Dubai's Free Zone Mainland Operating Routes: A Closer Look

Introduction

Under the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021), read with specific free zone regulations issued by the respective free zone authorities, a free zone company may only provide goods and services within its designated free zone, to other free zones, and outside the UAE for export purposes. Direct operations or sales in mainland Dubai require the free zone company to obtain separate licensing or engage third-party agents or distributors to conduct such mainland business activities.

In practice, many free zone companies routinely engage in mainland sales or services through agents or direct but unauthorised means, often without formal regularisation, leading to compliance risks. Executive Council Resolution No. (11) of 2025, published on March 3, 2025 ("Mainland Directive"), outlines three pathways (the "New Routes") which enable free zone companies to conduct activities in mainland Dubai, promoting integration between free zone and mainland jurisdictions.

Mainland Directive: Key Provisions

The Mainland Directive governs the conduct of activities by non-financial free zone establishments outside their designated zones but within the Emirate of Dubai, excluding those licensed in the Dubai International Financial Centre.

The Mainland Directive establishes the New Routes enabling these establishments to operate in mainland Dubai, subject to approval by the Department of Economy and Tourism (DET) and the relevant free zone authority. These provisions represent an important regulatory advancement for companies exploring Mainland Business Setup, ensuring legal compliance while accessing broader commercial opportunities.

The New Routes are as follows:

• · A license to establish a branch or subsidiary outside the free zone but within the Emirate, renewable annually for AED 10,000 and valid for one year.
• A license to establish a branch operating in the mainland from a registered office located in a free zone (referred to as a dual license), renewable annually for AED 10,000 and valid for one year.
• A temporary permit to conduct specific activities valid for up to six months and renewable for AED 5,000. This offers a separate and simplified route for short-term projects or market testing.
• If the free zone entity's business is regulated, additional approval from the relevant regulator may be required.

Operations are restricted to Dubai and require compliance with local laws. These developments do not affect the need for businesses operating across multiple Emirates to comply with the licensing requirements applicable in each relevant Emirate.

None of the New Routes authorises its holder to carry on business in any of the other Emirates.

Eligibility and Application Process

To qualify for any of these New Routes, companies must hold a Dubai Unified Licence (DUL), a single licence providing a unique identification number for businesses operating across Dubai's mainland or free zones, and operate in non-regulated sectors such as technology, consultancy, or trading. Applications are submitted through the Invest in Dubai platform, requiring trade licenses, corporate details, and activity-specific documentation.

Approvals are granted by the Department of Economy and Tourism and relevant free zone authorities. Existing free zone employees can undertake mainland activities without new visas.

Operational Scope and Compliance

These New Routes allow free zone companies to engage in mainland trading, access local supply chains, and participate in government contracts. For entities planning business setup in Dubai, these measures ensure smoother integration with the domestic economy while maintaining compliance with UAE’s regulatory framework.

Companies must maintain separate financial records for mainland and free zone operations to comply with audits and inspections. Income from mainland activities is subject to a 9% corporate tax under UAE Federal Decree-Law No. 47 of 2022, unlike qualifying free zone income, which may be exempt.

Article 13 of the Mainland Directive provides a transitional grace period for free zone companies that were conducting unauthorised mainland activities before the Mainland Directive was published. Such activities include selling goods or providing services directly in mainland Dubai without the required licenses, agents, or other compliant arrangements under the UAE Commercial Companies Law and applicable free zone regulations.

These companies have until March 3, 2026, to apply for and obtain one of the three pathways outlined in the Mainland Directive to regularise their operations. The Director General of the DET may grant a one-year extension where circumstances justify it. Companies that fail to comply within this timeframe may face administrative penalties, fines, or license suspension under relevant Dubai and federal laws.