Free zone, mainland or offshore: what the difference means

There are three common ways to hold a company connected to the UAE. They differ in who licenses the company, where it may trade, and what it is for.

Free zone

A free zone company is licensed by the authority of its free zone. Each free zone has its own authority and its own rules, and the UAE Government portal lists the authorities that regulate free zone activity. Free zones allow companies to be fully owned by foreign investors, and a free zone company can import, export and re-export with generally no restrictions on foreign trade. Goods that enter the UAE mainland need customs clearance.

Access to the mainland market is regulated. To sell goods or services locally, a free zone company must generally work through a licensed mainland distributor or set up a mainland branch or company, and direct mainland sales are generally not permitted, according to the UAE Government portal.

Dubai has a further route. Under Executive Council Resolution No. 11 of 2025, a free zone company may carry on activities in Dubai outside its free zone if it obtains a licence or permit from the Dubai Department of Economy and Tourism. In October 2025 Dubai launched a Free Zone Mainland Operating Permit for companies that hold a Dubai Unified Licence. Other emirates may differ, so ask the free zone authority and the emirate's economic department.

Mainland

A mainland company is licensed in the emirate where it is based, by that emirate's economic authority. In Abu Dhabi, for example, that is the Department of Economic Development. The UAE Government portal describes the steps: choosing a business activity (more than two thousand are available), a legal form, a trade licence and trade name, a location and any further approvals.

The Commercial Companies Law allows foreign investors to own up to 100% of a mainland company in the activities the law permits. Some activities are restricted, and the portal links to the list.

Offshore

"Offshore" is set by each offshore regime, not by one federal rule, so read the regime's own regulations. Two examples:

• Jebel Ali Free Zone. Its Offshore Companies Regulations 2023 allow an offshore company to be formed for any lawful business, except as the regulations provide. An offshore company may use consultants and accountants in the UAE, keep its books and hold meetings there, lease a registered office or own property in approved freehold areas, own a stake in an operating UAE company, and hold a UAE bank account. To carry out business activities in the zone or in any other jurisdiction it must obtain the appropriate licences or permits from the competent authorities (Regulation 14).
• Ras Al Khaimah International Corporate Centre. Its Business Companies Regulations 2018 say that no company may conduct activities in the UAE outside the zone unless it first obtains all appropriate licences from the competent UAE authorities (section 40).

When a free zone is the wrong answer

If most of your customers are inside the UAE, the rules above matter: a free zone company needs a distributor, a mainland branch or company, or, in Dubai, a licence or permit, to serve them. Whether a free zone is the closest fit depends on the activity and the rules that apply, so check with the licensing authority before deciding.

Before you choose

Write down what the company must do, who it will trade with, and where its people will be. Then compare the options against that list. This guide explains the terms; it does not tell you which to pick.