Free Zone vs Mainland: Which is better for your UAE Business in 2025?

Free Zone vs Mainland: Which is better for your UAE Business in 2025?

Introduction to Free Zone vs Mainland in the UAE

Choosing between a free zone and mainland setup is one of the first big decisions for any UAE business in 2025. With Dubai's economy booming and Abu Dhabi's diversification push, both options offer 100% foreign ownership, but they differ in operations, costs, and perks. This guide breaks down the real differences in ownership, visa quotas, tax treatment, customs, and renewal fees to help you decide. We'll include a handy comparison table and wrap up with when to pick each. Keywords: free zone vs mainland, UAE company setup, start business Dubai, UAE trade licence.

As of 2025, no major shifts from 2024 rules, but free zones continue emphasizing Qualifying Free Zone Person (QFZP) status for tax perks.

Ownership Rules

Both setups now allow 100% foreign ownership, thanks to 2021 amendments. Mainland companies can operate nationwide without restrictions, while free zones limit activities to within the zone or international trade (no direct mainland sales without a distributor). Some strategic sectors (e.g., oil, banking) on mainland may still need a local partner, but most activities don't.

Visa Quotas and Hiring

Visa access varies by setup:

• Mainland: Quotas based on office space—e.g., 1 visa per 9 sqm in Dubai (up to 6 for small offices). Flexible for growth, but requires Ejari (tenancy contract).

• Free Zone: Fixed packages with licenses—e.g., 3 visas for AED 15,000–20,000 annually, scaling to 10+ for larger setups. Easier for startups, but less flexible for rapid expansion.

Both use MOHRE for approvals, but free zones often bundle visas with flexi-desks.

Tax Treatment

Corporate tax (CT) is 9% on profits over AED 375,000 for both since June 2023, with 0% below. VAT at 5% applies equally. The edge for free zones: 0% CT on "qualifying income" (e.g., exports) if you meet QFZP criteria like substance and audited accounts—no de minimis non-qualifying income over 5% or AED 5 million. Mainland gets no such incentive, but easier access to local incentives.

Customs and Trade

• Mainland: Standard 5% customs duty on imports (CIF value), with full UAE market access.

• Free Zone: Duty-free imports/exports and storage; duties suspended until goods enter mainland (then 5% applies). Ideal for re-exports or manufacturing, but mainland transfers need compliance.

Designated zones add VAT suspensions for goods.

Renewal Fees and Costs

Renewals vary by location and activity:

• Mainland: AED 5,000–15,000 annually for licenses, plus office rent (AED 20,000+).

• Free Zone: AED 10,000–25,000, often including utilities and basic visas. Lower setup costs (AED 15,000–30,000 vs. mainland's 25,000–50,000), but zone-specific.

Free zones shine for cost-conscious international traders.

Comparisons: Free Zone vs Mainland

AspectFree Zone Advantages/LimitationsMainland Advantages/LimitationsOwnership100% foreign; no sponsor needed. / Limited to zone/international.100% foreign (most cases); nationwide access. / Rare sponsor for strategic sectors.Visa QuotasPackage deals (3–10 visas bundled). / Fixed, less scalable.Space-based (1 per 9 sqm). / Flexible, but office-dependent.Tax0% on qualifying income (QFZP). / Strict compliance.Standard 9% CT; no special exemptions. / Simpler local incentives.CustomsDuty-free imports/exports. / Mainland transfers taxed.Full market access. / 5% import duties.Renewal FeesAED 10k–25k (all-inclusive). / Varies by zone.AED 5k–15k. / Plus separate office/visa costs.

When to choose each

• Choose Free Zone if you're export-focused, need quick setup, or want tax perks and duty-free trade, perfect for tech, logistics, or e-commerce startups in Dubai Silicon Oasis or Jebel Ali.

• Choose Mainland for local market dominance, unlimited scaling, or service-based ops requiring UAE-wide presence, like retail or consulting in Dubai's DED jurisdiction.

Hybrid setups (free zone + mainland branch) are rising for flexibility.

Final Antravia Thoughts

In 2025, neither is "better", it just depends on your market, growth plans, and compliance appetite. Free zones offer speed and incentives; mainland provides reach. Consult a setup advisor to align with your goals and avoid pitfalls like QFZP audits.

For more, explore our guides on Payroll & WPS, VAT Registration, ESR, Company Setup, and Banking. Contact Antravia AE for personalized setup advice.

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References

• Filings.ae. (2025, Aug 25). What is the Difference between Mainland and freezone Company?. https://filings.ae/guides/difference-between-mainland-and-freezone-company

• Envoy Global. (2024, Oct 15). Understanding the Free Zone and Mainland. https://www.envoyglobal.com/insight/the-united-arab-emirates-understanding-the-freezone/

• AKW Consultants. (n.d.). Free Zone vs Mainland | Business Setup Cost in Dubai. https://akwconsultants.com/free-zone-vs-mainland-key-differences-to-know-about-uae-business-setup/

• LinkedIn. (2025, Jan 29). Mainland vs. Free Zones: How to Choose the Right Setup for Your Business. https://www.linkedin.com/pulse/mainland-vs-free-zones-how-choose-right-setup-j8wre

• SmartZone. (2025, Apr 18). Dubai Mainland vs Free Zone | Easy Guide for 2025. https://smartzone.ae/blog/the-difference-between-dubai-mainland-and-free-zone/

• RAKEZ. (2024, Jun 14). UAE Business Setup Costs – Mainland vs Free Zone. https://rakez.com/en/Blog/Details/Article/128/business-set-up-costs-in-the-uae-a-comparison-between-mainland-free-zone-companies

• OnDemand International. (n.d.). 7 Differences between Mainland and Free Zone Company in UAE. https://ondemandint.com/blog/differences-between-mainland-and-free-zone-company-in-uae/

• Links International. (2025, Aug 15). UAE Mainland vs. Free Zone: Which Is the Best Fit for Your Business?. https://linksinternational.com/blog/uae-mainland-vs-free-zone-which-is-the-best-fit-for-your-business/

• Shuraa. (2025, Aug 6). Free Zone vs Mainland Dubai: Explained. https://www.shuraa.com/free-zone-vs-mainland-dubai/

This article by Antravia is general information, not advice. Regulations evolve quickly (especially CT, QFZP, and excise). Verify key positions against the primary sources below or with a locally licensed advisor.