Mainland vs Free Zone: Where Should You Register New Company in Dubai?

If you're planning to open a company in Dubai, the first big decision you’ll face is this:

“Should I register my company in a Free Zone or in the Mainland?”

At COFTT, we get this question every single day. And it’s a good one - because the difference is not just about cost or ownership. It’s about how your business will legally operate in the UAE.

In this article, we’ll walk you through both options, step by step. And we’ll explain everything using real-world examples, so it all makes sense - even if you’re just starting out. You will get to know about the key difference between Mainland and Freezone license - Let's get started!

What Is a Free Zone Company in Dubai?

Free Zones are special business zones in the UAE where foreign investors can set up 100% owned companies - with no local partner required.

They’re affordable, fast to register, and perfect for entrepreneurs starting small or running global operations.

But, and this is the big part - Free Zone companies are not allowed to sell products directly in Mainland. Free Zones are considered outside the UAE for tax and customs purposes.

So if you want to do business inside the UAE (with customers in Dubai, Abu Dhabi, Sharjah, etc.), there are rules you need to follow.

What You Can and Can’t Do with a Free Zone Company

Let’s take a real example to make this crystal clear.

Imagine you're starting a trading company in a Free Zone, selling construction materials like, tiles, or lighting fixtures. You plan to sell these to local shops and contractors across the UAE.

Here’s the problem:

Your Free Zone import code only allows you to bring products into your Free Zone from outside of UAE. For example, you imported the product from China in your Freezone but you want to sell that in mainland. So to sell in mainland you need to bring the product in the Mainlad.

So, you cannot legally deliver those goods to a customer sitting in the mainland from your Freezone Warehouse because these products are considered outside UAE.

Sounds confusing? Let’s break it down.

So How Do Free Zone Companies Sell in the Mainland?

Here’s what Free Zone companies actually do to stay compliant and still sell inside the UAE:

Step 1: Hire a Mainland Importer

You cannot import goods directly from your Free Zone into the mainland.

So, you hire a licensed importer in Dubai mainland.

This mainland importer:

a. Handles customs clearance
b. Pays VAT and duties
c. Transfers ownership of goods to your company after it enters the UAE legally

Step 2: Store the Goods in Mainland Warehouse

Once cleared, your goods are legally inside the UAE. You can now store them in a subleased warehouse or fulfillment center in the mainland.

Now they’re ready for sale.

Step 3: Deliver Products Using a Mainland Courier

Free Zone companies can’t do direct deliveries to individuals in the mainland. So, you use a licensed mainland courier or logistics company to deliver orders to your customers.

This is the correct and legal way to operate if you’re in a Free Zone but want to reach UAE customers.

Now Let’s Talk About Mainland Companies

If you register your company in the mainland, your options are much more open.

You can:

a. Import products directly from overseas into Dubai mainland and Sell to anyone in the UAE - whether it’s B2B or B2C.

b. You can open a physical shop, warehouse, or showroom and deliver your own goods without needing a courier company

c. You can also apply for government contracts and sponsor more employees (based on office space)

Mainland companies don’t have the customs limitations Free Zone companies face. If your customer is in the UAE, Mainland setup gives you full freedom.

What About Service-Based Businesses Like IT or Marketing?

Let’s say you open a web design or digital marketing agency in a Free Zone.

Here’s what you can do:

You can legally offer services to clients in the UAE, even from your Free Zone office after getting some extra approvals. In this setup, you will not provide service from your client location which is Mainland.

But you must register for VAT if your revenue exceeds AED 375,000

And you must pay corporate tax (9%) if you’re doing business inside the UAE. Some services may also need extra government approvals, depending on your license.

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We’ve helped many clients structure their Free Zone service businesses correctly, especially when working with mainland clients.

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Which One Is Better? Free Zone or Mainland?

Let’s simplify it:

Choose FreeZone if:

a. You sell to clients outside the UAE (global market)
b. You offer online services like consulting, marketing, or software
c. You want to start small with a lower cost

Choose Mainland if:

a. You want to import and sell products inside Dubai or UAE
b. You plan to open a retail store, restaurant, or warehouse
c. You want to sell directly to consumers (B2C)
d. You need full control over logistics, staff, and deliveries

Still not sure?

That’s where we come in.

How COFTT Helps You Decide the Smart Way. We’re not here to confuse you with technical terms. We’re here to guide you based on how your business actually works.

At COFTT, we:

a. Break down your business model
b. Explain what’s legal and what’s not
c. Recommend the best jurisdiction
d. Handle the licensing, approvals, customs, and compliance for you

Whether you’re a first-time founder or scaling a global brand into the UAE - we make your Dubai setup smooth and stress-free.

Choose What Works for Your Business, Not Just What’s Cheaper

It’s tempting to pick the affordable option, but here’s the truth:
If your license doesn’t match your operations, your business can face trouble before it even starts.

Free Zones and Mainland licenses both have their advantages. The key is knowing what you can and can’t do - and setting things up the right way.

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Ready to figure out what’s best for you? Talk to us today and get your company up and running - legally, smoothly, and profitably. We provide Mainland company formation services in the UAE.