Introduction
Dubai’s business environment continues to evolve rapidly. Companies previously confined to operating within free zones are now allowed to expand into the mainland under new regulatory frameworks. This major reform opens opportunities for free zone entities to participate in on-shore markets without losing their free zone privileges.
For global investors and entrepreneurs, this change marks a new era of flexibility, enabling growth, diversification, and access to a much larger local customer base.
The Evolving Free Zone to Mainland Landscape
Historically, Dubai free zone companies benefited from full foreign ownership, customs advantages, and simplified setup, but were limited to operations inside the free zone or abroad. Mainland activities required a separate licence and, in some cases, local participation.
The new rules now allow free zone businesses to obtain mainland activity permits or branch licences, bridging the gap between offshore benefits and on-shore accessibility. These changes empower companies to trade directly with mainland clients, open physical offices in Dubai city, and compete for government or private contracts.
Key Permit and Licence Options for Free Zone Companies
Mainland Branch Licence
A branch licence enables a free zone company to operate in the mainland under its existing name. It must comply with mainland regulations and maintain distinct accounting records. The branch is considered an extension of the free zone entity rather than a separate legal company.
Hybrid Licence (Headquarters in Free Zone)
This model allows the company to maintain its base in a free zone while obtaining a permit for specific on-shore activities. It’s a cost-effective choice for service providers and consultants that need occasional or limited physical presence in the mainland.
Short-Term Activity Permit
For temporary projects, exhibitions, or pilot operations, a short-term permit provides limited-duration access (for example, up to six months). It’s ideal for companies testing market potential before committing to a full branch licence.
Strategic Benefits for Businesses
Local Market Access
Companies can now directly serve mainland clients, bid on government tenders, and open sales or support offices across Dubai without forming a separate on-shore entity.
Cost-Efficient Expansion
Hybrid or short-term permits significantly reduce setup costs and administrative overhead. Businesses can scale gradually while retaining free zone benefits.
Regulatory Clarity
While mainland access is simplified, compliance with local laws remains essential. Companies must maintain proper accounting for on-shore operations, obtain necessary activity approvals, and follow UAE labour and tax regulations.
Enhanced Brand Visibility
Operating both in a free zone and the mainland strengthens brand credibility, signalling that the company is established, compliant, and actively engaged in the domestic economy.
Step-by-Step Guide to Expanding into the Mainland
1. Review Current Licence
Confirm that your free zone licence is valid, your activity is accurately defined, and your incorporation documents are current.
2. Determine the Type of Access
Evaluate whether you need a full branch, hybrid model, or short-term permit. The right choice depends on your goals, operational needs, and cost considerations.
3. Verify Eligible Activities
Some business activities are restricted or regulated. Confirm that your intended operations are eligible for mainland permits.
4. Apply for the Permit or Licence
Submit an application to the relevant mainland authority such as Dubai’s Department of Economy and Tourism. You’ll typically need your free zone licence, incorporation documents, identity of authorised signatories, and a lease agreement if you plan to open an on-shore office.
5. Ensure Compliance
Establish clear financial records for mainland operations, align visa and employment policies with UAE labour laws, and meet tax and audit obligations.
6. Launch On-Shore Operations
Once approval is received, you may open your mainland branch or commence activity under the new licence. Integrate operations with your existing free zone systems for smooth financial and legal management.
Best Practices for Sustainable Expansion
Preserve Free Zone Advantages
Retain your original free zone entity to continue enjoying tax exemptions, customs benefits, and 100 % foreign ownership. Separate accounting ensures that free zone privileges are unaffected.
Control and Cost Balance
Each licence model offers a different level of commitment and operational freedom. Select the structure that fits your long-term business plan.
Test the Market Before Full Expansion
For new entrants, a short-term or hybrid permit provides flexibility to gauge demand and refine strategy before full integration into the mainland.
Maintain Transparent Governance
Keep detailed records of both free zone and mainland operations. This enhances regulatory compliance and simplifies audits or renewals.
Understand Tax and Accounting Implications
Mainland activities may be treated differently for taxation or VAT registration. Consult professionals to ensure your reporting remains accurate and optimised.
Why This Regulatory Change Matters
Allowing free zone entities to operate on the mainland redefines the UAE’s investment climate. It:
- Reduces redundancy and administrative barriers
- Encourages collaboration between on-shore and free zone sectors
- Expands the customer base for service providers and manufacturers
- Strengthens Dubai’s position as a global centre for trade and innovation
For investors, it combines the flexibility of a free zone with the reach and reputation of mainland operations.
How Septura Consulting Can Help
At Septura Consulting, we help businesses navigate the new regulatory environment for free zone to mainland expansion. Our services include:
- Assessing the most suitable licence or permit type for your business model
- Coordinating applications and approvals with Dubai authorities
- Ensuring full legal, financial, and operational compliance
- Providing ongoing advisory support for renewals, restructuring, or scaling your presence
Whether you’re a growing start-up or a multinational looking to diversify, we simplify every step of your expansion journey.
Conclusion
Dubai’s introduction of mainland activity permits for free zone companies marks a new era of business freedom and integration. It allows enterprises to expand seamlessly, serving local clients while retaining global advantages.
With expert guidance, structured compliance, and a clear operational strategy, this opportunity can unlock new growth for your company.
If you’re ready to explore how your free zone business can enter the mainland market, Septura Consulting is here to guide you — from licensing to long-term strategic planning.
