Free Zone vs Mainland Company Setup in Dubai: Key Differences

Introduction to the 2026 Business Landscape

Dubai has long been a magnet for entrepreneurs, but in 2026, the traditional boundaries between jurisdictions have been reshaped. Under Resolution No. 11 of 2025, the UAE has introduced a new era of corporate mobility. One of the first decisions you will face is whether to establish a free zone or a mainland company, but unlike previous years, 2026 allows for hybrid models that combine the benefits of both.

This guide explores the key differences in 2026, focusing on the new Corporate Tax environment and the ability for free zone firms to expand onshore without closing their original entity. Whether you are a lean startup or a global corporation, understanding these two structures is the first step toward a compliant setup.

The 2026 Hybrid Model: Resolution No. 11

A revolutionary change in 2026 is the Onshore Access for free zone companies. Previously, free zone firms were restricted from the mainland market. Now, eligible free zone companies can apply for a Mainland Operating Permit from the Department of Economy and Tourism DET.

• No Liquidation: You can move between free zones and the mainland without losing your legal history or contracts.
• Dual Licensing: Maintain your free zone tax benefits while serving mainland clients through a specialized DET permit.
• Streamlined Operations: Use a single Dubai Unified Licence DUL to manage your business identity across different zones.

Understanding Free Zone Company Setup in 2026

Free zones remain the go-to for international trade and digital services. Key 2026 features include:

• 100 Percent Foreign Ownership: Always the standard in free zones for all activities.
• Corporate Tax: Eligible for 0 percent tax on "Qualifying Income" (e.g., international trade, re-exports), provided you maintain adequate substance.
• Customs Duty: 0 percent duty for goods kept within Designated Zones like JAFZA or KIZAD.
• Audit Requirements: In 2026, most free zones now require audited financials to maintain their 0 percent tax status.

Advantages of Mainland Company Formation in 2026

Mainland companies offer unrestricted access to the local UAE market and government contracts.

• Market Access: Trade directly with any local consumer or government entity without a distributor.
• 100 Percent Ownership: Now available for over 1,000 commercial and industrial activities on the mainland, removing the need for a local sponsor in most cases.
• Corporate Tax: Subject to a standard 9 percent tax on profits exceeding 375,000 AED. However, the first 375,000 AED remains at 0 percent to support SMEs.
• Office Space: A physical office of at least 200 sq. ft. with Ejari registration is mandatory for mainland licenses.

Key 2026 Comparison Table

Feature	Mainland (DET)	Free Zone
Market Access	Directly across UAE and Global	International & Zone (Local via Permit)
Corporate Tax	9% (on profits > 375k AED)	0% (if Qualifying Income)
Office Requirement	Mandatory Physical Office	Flexi-desk / Physical / Virtual
Ownership	100% for most activities	Always 100%
Visa Quota	Depends on office size	Depends on package/office type

Choosing Your 2026 Path

Deciding between the two depends on your primary revenue source:

• International Focus: If your clients are outside the UAE, a free zone offers the best tax efficiency.
• Local & Government Focus: If you plan to open a restaurant, retail shop, or provide services to the UAE government, mainland is the way to go.
• Service-Based Startups: Consider a free zone with a Mainland Operating Permit to get the best of both worlds.

Conclusion

In 2026, the choice between free zone and mainland is more about tax structuring and operational scope than simple ownership. With the new hybrid permits and the implementation of the 9 percent corporate tax, professional guidance is essential to avoid tax leakage.

At BizVibez Consultants, we help you navigate these 2026 corporate mobility laws to find the most cost-effective and compliant setup. Contact us today for a tailored consultation.