One of the first decisions when you set up a business in Dubai is where to register it: on the mainland or in a free zone. The choice affects who you can sell to, where you need an office, how much you pay and how you are taxed. This guide compares the two so you can see which fits your plan.
Costs and rules below are typical figures from public guides as of October 2026. They vary by authority, licence type and activity, so confirm details before you apply.
What is a mainland company?
A mainland company is licensed by Dubai’s Department of Economy and Tourism. It can trade directly with customers anywhere in the UAE, including government and retail clients. In recent years the UAE has allowed full foreign ownership for most mainland activities, so a local partner is no longer required in many cases. Some regulated or strategic activities still have specific rules.
What is a free zone company?
A free zone is a designated area with its own regulator, such as DMCC, IFZA or Meydan. Free zone companies are usually owned 100% by the founder and are often set up around a specific industry, such as trading, media, technology or consulting. They are typically licensed to operate from the free zone and to serve international clients. Selling directly to customers on the mainland normally needs extra permission or a different structure.
Free zone vs mainland at a glance
| Free zone | Mainland | |
|---|---|---|
| Foreign ownership | 100% allowed | 100% allowed for most activities |
| Market access | Mainly outside the UAE or within free zones | Direct access to the UAE market |
| Office | Free zone office or flexi-desk package | Usually a lease or approved address |
| Typical setup cost | Often AED 30,000 to 50,000 or more | Often AED 20,000 to 40,000 or more |
| Best for | Consulting, e-commerce, international trading | Retail, local services, government work |
Treat the costs as rough starting points. Final prices depend on the activity, number of visas, office type and the provider’s package.
How corporate tax works
The UAE charges corporate tax of 9% on taxable profits above AED 375,000. Free zone companies that meet the conditions of a Qualifying Free Zone Person can pay 0% on qualifying income. In general this means earning income from allowed activities, mostly from customers outside the UAE or from other free zone companies. It also means keeping real substance in the zone, such as an office and staff, and keeping accounts that separate qualifying from non-qualifying income.
A Small Business Relief option has been available for companies with revenue under AED 3 million, available to both mainland and free zone businesses. Check whether it still applies to your tax year. The UAE has no personal income tax, and VAT of 5% applies to most goods and services once you pass the registration threshold. Always get tax advice for your own case.
Which one should you choose?
- Choose mainland if most of your customers are in the UAE, if you need to bid for local contracts, or if you want flexibility on where you operate.
- Choose a free zone if you serve international clients, work online, or want a simple package with an office and visas.
- Consider both if you want a free zone licence and a mainland licence for local work. Many founders use this setup.
Steps to set up a company in Dubai
- Define your activity and decide where your customers are.
- Choose mainland or a free zone and compare packages from several providers.
- Reserve your trade name and apply for the initial approval.
- Prepare your documents: passports, a business plan and proof of address.
- Get the licence and sign the lease or flexi-desk agreement.
- Apply for visas, open a bank account and register for VAT if needed.
Common mistakes to avoid
- Choosing only on the lowest price. Check what is included and what renewal costs.
- Picking the wrong activity. The licence must match what you do.
- Ignoring tax and accounting duties. Companies must keep records and file returns.
- Assuming a free zone company can sell anywhere in the UAE.
Frequently asked questions
Can a foreigner own 100% of a company in Dubai?
Yes, in free zones and for most mainland activities.
Do I need to live in Dubai to run a company?
Not always, but you need a residence visa to live in the UAE. Our guide to UAE residence visas explains the routes.
Is a free zone company tax free?
Not automatically. A 0% rate only applies if you meet the Qualifying Free Zone Person rules. Otherwise, 9% corporate tax applies to taxable profits above AED 375,000.
Need help choosing?
Read more on our business setup page or contact us and tell us what you plan to do. We can point you to the right next step.
This article is for general information only and is not financial, legal or tax advice. Fees, rates and rules change, so check current terms with the relevant authority, your bank or a licensed adviser.