A quiet but powerful change has taken place in the UAE business world.
Free zone companies — once confined to their zones — can now legally operate in the mainland under the latest business framework. It’s a shift that reflects how modern commerce actually works here: fluid, digital, and borderless.
Before, free zone firms were limited to international clients or other businesses inside their own zone. If they wanted to serve mainland customers, they had to appoint a local distributor or open a branch — not impossible, but messy. Now, the government has cut through that red tape.
Why the Rule Changed
The UAE wants to make business setup smoother for foreign investors and startups.
Over time, the line between “free zone” and “mainland” started to feel outdated — especially for service-based industries like tech, consulting, and marketing, where geography barely matters.
Officials realized that growth shouldn’t be trapped inside zone boundaries. So, this reform allows free zone companies to connect with mainland clients directly, through coordination between the free zone authority and the Department of Economic Development (DED).
It’s not chaos — it’s controlled flexibility.
Who Benefits the Most?
Startups, digital service providers, logistics companies, and SMEs gain a real advantage.
A digital agency in Dubai Media City can now serve a mainland hotel chain without setting up another entity. A logistics firm in RAKEZ can deliver to mainland businesses under one license.
This makes the UAE a more practical place to do business — especially for entrepreneurs who start small but aim to grow fast.
Even established foreign investors see this as a signal that the UAE is maturing economically — building trust through ease of operation.
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How It Works
Each free zone has its own coordination framework with the DED.
Businesses apply for approval to operate in the mainland, specifying the activities they plan to conduct.
Some industries, like healthcare or manufacturing, still require direct mainland registration due to local regulations.
But service sectors — IT, marketing, consultancy, and design — now have more breathing room.
This means fewer walls, more collaboration, and a smoother flow of trade.
Tax and Legal Perspective
The corporate tax structure remains attractive.
Free zone companies can continue enjoying the 0% corporate tax on qualifying income, provided they meet the Federal Tax Authority’s rules.
However, if a portion of income is earned through mainland operations, it may be subject to standard UAE tax rates.
It’s less about punishment and more about fairness.
Tax advisors recommend maintaining clear records to separate free zone and mainland revenues.
Transparency is now part of growth.
A Step toward Economic Integration
This reform shows confidence. The UAE isn’t just encouraging new companies; it’s knitting together different business environments into one cohesive market.
When free zone and mainland companies collaborate, the economy grows faster.
More cross-border deals, more jobs, and more innovation.
It’s the kind of move that keeps the UAE in step with places like Singapore — open, organized, and globally relevant.
If you’re a Business Owner, Here’s what to do
- Talk to your free zone authority – Each one has slightly different rules for mainland operations.
- Check your license – Make sure your activities are permitted under the new framework.
- Consult a DED advisor – Some paperwork is still needed, depending on the service type.
- Review your tax plan – Understand where your income will be taxed.
- Think long-term – This isn’t a loophole; it’s a step toward a unified UAE market.
It’s a good time to position your business ahead of the curve.
A Broader Perspective
This isn’t just about policy. It’s about mindset.
For years, business in the UAE has been divided by location and structure.
Now, the government is saying — those walls don’t define you anymore.
The idea is simple: if your business adds value, creates jobs, or drives innovation, the UAE wants to make it easier for you to operate.
That openness is what keeps investors coming back.
The landscape is changing fast, but it feels like change in the right direction.
FAQs
Can a free zone company sell products in the mainland?
Yes, but it depends on your license type. Some require DED approval or a local distributor, especially for trading goods.
Do I lose my free zone tax benefits if I work with mainland clients?
Not necessarily. Qualifying income remains exempt, but mainland revenue may be taxed — it depends on your business model.
Is this update valid across all free zones?
Most major zones like DMCC, IFZA, RAKEZ, and Dubai South are already implementing it, with others expected to follow.
