Free zones in Dubai have long been a magnet for international entrepreneurs, thanks to benefits such as 100% foreign ownership, tax incentives and easy setup. Yet one question consistently arises: can a free zone company actually do business in the Dubai mainland?
This matters because while free zones provide global reach and operational ease, most businesses cannot ignore the scale of Dubai’s mainland market. Failing to follow the right legal process can expose companies to fines, tax risks and even the loss of their licence.
We examine how the law treats free zone and mainland companies, the options available for market access, and what the most recent policy reforms mean for companies in Dubai, including those set up in DUQE Free Zone.
The Legal Divide Between Free Zone and Mainland Companies
Different authorities govern free zones and the mainland. A company licensed in a Dubai free zone falls under the rules of that zone’s authority. In contrast, a mainland company is regulated by the Dubai Department of Economy and Tourism (DET).
How Dubai Free Zones Operate
Free zone companies enjoy full foreign ownership, 0% corporate tax on qualifying income, and customs exemptions within their zone. Their activities, however, are confined to within the zone or abroad. By default, they are not authorised to trade or provide services directly in the mainland.
What a Mainland Licence Covers
A mainland licence issued by DET allows a business to operate across the entire UAE without geographic restriction. Mainland companies can trade freely, participate in government tenders and open offices or retail outlets anywhere in the country.
The legal separation is clear: no company may conduct business in the mainland without a DET licence, and fines can reach 100,000 for violations.
Can a Free Zone Company Trade in the Mainland?
The General Rule
By law, a free zone entity cannot simply sell products in Dubai’s mainland or provide on-site services to mainland clients. Doing so without permission constitutes unlicensed business activity.
The New Direction in Policy
Dubai has recognised that many free zone firms already engage with mainland clients and that integration benefits the economy. The Executive Council Resolution No. 11 of 2025 now allows any free zone company in Dubai, including those in DUQE, to obtain a branch licence or temporary permit from DET to operate in the mainland. This marks a decisive shift towards a borderless business environment.
Legal Pathways for Mainland Access
Dual Licensing Schemes
Dual licensing is the most efficient route. Under this system, a free zone company can register a branch with DET while keeping its base in the free zone. The branch licence costs 10,000 per year and permits onshore activities without requiring a local sponsor. For shorter projects or market testing, a six-month permit is available at 5,000.
Working with Local Agents and Distributors
Historically, free zone businesses worked with local agents or distributors to access mainland markets. A trading company would appoint a mainland distributor to handle customs and retail. At the same time, service firms could contract through a local service agent. This remains an option, but adds cost and complexity compared to the dual licensing route.
Establishing a Mainland Presence
A free zone company can also establish a separate mainland LLC or register a full branch under DET. Since the 2021 reform of the Commercial Companies Law, most activities allow 100% foreign ownership, removing the old requirement for a 51% Emirati shareholder. This route suits firms planning a permanent and independent onshore presence.
Temporary and Project-Based Permits
For specific contracts or events, a free zone entity may obtain a temporary permit from DET. These permits are valid for up to six months and are particularly useful for exhibitions, short projects or pilot operations.
How It Works in Practice: By Business Type
Service Companies
Consultancies and professional firms can contract with mainland clients. Still, if work is performed on client premises or in the city, a DET permit is required. Some firms deliver services remotely from the free zone, but this is a grey area. The dual licence now provides a clean, compliant solution for such businesses.
Trading Businesses
A free zone trader can sell goods to mainland clients, but the products must clear customs and incur the 5% duty. The buyer or a logistics provider usually handles the import process. What free zone traders cannot do is run a retail shop in the mainland without a DET licence. With a dual licence, they can establish a mainland showroom while maintaining their free zone base.
E-commerce Ventures
E-commerce firms in free zones often partner with local logistics providers to deliver to UAE customers. The UAE’s e-commerce law requires businesses targeting mainland consumers to hold the necessary approvals. With the new Dubai resolution, a free zone e-commerce company can obtain a mainland permit to sell directly to residents, rather than relying solely on third-party distributors.
The Impact of Recent Reforms
Foreign Ownership Changes on the Mainland
Since 2021, most mainland sectors have allowed full foreign ownership. This reduces the ownership advantage that free zones once exclusively held. However, free zones still offer simplified administration and tax incentives.
The Role of Corporate Tax
From 2023, the UAE introduced a 9% corporate tax. Free zone companies retain 0% on qualifying income, but profits from mainland activities are taxable at 9%. This makes it essential for free zone firms to separate their accounts and ensure transparency when serving mainland customers.
Stricter Compliance and Enforcement
Authorities have given a one-year grace period from March 2025 for free zone companies already operating in the mainland to obtain the proper DET licence. After that, enforcement is expected to tighten. The cost of compliance is relatively modest compared with the risks of operating without approval.
What This Means for DUQE Free Zone Companies
DUQE Free Zone, located aboard the QE2 in Port Rashid, offers entrepreneurs 100% ownership, zero tax on qualifying income and quick incorporation. Like other Dubai free zones, DUQE companies are not automatically permitted to trade in the mainland.
However, DUQE businesses now benefit from Dubai’s new dual licensing framework. A DUQE company can secure a DET branch licence to reach customers in Downtown Dubai or elsewhere in the city, without losing its free zone benefits or needing a local sponsor. With DUQE’s central location and strong support services, companies can easily expand into the wider Dubai market under this integrated system.
Enjoy The Advantages Of Free Zone Status While Still Accessing The Full Potential Of The Dubai Market
A free zone company in Dubai cannot simply trade in the mainland without permission, but the barriers are lower than ever. With dual licensing, temporary permits and relaxed ownership rules, entrepreneurs can now operate in both jurisdictions legally and cost-effectively.
For companies in DUQE Free Zone, this means the ability to enjoy the advantages of free zone status while still accessing the full potential of the Dubai market. The key is to formalise mainland activity through the correct DET licence, rather than rely on informal or grey-area arrangements.
FAQs
Can a DUQE Free Zone company directly sell to customers in Downtown Dubai?
Yes, but only if it obtains a DET branch licence or permit. Otherwise, sales must go through a mainland distributor.
What is the cost of getting a dual licence from DET for a free zone company?
The annual fee is 10,000 for a branch licence, or 5,000 for a six-month permit.
Do free zone companies pay corporate tax on income from mainland clients?
Yes, profits from mainland activity are taxed at 9%, even if the company qualifies for 0% on other income.
Can a free zone trading company open a retail shop in the mainland?
Not under a free zone licence alone. It must either obtain a DET branch licence or set up a mainland LLC.
What happens if a free zone business operates in the mainland without a licence?
The company risks fines up to 100