The old answer was simple: free zone for tax, mainland for market access. Corporate tax and the 2025 mainland permit rules changed that. Here is the current picture.
This is the first real decision you make, and the most expensive one to get wrong. Fixing it later means a new licence, new visas and new bank accounts. The comparison used to be straightforward — free zones meant zero tax and quick incorporation, mainland meant local market access. Two developments have blurred that: federal corporate tax, and Dubai Executive Council Resolution No. 11 of 2025, which now allows many free zone firms to operate on the mainland under permit. Ownership No longer a differentiator. Free zones have always allowed 100% foreign ownership, and mainland now permits it across most activities. If someone tells you that you need an Emirati partner for a mainland company, check the activity before believing it — for the majority, you do not. Where you can trade This is the real dividing line. A free zone company trades internationally and within its zone freely. To sell into the UAE mainland it has historically needed a local distributor, or to pay customs duty on goods crossing in. Under the 2025 resolution, many free zone firms can now obtain a permit to operate on the mainland — but it is a permit, with conditions, not an automatic right. A mainland company trades anywhere in the UAE without restriction, can open unlimited branches, and can bid for government contracts. Tax — the part that has changed The UAE introduced a 9% federal corporate tax on taxable profits above AED 375,000 under Federal Decree-Law No. 47 of 2022. That applies to mainland and free zone companies alike. A free zone company can still access a 0% rate — but only on Qualifying Income, and only if it satisfies the Qualifying Free Zone Person (QFZP) tests, which include substance requirements and activity restrictions. It is not automatic, and it is not "free zone = no tax". Lose QFZP status and you do not just pay 9% for one year — you pay it for five consecutive years, with no threshold relief. That is the single most under-appreciated risk in UAE structuring right now, and it is why activity selection at setup matters more than it used to. Cost Free zone wins on entry cost, largely because no physical office is required. Mainland requires premises and Ejari registration, which typically adds more than the licence itself. Free zone packages start around 3,500 AED; realistic mainland budgets start around 15,000 AED before rent. Visas Free zone visa allocation is tied to your package — typically 0 to 8 without an office. Mainland allocation is tied to office space, so it scales further but costs more to unlock. The decision, simplified Choose free zone if Your customers are international, or other businesses. You are a consultant, agency, e-commerce seller or trader. You want the lowest all-in cost. You do not need a physical shopfront Choose mainland if You sell directly to UAE consumers. You need a physical retail or restaurant location. You want government contracts. You are in contracting or trades The honest test is one question: where are your customers? Answer that and the structure follows. Still torn? Because we file in both, we have no reason to push you either way. Get an honest recommendation.