The free zone vs mainland licence choice is usually priced on the set-up quote. The bigger costs sit elsewhere: who you may legally sell to, how many people you can sponsor, what you must audit and what it takes to switch later. We set out the five costs owners most often miss, each linked to the authority that sets the rule.
This is general information, not legal advice, and rules differ by emirate and by free zone. Check your own licensing authority before you sign a lease.
The licence decides who can legally be your client, not just where you sit
The licence is a market decision. The UAE government portal says free zone companies are considered outside the UAE mainland jurisdiction. They trade freely inside the zone and abroad. Access to the mainland market is regulated.
To sell goods or services locally, the same page says a free zone company must work through a licensed mainland distributor or set up a mainland branch or company. Direct mainland sales are generally not permitted without the required mainland licences or approvals.
A mainland company carries no such limit. The portal's full foreign ownership page explains that the commercial companies law, as amended, removed the requirement for a majority Emirati shareholder or local partner for most activities. Activities the Cabinet classes as having strategic impact still need approvals and may carry ownership limits.
The first blocker owners report is an activity-code mismatch. The portal counts more than 2,000 business activities and says the legal form must match the activity. When we check a trade licence against the award category entered, the activity line is the first thing we read. A mismatch there is the most common reason we go back to an entrant with a question.
Five costs compared
| Cost owners miss | Free zone licence | Mainland licence | Authority source |
|---|---|---|---|
| Who you may invoice | Zone and international clients; mainland sales through a distributor, a branch or a mainland approval | Clients across the UAE, including government bodies | UAE government portal |
| Ownership | Set by the free zone authority | Full foreign ownership for most activities; strategic-impact activities need approval | UAE government portal |
| Visa quota basis | Set by the zone, often tied to office type and size | Approved by MoHRE on legal status, facility size, projects and business need | UAE government portal |
| Audited accounts for corporate tax | Required for every Qualifying Free Zone Person, at any revenue | Required once revenue exceeds AED 50 million in the tax period | Ministry of Finance decision |
| Licence and establishment-card fees | See the free zone authority's fee schedule | See the emirate economic department's fee schedule | Free zone set-up costs; mainland licensing steps |
Visa quotas are the hidden constraint on a growing services firm
In a free zone the quota is set by the zone authority, and many tie it to the space you rent. DMCC, for example, publishes its own allocation. It allows up to 3 visas on a flexi desk and 4 or 5 on a serviced office. Physical space earns 1 visa for every 9 square metres.
On the mainland the rule is different. The portal's recruiting page says the Ministry of Human Resources and Emiratisation approves the quota. It weighs the company's legal status, the size of its work facilities, its projects and its business requirements, with evidence from the employer. The approved quota can be amended later.
The practical cost is the same in both cases. A cheap desk keeps headcount low, so price the office for your target team, not for launch.
Audit and accounting duties differ more than the headline fee suggests
The set-up quote rarely includes the audit. Corporate tax changes that. A Ministry of Finance decision on audited financial statements names two groups that must keep audited accounts. One is a taxable person with revenue above AED 50 million in the tax period. The other is every Qualifying Free Zone Person.
So a small free zone firm that wants the free zone tax treatment pays for an audit every year, whatever its size. The Federal Tax Authority's free zone person bulletin sets out the other conditions. They include adequate substance in the zone, transfer pricing documentation and a cap on non-qualifying revenue of AED 5 million or 5% of total revenue, whichever is lower.
That cap matters for the client question above. A Qualifying Free Zone Person pays a 0% rate on qualifying income and 9% on other income. Mainland revenue outside the qualifying activities can push a firm past the cap. The bulletin says that ends the status for that tax period and the four after it.
Mainland firms below the revenue threshold are not caught by this decision. Your licensing authority, your bank or the commercial companies law may still ask for audited accounts. Confirm with your registrar before you budget.
Moving from free zone to mainland is a re-licensing exercise, not a tweak
There is no switch to flip. In Dubai, the Executive Council resolution on free zone establishments' activities sets the path. The Department of Economy and Tourism may license a branch inside the emirate or a branch operating out of the free zone. It may also issue a temporary permit for specific activities.
Each route needs the free zone authority's approval and a valid free zone licence. The resolution sets the fee at AED 10,000 per year for a branch operating out of the free zone. A temporary permit costs AED 5,000 and lasts up to six months. A branch has no separate legal personality. The firm must keep separate financial records for its mainland activity.
One provision helps. A licensed establishment may keep using its existing workforce registered on the free zone portal. The DIFC is outside this resolution, and other emirates set their own rules.
A full move to a new mainland company is a fresh application. The portal's mainland steps run through activity, legal form, trade name, initial approval, memorandum, location and any sector approvals. Expect contracts, bank mandates and visas to need re-papering. Plan the move around your contract cycle, not your renewal date.
Which structure the firms in our directory actually trade under
Our winners directory records 919 winners of the Arabian Best of Best Awards. Of these, 595 are based in the United Arab Emirates, well ahead of the next market.
We do not keep a count of licence types. What we see is a real mix. Firms that sell to walk-in local customers tend to hold emirate licences, and firms that sell across borders often hold free zone licences. Neither scores higher. The jury scores the evidence against the published criteria, and the licence only has to match the claim.
Choose the award category that matches the activity on your licence. Entry is free on the Free plan for one programme and one category; paid options are on the fee page. No plan, package or payment influences the jury or the result.
Free zone vs mainland licence: questions owners ask
Can a free zone company invoice a mainland client directly?
Generally not as a routine sale. The UAE government portal says a free zone company selling locally must use a licensed mainland distributor or open a mainland branch or company. The exception is a company holding the required mainland licences or approvals. In Dubai, the Department of Economy and Tourism can issue a branch licence or a temporary permit.
Does a mainland licence require a local partner?
For most activities, no. The commercial companies law, as amended, removed the requirement for a majority Emirati shareholder or local partner, so foreign investors can own a mainland company outright. Activities the Cabinet classes as having strategic impact, such as banking, insurance, telecoms and defence, still carry approvals or ownership limits.
Which structure makes a bank account easier to open?
Neither structure guarantees an account. Each bank runs its own checks, and the government portal lists a trade licence and company documents among the papers banks may request. Owners who enter with us report that banks ask most about evidence of real activity: a lease, staff on payroll and invoices that match the licence.
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