Free Zone vs Mainland Dubai: Which Is Right for Your Business?
The single most important decision when setting up a business in Dubai is whether to register in a free zone or on the mainland. This choice affects your ownership structure, startup costs, ability to trade within the UAE, visa allocation, banking options, and even your company's perceived prestige. Both options have distinct advantages, and the right answer depends entirely on your business model, target market, and growth plans. This guide provides a comprehensive side-by-side comparison with real pricing data for 2026, so you can make an informed decision.
Complete Comparison Table
| Feature | Free Zone | Mainland |
|---|---|---|
| Foreign ownership | 100% (always) | 100% (most activities since 2020) |
| Startup cost | AED 5,750 - 25,000 | AED 25,000 - 50,000+ |
| Trade in UAE mainland | B2B: Yes. B2C: Via e-commerce or dual license | Unrestricted throughout UAE |
| Office requirement | Flexi-desk from AED 3,000/yr | Physical office (Ejari lease required) |
| Customs duty | 0% (within zone) | 5% standard rate |
| Corporate tax | 0% on qualifying income; 9% otherwise | 9% on profits above AED 375,000 |
| Setup timeline | 3-7 business days | 2-4 weeks |
| Licensing authority | Free zone authority (IFZA, DMCC, etc.) | Dubai Economy & Tourism (DET) |
| Visa allocation | 1-6 (flexi-desk); 10+ (office) | Based on office size (1 per 9 sqm) |
| Government contracts | Limited eligibility | Full eligibility |
| Profit repatriation | 100% | 100% |
When to Choose a Free Zone
A free zone company is the right choice for the majority of foreign entrepreneurs entering the UAE market. Specifically, consider a free zone if:
- Your clients are primarily international — If you service clients outside the UAE (or other free zone companies), a free zone gives you all the benefits at a lower cost. Consulting firms, tech companies, and remote-work businesses fall into this category.
- You want to minimise costs — With packages from AED 5,750, free zones are significantly cheaper than mainland registration. The flexi-desk option eliminates the need for a physical office lease.
- You sell online — Free zone companies can sell to UAE consumers through e-commerce platforms without restriction. This makes free zones ideal for e-commerce businesses.
- You want fast setup — Free zone registration takes 3 to 7 days. Mainland setup takes 2 to 4 weeks.
- You import/export goods — The customs duty exemption within free zones makes them attractive for trading companies. Goods entering and leaving the zone pay no duty.
When to Choose Mainland
A mainland company is the better option in more specific scenarios:
- You need to sell directly to UAE consumers from a physical location — Retail shops, restaurants, cafes, salons, and other consumer-facing businesses must have a mainland license to operate in Dubai's commercial districts.
- You want to bid on government contracts — UAE government tenders generally require a mainland license. If government clients are part of your business plan, mainland is essential.
- You need flexibility across all emirates — A mainland license allows you to trade throughout the UAE and GCC without any jurisdictional limitations. Free zone companies are technically limited to their zone's territory for physical operations.
- Your industry requires mainland licensing — Certain regulated activities (construction, healthcare, education, real estate brokerage) require specific mainland approvals that are not available in free zones.
Cost Comparison in Detail
The cost difference between free zone and mainland is substantial, particularly in the first year. Here is a realistic budget comparison for a typical consulting or services company:
| Cost Item | Free Zone (IFZA) | Mainland (DET) |
|---|---|---|
| License + registration | AED 12,000 | AED 15,000 |
| Office space | Included (flexi-desk) | AED 15,000 - 30,000 (Ejari lease) |
| Visa (1 person) | Included | AED 5,000 - 7,500 |
| MOA notarisation | Included | AED 2,000 - 4,000 |
| External approvals | N/A | AED 1,000 - 5,000 |
| Estimated total (Year 1) | AED 12,000 | AED 38,000 - 61,500 |
As the table shows, a free zone company at IFZA costs roughly one-third to one-half of a mainland setup. The gap narrows in subsequent years (since office leases and notarisation are ongoing), but free zones remain more affordable overall. For a comprehensive overview of setup costs across all options, see our Dubai business setup guide.
The Hybrid Approach: Dual License
For businesses that need the benefits of both worlds, several free zones now offer dual licensing. A dual license allows a free zone entity to also obtain a mainland DET license, enabling unrestricted trade throughout the UAE while maintaining the free zone's tax and ownership benefits. DMCC, DAFZA, and Dubai South are among the zones that facilitate this. The cost is higher—typically the free zone license fee plus an additional AED 10,000 to AED 15,000 for the mainland component—but it eliminates the need to set up two separate companies. If you are unsure about the right structure for your situation, our AI recommendation tool can guide you through the options. You can also explore trade license types and company formation structures for more details on legal entity selection. Freelancers and solo professionals should also consider whether a freelance visa might be the simplest starting point.
Frequently Asked Questions
Can I have both a free zone and mainland company?
Yes. Many entrepreneurs start with a free zone company and later add a mainland branch or separate entity. Some free zones (DMCC, DAFZA) also offer dual licenses that allow both free zone and mainland activity under a single entity. Operating both is common for businesses that need to serve both mainland UAE consumers and international markets.
Is a free zone company considered "offshore"?
No. A free zone company is an onshore UAE entity with a physical registered address, trade license, and the ability to sponsor visas. It is distinct from a UAE offshore company (available in JAFZA and RAK ICC), which cannot have a physical presence, employ staff in the UAE, or obtain visas. Free zone companies are fully operational businesses.
Which option is cheaper: free zone or mainland?
Free zone companies are significantly cheaper to set up. First-year costs start from AED 5,750 (SHAMS) to AED 25,000 (DMCC). Mainland companies typically cost AED 25,000 to AED 50,000+ due to office lease requirements, initial approval fees, and notary costs. However, mainland renewal costs can be lower than premium free zones in subsequent years.
Can a free zone company do business with mainland UAE companies?
Yes, with some nuances. Free zone companies can freely engage in B2B transactions with mainland companies (selling services, wholesale goods). They can also sell to UAE consumers via e-commerce. The main restriction is direct retail or service provision from a physical mainland location, which requires a mainland license or branch.
Do I need a local sponsor for a mainland company in 2026?
No, in most cases. Since the 2020 amendments, over 1,000 commercial activities are open to 100% foreign ownership on the mainland. Only specific strategic sectors (oil and gas, defence, certain banking activities) still require an Emirati partner. The requirement for a local service agent (for sole establishments) has also been largely eliminated.