Mainland versus free zone for a services business
I am a consultant with UAE clients. Should I set up on the mainland or in a free zone?
The situation
A mainland licence lets you trade directly with anyone in the UAE. A free zone licence is often cheaper but is designed for business inside the zone and abroad. Your choice also affects Corporate Tax, because only a free zone company can be a Qualifying Free Zone Person.
The law
- Federal Decree-Law 32 of 2021 on Commercial Companies: Mainland legal forms and foreign ownership
- Art 18, Federal Decree-Law 47 of 2022: 0% rate on qualifying income is open only to Qualifying Free Zone Persons
What it means for you
If most of your clients are onshore UAE businesses, mainland is the cleaner fit, because service income from mainland clients is generally not qualifying income for a free zone company. Market guides put a mainland licence at about AED 15,000 to 35,000 or more in year one and a basic free zone licence from about AED 12,500 at Meydan. Example: a consultant billing AED 600,000 a year to Dubai mainland clients would pay 9% Corporate Tax on profit above AED 375,000 either way, so the free zone tax benefit may not exist. Choose on market access and cost, not the 0% headline.
What to do
- List where your clients sit: mainland, free zone or abroad.
- Price both options with government fees and office.
- Check whether your income could be qualifying income in a free zone.
- Pick the licence and register for Corporate Tax within 3 months.
We can do this for youMainland company setup in Dubai or Abu Dhabi: activity, legal form, trade licence, office and first registrations: AED 4,500