Mainland vs Free Zone – Which is Best for Business Setup in Dubai?
Dubai has become an ideal location for businesses to grow and expand. When choosing the right location for starting a business, Dubai pops up in the mind. With the world-class infrastructure and investor-friendly taxation policies, it’s a flourishing destination for business. The business-friendly reforms make it a remarkable location for investors and entrepreneurs. In 2024, an estimated 25,000 new businesses were registered in Dubai. The reasons highlighted were the benefits and advantages it provides to the investors.
The most crucial step is to choose the right jurisdiction for your business. The question that arises here is which one is the best. Dubai mainland company setup or a free zone company? Which option will save you time, money, and headaches?
This isn’t just a bureaucratic choice. It affects your ownership rights, market access, visas, office requirements, and even how much tax you pay. According to the Dubai Department of Economic Development (DED), choosing the right setup is crucial for compliance and market access. Setup business in Dubai requires a complete understanding of the process. Let’s have a detailed insight.
Understanding Business Setup in Dubai
What is a Dubai Mainland Company Setup?
A Dubai mainland company setup means registering your business under the Department of Economic Development (DED) and obtaining a Dubai DED License. This gives you the freedom to operate anywhere in Dubai and across the UAE, serve local clients, and even bid for government contracts.
Wondering who should go for a mainland setup? If your business needs a physical presence or plans to serve local customers directly, the mainland is usually the best choice. Cafes, gyms, and retail stores are the sectors that benefit the most while setup business in Dubai.
Real-world example: Sarah, a new entrepreneur from London, applied for a Dubai Mainland License to open a chain of cafes. With this license, she could lease multiple locations, hire staff locally, and even cater to government events. A free zone setup wouldn’t have given her that kind of flexibility. This aligns with DED guidelines for LLC companies in the retail and service sectors.
She later successfully opened 3 outlets within 6 months, demonstrating the flexibility of a mainland business setup for expansion.
What is a Free Zone Business Setup?
Popular free zones include Dubai Internet City, Dubai Media City, and DMCC Free Zone. In 2025, several free zones will also offer reduced visa fees and expedited licensing for e-commerce businesses. They offer perks like 100% foreign ownership, tax exemptions, and simple registration processes.
Free zones are ideal if your business focuses on international trade or e-commerce. Many zones cater to specific industries—like Dubai Media City for creatives or DMCC Free Zone for trading companies.
Example: Ahmed runs an online tech store selling gadgets globally. Setting up in a free zone let him skip complex mainland regulations, keep full ownership, and enjoy tax exemptions—all while focusing on growth outside the UAE.
Free zone vs mainland Dubai: Key Differences
Here is a complete breakdown for the free zone vs mainland Dubai key differences:
Ownership Structure
For a Dubai LLC company, most mainland activities now allow 100% foreign ownership, though some require a local partner. For example, businesses in real estate brokerage or oil & gas services still require a UAE national as a partner or shareholder. Free zones automatically grant full ownership, which is attractive for international investors who want total control from day one. According to UAE commercial law, certain strategic sectors maintain this requirement.
Licensing and Regulations
A UAE mainland license allows unrestricted trade in Dubai and the wider expansion of Dubai LLC company. According to Dubai DED Licensing Guidelines, a construction company without a mainland license cannot legally operate or bid for projects within Dubai city limits. Free zone licenses are limited to the zone and usually require a local distributor to trade on the mainland.
Here’s a tip: If your business depends on local clients or government contracts, a Mainland business setup in Dubai is usually safer.
Business Scope and Market Reach
Mainland companies can operate freely anywhere in Dubai, bid on government projects, and serve local customers. Free zone companies are mostly limited to international markets or exporting. Over 60% of construction and retail companies in Dubai opt for mainland licenses to meet government tender requirements and serve local clients effectively.
Example: A construction firm cannot legally operate in Dubai without a mainland license. A free zone setup would restrict it to outside-the-UAE work.
Office Space Requirements
Mainland setups require a physical office. This can be rented or owned. Free zones are flexible—many allow virtual offices or flexi-desk options, which are perfect for startups or online businesses.
For mainland setups, the minimum office size is typically 200–500 sq. ft., costing approximate AED 20,000–50,000 per year depending on the location.
Visa and Employment Quotas
A Dubai mainland license allows you to sponsor more employees, depending on office size. Free zones often have visa limits tied to license type or office size, which can be restrictive as your business grows.
A 500 sq. ft. mainland office may allow sponsoring up to 5 visas, whereas a similar free zone license might limit you to 2 visas. This can directly impact your ability to scale operations quickly.
Taxation Policies
Mainland companies pay corporate tax if earnings exceed AED 375,000. VAT rules also apply. Free zones often offer tax exemptions or zero corporate tax, provided companies meet their regulations. While free zones save money initially, mainland companies have more room to grow locally.
According to the UAE Federal Tax Authority, a company earning AED 500,000 would pay 9% corporate tax on AED 125,000 above the exemption threshold.
Choosing Between Mainland Business Setup Dubai and Free Zone
Why is a Dubai Mainland Company Setup the Right Choice?
A mainland business setup Dubai is ideal if your Dubai LLC company wants to serve within or across the UAE and requires a Dubai DED license. It is also the best option for obtaining government tenders. A UAE mainland license can help in the trade and allows flexibility in different sectors.
Example: Businesses like retail stores and construction companies should possess a legal Dubai Trade Licence to operate their business.
Mainland business setup Dubai can let you scale the business and gain access to the global markets.
Why Should You Choose a Free Zone Setup?
Free zones are ideal for businesses targeting international markets, exports, or e-commerce. They are quick to set up, cheaper initially, and allow full foreign ownership.
Example: An online fashion store selling globally benefits from a free zone setup because it avoids mainland bureaucracy while enjoying tax exemptions.
Hybrid Models – Combining Mainland and Free Zone
Some businesses operate both in the mainland and a free zone. This hybrid model allows international trading benefits through the free zone while keeping access to the UAE local markets.
Tip: Medium and large companies often use this approach to diversify operations and reduce risks.
| Feature | Dubai Mainland Company Setup | Free Zone Company Setup |
| Ownership | 100% foreign allowed (some exceptions need a local partner) | 100% foreign ownership |
| Market Access | Full UAE local market access | Restricted to the zone; requires a distributor for the mainland |
| Licensing Authority | Department of Economic Development (DED) | Free Zone Authority |
| Office Requirement | Physical office required | Virtual/flexi-desk allowed |
| Visa Options | More visas based on office size | Limited visas per license |
| Business Scope | Local + international trade | Mainly international trade/export |
| Cost | Higher setup & operational costs | Lower initial costs, bundled packages |
| Government Tenders | Eligible | Not eligible |
| Ideal For | Retail, services, local clients, government projects | E-commerce, export, online businesses |
| Flexibility | High for local operations | High for global operations |
Step-by-Step Guide to Setup Business in Dubai
Steps for Dubai Mainland Company Setup
- Choose Business Activity: Ensure it’s allowed under DED rules.
- Get Initial Approvals: Submit documents to the DED.
- Register Trade Name: Pick a unique and compliant name.
- Lease Office Space: Meet physical office requirements.
- Finalize Dubai Mainland License: Obtain your Dubai DED license and start operating.
Steps for Free Zone Business Setup
- Select Free Zone and Activity: Match the zone to your industry.
- Apply for License: Submit documents to the Free Zone Authority.
- Lease Office or Flexi-Desk: Depending on your business needs.
- Get Visa Quota Approval: Secure employee visas.
Cost Comparison – Mainland vs Free Zone Dubai
Initial Investment
Mainland companies have higher setup costs—licenses, office rent, and compliance fees. Free zones are cheaper upfront and often offer bundled packages (license, visa, office).
Long-Term Operational Costs
Free zones save money initially but limit local trading. Mainland setups cost more upfront but scale better over time, giving unrestricted access to clients and contracts in Dubai.
FAQs About Dubai Mainland Company Setup and Free Zone
Q1: What is the difference between Dubai mainland and free zone companies?
Mainland companies can trade across the UAE; free zones focus on international trade and are limited to their zone.
Q2: Which is cheaper: a free zone license or a UAE mainland license?
Free zones are cheaper initially; mainland costs more but offers full UAE market access.
Q3: Do I need a local partner for a mainland company?
Most activities allow 100% foreign ownership; some industries require a UAE partner.
Q4: Can a free zone company trade on the Dubai mainland?
Not directly; a local distributor or mainland branch is needed.
Q5: How many visas can I get with the mainland vs the free zone?
Mainland allows more visas based on office size; free zones have limits per license type.
Q6: Is the physical office mandatory for both the zones?
The Mainland offices require a physical presence, while the free zones can have flexi desks and virtual offices.
Q7: Which setup is better for local clients?
The Mainland is ideal for serving the Dubai and UAE local markets.
Q8: Which setup is better for exports or online businesses?
Free zones are more suitable for international trade and e-commerce.
Q9: Is there any possibility of switching from a freezone company to a mainland one?
Yes, you can convert a freezone company to a mainland company, but it requires approvals and extra costs.
Q10: Which setup allows participation in government tenders?
Only mainland companies can bid for government contracts.
Conclusion
Dubai is the most innovative destination for business due to its investor-friendly policies. Choosing the right jurisdiction is the key to success. There are two main jurisdictions, i.e., Dubai mainland company setup and a Free Zone. Now to choose between them depends on your goals and business activity. The Mainland is ideal if the business aims to gain government contracts and requires physical presence for the clients. Free zones suit businesses that deal with international trading opportunities.
For a smooth process, understanding your business activity and needs is important. Also, expert tips and recommendations are necessary to navigate through the process.
For expert guidance, hire an expert Dubai business setup consultant from Business Setup Experts to ensure compliance with the latest 2025 regulations and make informed decisions for growth.
