On 17 March 2025, the Government of Dubai Media Office announced that the Executive Council of Dubai issued Resolution No. 11 of 2025, which regulates the operations of free zone companies in mainland Dubai (the “Resolution”). To facilitate this change, the Government is introducing a simplified licensing procedure.
According to the press release, free zone companies in Dubai will now be able to engage in business activities on the Emirate’s mainland. This represents a significant shift in the operational framework for free zone entities, allowing them to access and operate within Dubai’s domestic market.
Main changes and targeted businesses
The new regulations are designed for companies looking to expand their operations beyond the free zone in which they are registered. Currently, there are over 20 free zones in Dubai. The only exception applies to financial institutions based in the Dubai International Financial Centre (DIFC), which will continue to follow the existing rules.
According to the Resolution, a company licensed by any Free Zone Authority in Dubai will be allowed to operate outside its free zone (but still within the Emirate of Dubai) as long as it obtains the necessary licenses or permits from the Dubai Department of Economy and Tourism (DET).
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Free zone companies currently may operate in mainland Dubai, but only if they follow a licensing procedure agreed upon between the DET and the relevant free zone authority. The updated licensing procedure is anticipated to simplify the process, allowing these companies to commence operations outside the free zone more easily.
Conditions for doing business in Dubai’s mainland
Recent changes do not place free zone companies on equal footing with Dubai’s mainland companies. Free zone companies will continue their status and enjoy all associated benefits. To operate on the mainland, these companies will need to:
- obtain the necessary permits and licenses for their activities from the relevant authorities in Dubai;
- comply with all legal and regulatory requirements of the UAE and Dubai related to their activities;
- maintain separate accounting records for their transactions within and outside the free zone.
To get the right to conduct business outside the free zone, a company must obtain a license from the DET to establish a branch in Dubai or receive a permission to perform certain activities within the Emirate. The DET will issue these licenses for one year, with the possibility of an extension. In the coming months, the DET is expected to release a list of economic activities that free zone companies will be permitted to conduct within Dubai.
Corporate tax on income earned outside the free zone
The taxation of profits earned by free zone companies from operations on the mainland is an important issue to consider. Even if a company is a qualified free zone person (QFZP) and benefits from a zero tax rate, it may still be subject to the standard corporate tax in the UAE on income generated outside the free zone (with the applicable rate of 9% on profits exceeding the non-taxable minimum). This conclusion stems from the requirement that companies maintain separate accounting records for transactions outside the free zone.
Further clarifications regarding this and other tax matters are anticipated from the Federal Tax Authority.
Concluding remarks
Currently, not all details of the new procedure are available. A step-by-step algorithm for free zone companies to start a business on the mainland requires further study.
We also draw your attention to the fact that this information only concerns Dubai. It is still unclear whether similar opportunities will be available for free zone companies in other Emirates.
The new regulations allowing free zone establishments to access Dubai’s domestic market will enhance the competitiveness of this jurisdiction, both within the UAE and globally. With the ability to operate within the whole Emirate, establishing a free zone company in Dubai can become an even more flexible and versatile solution for your international business.
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