Mainland companies are licensed by an emirate’s Department of Economy and can trade anywhere in the UAE without geographic restrictions, while free zone companies are licensed by a free zone authority and generally need a local agent or mainland branch/distributor to conduct onshore business.
Foreign investors can own 100% of many mainland LLCs under the updated Commercial Companies Law, and free zones allow 100% foreign ownership from day one.
Free zone entities may access a 0% corporate tax rate on qualifying income if all conditions for a Qualifying Free Zone Person are met, while non-qualifying income is taxed under the general corporate tax framework.
VAT: Both mainland and free zone businesses are subject to UAE VAT rules, with mandatory registration at an annual taxable turnover of AED 375,000.
Ownership: 100% foreign ownership is permitted for many mainland activities under Federal Decree-Law reforms, and free zones allow full foreign ownership as a standard feature.
Market access: Mainland licenses allow direct B2B and B2C sales across the UAE, whereas free zone firms must use a local distributor or obtain appropriate onshore permissions to sell in the mainland.
Approvals: Mainland setups typically require DED approval, initial approval, and any activity-specific external approvals; free zone setups follow the authority’s streamlined process with zone-specific rules.
Office and visas: Mainland often requires suitable office space aligned with activity and visa quotas, while many free zones offer flexi-desk, shared, or virtual options with predefined visa packages.
Tax and compliance: Free zones can achieve 0% on qualifying income if they meet substance, audited accounts, and activity criteria under the latest ministerial decisions; otherwise, standard corporate tax rules apply.
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