Quick answer
Can a free zone company trade in mainland UAE? Yes, via four legal routes. Compare the costs, permits and 2025 Dubai rules so you can choose the right one.
Free zone company trade in mainland UAE is one of the most common questions founders ask, and the rules changed in 2025. The short answer is yes, but not directly from inside its free zone licence; the company must use one of four legal routes: a licensed mainland distributor, the new DET Free Zone Mainland Operating Permit, a mainland branch of the free zone entity, or a separately licensed mainland LLC. As of 2026, founders who get the structure right protect both their 0% qualifying free zone tax status and their access to mainland customers.
Key Takeaways
- A free zone company cannot sell directly to mainland UAE customers without a defined route in; goods become subject to UAE customs duty only when they cross into the mainland.
- Dubai’s Free Zone Mainland Operating Permit, launched in October 2025, costs AED 5,000 for six months and is renewable at the same rate.
- Dubai Executive Council Resolution No. 11 of 2025 also allows a one-year mainland branch licence at AED 10,000 per year.
- Income earned from mainland activity is subject to the UAE’s 9% corporate tax, separate from qualifying free zone income taxed at 0%.
- Companies operating outside their free zone must comply within one year of the Resolution’s effective date, with a possible one-year extension.
Can a Free Zone Company Trade in Mainland UAE? The Definitive Answer
A free zone licence permits trade inside the free zone and internationally, but it does not, by itself, authorise direct B2C or B2B sales to customers based on the UAE mainland. The UAE Government portal is explicit on this: a free zone company must either appoint a licensed mainland distributor or set up a mainland branch or company to reach the domestic market.
However, the picture shifted in October 2025. Dubai’s Department of Economy and Tourism (DET), working through the Dubai Business Registration and Licensing Corporation and the Dubai Free Zone Council, launched the Free Zone Mainland Operating Permit. As a result, eligible free zone companies can now operate on Dubai’s mainland under a structured permit, while retaining their free zone status.
Why the rule exists
The UAE has historically separated the two regimes for good reason. Free zones offer 100% foreign ownership and customs-free zones for re-export; the mainland is regulated by each Emirate’s DED and serves the domestic economy. Therefore, allowing unrestricted crossover would blur tax, customs and licensing boundaries.
What “trading in the mainland” actually means
Trading in the mainland generally covers three activities: selling goods or services to customers physically located outside your free zone, holding stock for domestic distribution, and bidding on UAE government contracts. Notably, online sales delivered into the mainland also count, which catches many e-commerce founders by surprise.
Four Routes for a Free Zone Company to Trade in Mainland UAE
Each route carries different costs, compliance load and strategic implications. Consequently, the right choice depends on whether you are testing a market, running ongoing operations, or pivoting your primary base. If you are still choosing your initial licence, our overview of Free Zone Company Formation UAE walks through the trade-offs before you commit.
| Route into the mainland | How it works | Indicative cost | Best for |
|---|---|---|---|
| Local distributor / commercial agent | A licensed mainland company imports, clears customs, files VAT and sells to end customers on your behalf | Commission or margin to the distributor (no DET fee) | Product businesses testing the market without a mainland entity |
| DET Free Zone Mainland Operating Permit | Free zone company operates directly on the mainland for non-regulated activities under Resolution No. 11 of 2025 | AED 5,000 for six months, renewable | Short-term projects, consultancy and trading; market testing |
| Mainland branch licence | A branch of the free zone company registered with DET to operate outside the free zone | AED 10,000 per year, renewable | Ongoing mainland operations under the existing company name |
| Separate mainland LLC | A standalone DET-licensed company that trades anywhere in the UAE and bids on government work | Full mainland setup cost | Businesses making the mainland their primary market |
Route 1: Appoint a local distributor
This remains the lowest-friction option for product businesses. The distributor takes title to your goods, handles customs clearance and VAT, and sells to end customers under their own mainland licence. In return, they keep a margin or commission. Importantly, you retain your free zone tax position, because the mainland-sourced income sits with the distributor.
Route 2: Apply for the DET Free Zone Mainland Operating Permit
This is the headline change. The permit costs AED 5,000, runs for six months and renews at the same rate. Furthermore, it covers non-regulated activities including technology, consultancy, design, professional services and trading. Eligible companies must hold a Dubai Unified Licence (DUL) and apply through the Invest in Dubai platform.
Route 3: Register a mainland branch
Under Dubai Executive Council Resolution No. 11 of 2025, a free zone company can take a branch licence valid for one year at AED 10,000, renewable. This suits businesses with consistent mainland revenue, because the branch operates under the parent company’s name and reputation while remaining linked to the free zone entity for ownership purposes.
Route 4: Incorporate a separate mainland LLC
Finally, if the mainland is your primary market or you want to tender for UAE government contracts, a standalone DED-licensed company is the cleanest structure. For founders weighing this path, our guide to Mainland Company Formation Dubai covers ownership rules, capital requirements and activity selection in detail.
The 2025 Dubai Rules: What Resolution No. 11 Actually Changed
Resolution No. 11 of 2025 is the legal anchor for the new permit framework. It allows free zone companies to conduct activity on Dubai’s mainland while retaining their free zone status, which was previously impossible without a separate licence. Moreover, it sets out two clear instruments: a temporary permit (six months, AED 5,000) and a branch licence (one year, AED 10,000).
Compliance obligations under the Resolution
Free zone companies operating on the mainland must meet specific compliance duties. First, they must maintain separate financial records for the mainland activity, so qualifying free zone income is not contaminated. Second, businesses currently operating outside their free zone must come into compliance within one year of the Resolution’s effective date, with a possible one-year extension.
Is this available outside Dubai?
As of 2026, the Free Zone Mainland Operating Permit is a Dubai DET initiative. Free zones in Abu Dhabi, Sharjah, RAKEZ and other Emirates continue to follow their own routes, typically a branch with the relevant DED or a local distributor. Founders structured across multiple Emirates should plan accordingly, and a focused corporate structuring review usually pays for itself within the first year.
Tax, Customs and Bookkeeping When You Cross the Line
This is where many founders trip up. The headline 0% free zone corporate tax is generous, but it is conditional. Crucially, it only applies to qualifying income from qualifying activities under the Federal Tax Authority’s corporate tax regime.
The 9% mainland tax point
Once a free zone company earns income from mainland activity, that income is generally subject to the UAE’s 9% corporate tax. The 0% qualifying free zone income sits in a separate bucket. Therefore, separate bookkeeping is not optional; it is the mechanism that protects your free zone status.
Customs treatment of goods
Goods inside a free zone are treated as outside the UAE customs territory and attract 0% duty. Once they move into the mainland, however, standard UAE customs duty applies. As a result, importers using a distributor route should ensure customs entries match their VAT and corporate tax filings to avoid mismatched declarations.
VAT and invoicing
VAT registration thresholds and rules apply equally to mainland and free zone activities. In most cases, a free zone company invoicing mainland customers should issue UAE VAT-compliant invoices through the correct entity, and reconcile mainland revenue separately. A short legal consultation before your first mainland invoice is often cheaper than fixing it later.
How to Choose the Right Route for Your Business
Start with three questions. First, how much mainland revenue do you actually expect in the next 12 months? Second, do you need to operate in your own name, or is a distributor’s brand acceptable? Third, are any of your activities regulated, for example healthcare, financial services or education?
Decision shortcuts
- Testing the market: The AED 5,000 six-month permit is hard to beat.
- Ongoing consultancy or B2B services: A mainland branch at AED 10,000 per year keeps brand consistency.
- Government tenders or heavy domestic distribution: A separate mainland LLC remains the right answer.
- Regulated activities: Default to a mainland LLC and seek pre-clearance from the relevant authority.
Common mistakes to avoid
Many founders invoice mainland customers directly from a free zone licence and assume nothing is wrong because payment cleared. Unfortunately, that creates corporate tax exposure and can disqualify qualifying free zone income. Similarly, relying on an informal “friend with a mainland licence” is not a substitute for a properly documented distributor agreement.
Frequently Asked Questions
Can a free zone company sell directly to customers in mainland UAE?
No, a free zone company cannot sell directly to mainland UAE customers from its free zone licence alone. It must work through a licensed mainland distributor, hold a DET Free Zone Mainland Operating Permit, register a mainland branch, or set up a separate mainland LLC. Goods only attract UAE customs duty once they move from the free zone into the mainland.
What is the Dubai DET Free Zone Mainland Operating Permit and how much does it cost?
The Free Zone Mainland Operating Permit is a Dubai DET licence that allows eligible free zone companies to operate on Dubai’s mainland for non-regulated activities; it costs AED 5,000, is valid for six months and is renewable at the same rate. It covers technology, consultancy, design, professional services and trading. Applicants must hold a Dubai Unified Licence and apply through the Invest in Dubai platform.
Do I still need a local distributor to trade in the mainland in 2026?
Not necessarily; since October 2025 you can use the DET permit or a mainland branch instead of a distributor for non-regulated activities in Dubai. A distributor remains useful for product businesses that want zero setup cost and a partner to handle customs, VAT and last-mile sales. The right choice depends on margin, volume and how much control you want over the customer relationship.
Does mainland income from a free zone company get taxed at 9%?
Yes, income a free zone company earns from mainland activity is generally subject to the UAE’s 9% corporate tax, separate from any 0% qualifying free zone income. This is why the Resolution requires separate financial records for mainland activity. Without that segregation, you risk losing the 0% treatment on income that would otherwise qualify.
What is the deadline for free zone companies to comply with the new mainland rules?
Free zone companies currently operating outside their free zone must comply within one year of the effective date of Dubai Executive Council Resolution No. 11 of 2025, with a possible extension for a further year. Compliance means choosing a permitted route, obtaining the relevant permit or branch licence, and maintaining separate books for mainland income.
Is the new permit available to free zones outside Dubai?
No, the Free Zone Mainland Operating Permit is a Dubai DET initiative and currently applies only to Dubai’s mainland. Free zone companies in Abu Dhabi, Sharjah, RAKEZ and other Emirates continue to follow the traditional routes: a local distributor, a branch with the relevant DED, or a separate mainland company. Each Emirate may issue its own framework in time.
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax, or regulatory advice. Rules and fees in the UAE change frequently. Before acting on anything you read here, speak to a qualified advisor — we are happy to help.