Guide to Starting a Business in Dubai Mainland vs. Free Zone
Date: 09-02-2026
Starting a business in Dubai in 2026 requires entrepreneurs to navigate a reshaped legal landscape. Under the landmark Resolution No. 11 of 2025, the traditional choice between Mainland and Free Zone has evolved into a more flexible hybrid model. This decision impacts your ownership structure, tax obligations, and your ability to access the local UAE market directly.
In 2026, the introduction of the Dubai Unified Licence DUL and the full implementation of Corporate Tax mean that structural differences are more about tax optimization and operational scope than simple market access. This guide explains the latest legal and financial distinctions to help you choose the right launchpad for your venture.
Key Differences Between Dubai Mainland and Free Zone (2026 Update)
The business setup environment is now regulated to allow Corporate Mobility. Free zone companies can now expand onshore legally through specialized permits, breaking the old restriction that limited them to international trade only.
| Feature | Dubai Mainland DET | Dubai Free Zone |
|---|---|---|
| Ownership | 100% foreign ownership for 1,000+ activities | Always 100% foreign ownership |
| Mainland Access | Unlimited and direct across the UAE | Allowed via Mainland Operating Permit |
| Corporate Tax | 9% on profits above AED 375,000 | 0% on Qualifying Income only |
| Office Requirement | Mandatory physical office with Ejari | Flexi-desk, Virtual, or Physical allowed |
| Licensing Authority | Dept. of Economy and Tourism DET | Independent Free Zone Authority |
| Audit Mandate | Mandatory for tax and renewal | Mandatory for 0% tax status in 2026 |
2026 Strategy: If your core revenue comes from local government tenders, choose Mainland. If your revenue is 80% international, choose a Free Zone and use a permit for occasional local work.
Understanding Mainland Business Setup 2026
Mainland companies are the backbone of the domestic economy. In 2026, they offer the highest level of market penetration and credibility with local banks.
Advantages of Mainland Setup
- Direct Market Access: Trade with any individual or entity across the UAE without intermediaries.
- Government Tenders: Unrestricted eligibility for federal and local government contracts.
- Visa Flexibility: Unlimited visa quotas based on the physical size of your office space.
- Global Mobility: Easier to establish branches in other emirates under the same corporate umbrella.
2026 Tax Note
Mainland firms must register for the 9 percent corporate tax. However, Small Business Relief remains available until December 2026 for entities with revenue below AED 3 million.
Understanding Free Zone Business Setup 2026
Free Zones have evolved into specialized industrial and tech hubs. In 2026, they are the preferred choice for Qualifying Free Zone Persons QFZP looking to optimize tax.
Advantages of Free Zone Setup
- Tax Optimization: 0 percent corporate tax on qualifying international income.
- 100 Percent Repatriation: Seamless movement of capital and profits globally.
- The Onshore Permit: For a fee of AED 5,000, you can now obtain a 6-month renewable permit to trade on the mainland.
- Digital Onboarding: Setup timelines have been reduced to as little as 3-5 days via unified portals.
The 2026 Substance Rule
To keep your 0 percent tax status, you must demonstrate Adequate Substance in the zone, which includes a physical presence and local operating expenditure.
Things to Consider for Your 2026 Decision
Before finalizing your structure, evaluate these 2026 factors:
- Target Market: Will you be invoicing mainland UAE companies? If yes, calculate the 9 percent tax impact vs the cost of a mainland permit.
- E-Invoicing Readiness: By July 2026, both jurisdictions must comply with the new federal digital invoicing standards.
- Dubai Unified Licence DUL: Ensure your chosen free zone is part of the DUL system for easier cross-border operations.
- Workforce Mobility: Under Resolution No. 11, you can now use your free zone staff for mainland projects legally.
Bonus Tip: Use the Invest in Dubai platform to simulate your setup costs for both jurisdictions before paying any fees.
Common Questions 2026
-
Can a Free Zone company trade in the UAE mainland in 2026?
Yes. You can now apply for a Mainland Operating Permit from the DET. This allows you to trade onshore without setting up a second company.
-
Is local sponsorship required in 2026?
No. For most commercial and professional activities, 100 percent foreign ownership is the default for both Mainland and Free Zone setups.
-
Which setup is better for a Tech Startup?
A Free Zone like Dubai Internet City or DIFC is usually better for tech due to specialized ecosystems and IP protection laws.
Final Recommendation
The choice between Mainland and Free Zone in 2026 is no longer about "isolation" vs "access." It is about choosing the most tax-efficient base for your global and local operations. If your business model is hybrid, a Free Zone setup with a Mainland Operating Permit offers the best ROI.