Dubai has positioned itself as one of the most business-friendly cities in the world. Entrepreneurs, freelancers, and multinational companies alike are drawn to the city for its tax benefits, ease of company formation, and access to global markets. In 2025, the decision most business owners face when setting up a company in Dubai is whether to establish in a Free Zone or the Mainland. Both offer unique advantages and challenges, and the right choice depends largely on your industry, business goals, and target market.
This guide breaks down everything you need to know about Free Zone and Mainland company setups in 2025. We will explore their structures, ownership rules, tax implications, costs, and benefits so that you can make an informed decision.
Understanding the Basics
What is a Free Zone Company?
A Free Zone is a designated economic area in Dubai where businesses enjoy benefits such as 100 percent foreign ownership, tax exemptions, and simplified setup procedures. Free Zones were originally created to attract international investors and encourage specialized industries. Today, Dubai has more than 30 Free Zones, each catering to different sectors such as media, technology, logistics, healthcare, and finance.
What is a Mainland Company?
A Mainland company is registered with the Department of Economy and Tourism (DET) in Dubai. It allows businesses to operate anywhere in the UAE market and internationally. Unlike Free Zones, Mainland companies can trade directly with the local market without the need for a distributor or agent.
Ownership and Control
Free Zone Ownership in 2025
One of the biggest reasons Free Zones became popular was the ability for foreign investors to retain 100 percent ownership. This continues in 2025. Investors do not need a local partner or sponsor to set up in most Free Zones. This makes Free Zones particularly attractive for small business owners, consultants, and startups who want full control.
Mainland Ownership in 2025
Previously, foreign investors were required to have a local Emirati partner holding at least 51 percent shares in a Mainland company. However, regulatory reforms have changed this landscape. In 2025, 100 percent foreign ownership is allowed in many sectors on the Mainland, though some strategic industries may still require Emirati participation. This shift makes Mainland setups more appealing than ever for international businesses.
Business Activities
Free Zone Business Activities
Free Zones are often industry-specific. For example, Dubai Media City focuses on content creation and broadcasting, Dubai Internet City is geared toward tech firms, and Jebel Ali Free Zone is known for logistics and trade. If your business activity matches the Free Zone’s specialization, the setup process is usually straightforward. However, Free Zone companies are typically limited in conducting business outside their zone without a local distributor.
Mainland Business Activities
Mainland companies enjoy much greater flexibility. They can conduct a wide range of activities across sectors such as retail, construction, hospitality, and professional services. A Mainland license allows you to trade directly with the local UAE market, bid for government contracts, and open offices anywhere in the country. This flexibility is a key reason many companies still prefer Mainland setups in 2025.
Market Access
Free Zone Access
Free Zones are excellent for businesses focused on international trade, e-commerce, or online consulting. You can serve clients worldwide, and many Free Zones are strategically located near ports, airports, and logistics hubs. However, to sell products or services directly to customers in Dubai or other parts of the UAE, a Free Zone company must work through a local distributor or agent.
Mainland Access
A Mainland license provides direct access to the entire UAE market. If your goal is to build a brand presence in Dubai, run a retail shop, open a restaurant, or offer professional services locally, the Mainland is the better choice. Mainland companies can also compete for government tenders, which is not an option for Free Zone entities.
Taxation in 2025
Free Zone Taxation
One of the biggest attractions of Free Zones has been tax advantages. In 2025, Free Zone companies can still benefit from 0 percent corporate tax on qualifying income. However, the UAE corporate tax of 9 percent applies to profits that do not fall under the qualifying income category or are derived from business outside the Free Zone’s exemption. VAT at 5 percent also applies in both Free Zones and the Mainland.
Mainland Taxation
Mainland companies are fully subject to the UAE’s corporate tax framework. This means a 9 percent corporate tax on profits above AED 375,000. However, companies still benefit from no personal income tax, no capital gains tax, and no withholding tax. For businesses generating significant local revenue, the Mainland tax obligations may be higher compared to Free Zones, but the access to the UAE market often outweighs this.
Setup Costs
Free Zone Costs
Free Zones are often more cost-effective for startups and small businesses. Setup packages can start at relatively affordable rates and may include visa quotas, office space, and other administrative support. Virtual office packages are also available, reducing overhead for freelancers and consultants.
Mainland Costs
Mainland setups can be more expensive due to additional requirements such as office leasing and approvals from different government departments. However, with reforms in 2025, the process has become simpler and more transparent, reducing the time and hidden costs once associated with Mainland companies.
Visa and Residency Options
Both Free Zone and Mainland companies can sponsor visas for employees and their families. The number of visas you can obtain depends on your office space and license type.
- Free Zone visas are tied to the Free Zone authority and may be limited in number, especially for small packages.
- Mainland visas can be more flexible, especially if your company is growing and you need to hire larger teams.
For entrepreneurs seeking long-term residency, both Free Zone and Mainland ownership can qualify you for UAE Golden Visas if you meet the investment criteria.
Flexibility and Scalability
- Free Zones are great for startups, freelancers, and international firms testing the market. They offer low-cost entry points and simplified administration. However, scaling into the local market can be challenging.
- Mainland companies are better suited for businesses with ambitions to expand within the UAE and the wider Middle East. They allow more flexibility in operations, partnerships, and recruitment.
Choosing Between Free Zone and Mainland in 2025
Here is a simplified breakdown to help you decide:
- Choose a Free Zone if your business is:
- Export-focused
- Online or service-based with international clients
- A startup looking for low-cost setup
- Operating in a specialized industry with a matching Free Zone
- Choose the Mainland if your business is:
- Targeting the UAE local market
- Planning to open retail shops, restaurants, or service outlets
- Interested in bidding for government contracts
- Looking to scale with unlimited flexibility across sectors
Trends to Watch in 2025
- Corporate Tax Impact: With the new tax regime, businesses are carefully evaluating whether Free Zone exemptions apply to them.
- Foreign Ownership Freedom: The ability to own 100 percent of a Mainland business makes it a strong competitor to Free Zones.
- E-commerce Growth: Online businesses continue to favor Free Zones due to cost-effectiveness and global reach.
- Hybrid Models: Some companies are setting up both Free Zone and Mainland entities to maximize benefits.
- Government Contracts: With Dubai investing heavily in infrastructure and innovation, Mainland companies are well-positioned for opportunities.
Final Thoughts
The choice between Free Zone and Mainland business setup in 2025 is not about which option is better overall, but which is better for your business goals. If you are an entrepreneur aiming for international clients and a cost-efficient structure, Free Zones remain highly attractive. If your vision involves building a brand in Dubai, reaching local customers, or competing for large contracts, the Mainland is likely the stronger path.
Dubai’s evolving business landscape continues to offer opportunities for all kinds of entrepreneurs. By aligning your company structure with your target market and growth strategy, you can ensure long-term success in one of the world’s most dynamic economies.
If you are considering starting your journey in Dubai, the choice between Free Zone and Mainland can feel overwhelming. Every business has different priorities, whether it is tax benefits, global trade opportunities, or the ability to operate across the UAE. This is where GenZone makes the process simple. With years of expertise in Dubai company formation, GenZone provides transparent, step-by-step guidance, ensuring that entrepreneurs not only choose the right structure but also set up smoothly without hidden costs or complications. From licensing and visas to banking and compliance, GenZone is a trusted partner for entrepreneurs who want to focus on growth while leaving the setup to the experts.
