Free zone or mainland? Find the right UAE setup
Choose a mainland licence if you sell directly to UAE customers, need a shop or site outside a free zone, or want government contracts. Choose a free zone if your customers are mostly overseas, you trade internationally or hold investments, and want a simpler, cheaper setup. Both pay the same corporate tax unless the free zone company qualifies for the 0% QFZP rate.
Reviewed by Countify's ACCA/FCCA chartered certified accountants · Updated
- Better fit
- Either can work
- Mainland score
- 1
- Free zone score
- 1
Tax is not the deciding factor for most SMEs: both pay 9% corporate tax above AED 375,000 unless a free zone company qualifies as a QFZP.
Results are estimates for general information, not tailored advice.
Typical recommendations
Based on the answers shown.
| Business | Better fit |
|---|---|
| Consultant with overseas clients | Free zone |
| Café in Dubai | Mainland |
| Re-export trader | Free zone |
A free zone company can still serve UAE customers through a distributor or a mainland branch.
The trade-offs
Free zone companies can generally trade within their free zone and abroad, and reach UAE customers through distributors or a mainland branch. Mainland companies licensed by the emirate's economic department can trade anywhere in the UAE and with government. Since 2021, most mainland activities allow 100% foreign ownership.
Tax
Free zone status does not mean tax-free. A free zone company pays 0% only on qualifying income if it meets every QFZP condition; otherwise it pays 9% above AED 375,000 like a mainland company, and may use Small Business Relief. Our free zone vs mainland guide goes deeper.
Frequently asked questions
Can a free zone company work with mainland clients?
It can sell services to mainland businesses in many cases, but trading goods directly into the mainland usually needs a distributor, a mainland branch or a dual licence. Check your free zone's rules.
Is a free zone company tax-free?
No. It pays 0% only on qualifying income if it meets the QFZP conditions; otherwise standard corporate tax rates apply.
Company formation in the UAE
We set up your free zone or mainland company, open the tax registrations and get bookkeeping running from day one, so the first year has no surprises.