes. The Dubai framework requires separate financial records for operations conducted outside the Free Zone.

It depends on the supply and registration status. A Free Zone location does not create a general VAT exemption.

No. Only specifically listed zones qualify, and the special VAT treatment is limited mainly to particular goods transactions.

No automatic authority is created outside the Emirate of Dubai. The company must obtain any permission required by the relevant emirate.

The initial rollout focuses on eligible non-regulated activities. Regulated activities require approval from the appropriate authority and may not qualify under the initial framework.

A permit may suit limited or controlled mainland operations. A mainland LLC may be better for substantial, permanent, regulated, retail or asset-intensive business.

Yes. KPM Global can review the licence, customers, mainland activities, tax position and operating requirements before recommending a permit, branch, distributor or mainland company.