Dubai’s New Regulation: Free Zone Companies Can Now Operate in the Mainland
Dubai has introduced a groundbreaking regulatory change allowing free zone companies to conduct business in the mainland under specific conditions. This development is a part of the emirate’s continuous efforts to enhance its business-friendly environment, aligning with the Dubai Economic Agenda (D33), which aims to double the city’s economy by 2033 and position it among the top three global economic hubs.
At DY Lawyers and Legal Consultants, we recognize the significance of this regulation for businesses operating in Dubai. This article provides a detailed overview of the new law, its requirements, and its implications for free zone companies.
Key Aspects of the New Regulation
The Executive Council Resolution No. (11) of 2025 establishes a framework for free zone companies to expand their operations beyond their designated zones and into the mainland, subject to the following conditions:
1. Licensing Requirements
Companies intending to operate in the mainland must obtain the necessary approvals and licenses from the Dubai Department of Economy and Tourism (DET). This ensures regulatory compliance and legitimacy when conducting business outside the free zone.
2. Adherence to Federal and Local Laws
Businesses must comply with all applicable federal and local laws governing their sector. This includes commercial regulations, taxation policies, and employment laws.
3. Financial Record-Keeping
Free zone companies engaging in mainland activities must maintain separate financial records for transactions conducted outside the free zone. This ensures transparency in financial reporting and tax obligations.
4. Validity and Renewal of Licenses
Licenses issued for mainland operations will be valid for one year, with the option for renewal upon compliance with regulatory requirements.
5. Specified Economic Activities
The DET, in coordination with relevant authorities, will issue a list of approved economic activities within six months. This list will define the business activities that free zone companies can legally undertake in the mainland.
6. Compliance Timeline
Businesses currently operating in the mainland under a free zone license must comply with the new regulation within one year from its enforcement date. An additional one-year extension may be granted under specific circumstances.
Impact on Free Zone Companies
This new regulation opens significant opportunities for free zone businesses while also introducing new compliance requirements. Below are some of the key implications:
1. Access to a Larger Market
Free zone companies will now be able to expand their customer base by directly offering goods and services in the mainland, eliminating the previous limitations that required them to work through local distributors or establish a separate mainland entity.
2. Operational Flexibility
This regulation allows businesses to operate more seamlessly across free zones and the mainland, reducing operational constraints and offering greater scalability.
3. Taxation Considerations
Traditionally, free zone companies benefited from tax exemptions. However, businesses that generate revenue from mainland operations will be subject to corporate tax regulations. As per the UAE Corporate Tax Law, the following tax rates apply:
9% corporate tax on taxable income exceeding AED 375,000.
15% minimum top-up tax for large multinational corporations with annual global revenues exceeding €750 Million.
What Free Zone Companies Should Consider Before Expansion
While this regulatory change presents new growth opportunities, free zone businesses must carefully assess the financial and legal implications before expanding into the mainland.
1. Compliance and Licensing
Companies should consult with legal professionals to ensure they meet all necessary licensing and regulatory requirements before commencing mainland operations.
2. Financial and Tax Planning
Businesses must evaluate the tax implications of operating in the mainland, ensuring proper financial structuring to remain compliant while optimizing costs.
3. Employment and Labor Law Considerations
Free zone companies must also adhere to UAE labor laws when hiring staff for mainland operations, including visa regulations, employee benefits, and contractual obligations.
Conclusion
Dubai’s new regulation marks a major shift in the emirate’s business environment, providing free zone companies with unprecedented access to the mainland market. While this policy fosters economic growth and business expansion, companies must carefully assess compliance requirements and financial implications before taking advantage of the new opportunities.
At DY Lawyers and Legal Consultants, we specialize in guiding businesses through legal and regulatory frameworks in Dubai. If you require assistance with licensing, compliance, or corporate restructuring, our team is here to provide tailored legal solutions.
Disclaimer: The content in this article is provided for informational purposes only and does not constitute legal advice.
