If you run a free zone company in the UAE, 2026 brings a major opportunity. New amendments to the UAE Commercial Companies Law now make it significantly easier for free zone businesses to expand their operations into the mainland — without shutting down and starting over. This is one of the most important regulatory changes for free zone to mainland expansion in the UAE in recent years.
Previously, free zone companies that wanted to operate onshore had to go through a complex and costly process — often requiring full company liquidation, re-incorporation, and the loss of commercial history. Under the new framework, businesses can retain their legal identity, contracts, and operational track record while accessing the broader UAE mainland market.
In this guide, we break down the new rules, explain the licensing options, outline the tax implications, and provide a step-by-step roadmap so your free zone company can expand to the mainland in full compliance.
What Changed: The Commercial Companies Law Amendments
In October 2024, the UAE enacted sweeping amendments to the Commercial Companies Law (Federal Decree-Law No. 32 of 2021). These changes were further supported by Executive Council Resolution No. 11 of 2025, which provides the operational framework for free zone companies seeking mainland access.
The core change is simple but powerful: free zone and financial free zone companies can now set up branches or representative offices on the mainland, subject to licensing approval from the relevant authority. There is no longer a requirement to liquidate and reincorporate.
Key Provisions of the New Law
- Registration transfer between emirates, free zones, and financial free zones is now permitted without liquidation
- Companies retain their legal identity, contracts, obligations, and commercial history
- Free zone companies can conduct mainland activities through branches, dual licenses, or approved permits
- A new legal structure — the non-profit commercial company — has been introduced for entities in education, healthcare, innovation, and social impact
- The Department of Economy and Tourism (DET) will publish an approved activities list for eligible businesses
These amendments are expected to increase company registrations by 10 to 15 per cent in the first year, supporting the UAE’s goal of reaching two million registered companies by the end of the decade.
Three Ways Free Zone Companies Can Operate on the Mainland
Under the new rules, free zone businesses have multiple pathways to establish a mainland presence. Each option carries different cost, compliance, and operational implications.
1. Branch License
A branch license allows your free zone company to open a full branch on the mainland. This is best suited for businesses that want a permanent onshore presence. The branch operates under the parent free zone entity’s legal identity.
- Full mainland operational presence
- Estimated annual cost: AED 10,000
- Must obtain licensing approval from the relevant mainland authority
- Suitable for professional services, technology, consulting, and holding companies
2. Dual License (Linked Mainland License)
A dual license connects your free zone license to a corresponding mainland license. This allows you to operate in both jurisdictions simultaneously without creating a separate legal entity.
- Bridges free zone and mainland operations under one corporate structure
- Reduces administrative duplication
- Ideal for businesses that serve both free zone and mainland clients
3. Short-Term Permit
For temporary projects or seasonal operations, a short-term permit provides time-limited mainland access without a full branch commitment.
- Estimated annual cost: AED 5,000
- Best for project-based work or testing mainland market viability
- Lower compliance burden than a full branch
If you are still deciding between starting in a free zone or directly on the mainland, our cheapest business setup in Dubai 2026 guide compares every budget option side by side — including free zone licenses from AED 5,000.
Tax Implications: What Free Zone Companies Must Know
Expanding to the mainland has direct UAE corporate tax consequences. Free zone companies that have been enjoying a 0% corporate tax rate under the Qualifying Free Zone Person (QFZP) framework must carefully structure their expansion to avoid losing that benefit.
Corporate Tax on Mainland Income
Income earned from mainland operations is subject to the standard UAE corporate tax rate of 9% on taxable profits exceeding AED 375,000. This applies regardless of your free zone status.
Smaller enterprises with mainland profits under the AED 375,000 threshold may qualify for zero taxation under the small business relief provisions.
Maintaining QFZP Status
Free zone companies can still retain their 0% tax rate on qualifying income — but only if they meet the tightened QFZP criteria for 2026:
- Economic substance: Physical presence, qualified UAE-based employees, and sufficient local operating expenditure
- De minimis threshold: Non-qualifying revenue must not exceed 5% of total revenue or AED 5 million (whichever is lower)
- Audited financial statements: Companies with annual revenue exceeding AED 50 million must prepare audited financials
- Segregated accounting: Mainland and free zone income streams must be separately tracked and reported
The critical point is this: mainland income will always be taxable at 9%, even if your free zone qualifying income remains at 0%. Proper accounting segregation is essential to avoid the entire income being reclassified as taxable.
The March 2026 Compliance Deadline
If your free zone company is already conducting mainland activities — whether through informal arrangements, direct sales, or service delivery — you face an important deadline. By March 2026, all free zone companies trading on the mainland must hold one of the approved licenses or permits.
Operating on the mainland without proper authorisation after this deadline could result in:
- Administrative penalties from the DET or relevant licensing authority
- Loss of QFZP status, making all income subject to 9% corporate tax
- Contract and liability risks if mainland clients challenge the legitimacy of your operations
If you have been operating in a grey area, now is the time to formalise your structure.
Visa Benefits for Business Owners Expanding to Mainland
Business owners expanding from free zones to the mainland may also benefit from the UAE Golden Visa programme, which offers 10-year renewable residence for investors, entrepreneurs, and skilled professionals — with no sponsor required and unlimited time outside the UAE. For a detailed breakdown of all government fees, medical costs, and service charges involved, see our Golden Visa cost guide for UAE 2026.
Step-by-Step: How to Expand Your Free Zone Company to the Mainland
Here is a practical roadmap for free zone businesses looking to take advantage of the new rules:
Step 1: Review the Approved Activities List
Consult the DET’s authorised activities list to verify that your business activities are eligible for mainland licensing. Not all free zone activities may have a mainland equivalent.
Step 2: Choose Your Expansion Structure
Evaluate whether a branch license, dual license, or short-term permit best suits your business model. Consider factors like:
- Volume of mainland business
- Whether the presence is permanent or project-based
- Cost and administrative overhead
- Impact on your QFZP status
Step 3: Set Up Segregated Accounting
Before commencing mainland operations, implement a dual accounting system that clearly separates free zone and mainland income. This is critical for tax compliance and maintaining your free zone tax benefits.
Step 4: Apply for the Appropriate License
Submit your application to the relevant mainland licensing authority. Requirements typically include:
- Valid free zone trade license
- Certificate of incorporation
- Board resolution approving the expansion
- Tenancy contract for mainland office (if required for branch)
- Completed application form and fees
Step 5: Update Your Tax Registration
Notify the Federal Tax Authority (FTA) through the EmaraTax portal of any changes to your business structure. This ensures your corporate tax and VAT registrations reflect your expanded operations.
Step 6: Engage a Tax Consultant
Given the complexity of maintaining QFZP status while operating on the mainland, working with an experienced UAE tax consultant is strongly recommended. A qualified adviser can help structure your expansion to minimise tax exposure while ensuring full compliance.
Benefits of Free Zone to Mainland Expansion
The new framework offers several strategic advantages for free zone companies:
- Access to government contracts: Many public sector tenders require a mainland license
- Wider customer base: Serve mainland clients directly without intermediaries
- Retained identity: No need to liquidate, reincorporate, or lose commercial history
- Cost efficiency: Branch and permit costs are relatively low (AED 5,000–10,000 annually)
- Operational flexibility: Choose the level of mainland presence that matches your business needs
- Competitive advantage: Position your company ahead of competitors still operating solely within free zones
Common Mistakes to Avoid
As businesses rush to comply with the new rules, we see several common errors:
- Operating on the mainland without a license: This is the most common violation and can trigger penalties and loss of QFZP status
- Failing to segregate accounts: Mixed accounting between free zone and mainland income can result in all income being taxed at 9%
- Assuming automatic eligibility: Not all free zone activities qualify for mainland licensing — always check the approved list first
- Ignoring economic substance requirements: Mainland expansion may require additional employees, office space, or operational expenditure to meet substance tests
- Missing the deadline: Free zone companies already operating on the mainland must be properly licensed by March 2026
Frequently Asked Questions
Can a free zone company trade directly on the UAE mainland?
Yes, under the new amendments to the Commercial Companies Law and Executive Council Resolution No. 11 of 2025, free zone companies can now operate on the mainland through a branch license, dual license, or short-term permit. Previously, this required full liquidation and re-incorporation as a mainland entity.
Will expanding to the mainland affect my QFZP 0% corporate tax rate?
Your free zone qualifying income can still benefit from the 0% rate, but mainland income is always taxed at 9% on profits above AED 375,000. The key is maintaining segregated accounting between free zone and mainland operations. If accounts are mixed, the FTA may reclassify your entire income as taxable at 9%. You must also ensure mainland non-qualifying revenue stays within the de minimis threshold (lower of 5% of total revenue or AED 5 million).
How much does it cost for a free zone company to get mainland access?
A branch license costs approximately AED 10,000 per year, while a short-term permit is around AED 5,000 per year. Dual license costs vary by free zone. These are significantly cheaper than setting up an entirely new mainland company, and you retain your existing legal identity, contracts, and commercial history.
What is the deadline for free zone companies already operating on the mainland?
Free zone companies that are already conducting business on the mainland — whether through direct sales, service delivery, or informal arrangements — must hold a valid branch license, dual license, or short-term permit by March 2026. Operating without proper authorisation after this deadline can result in administrative penalties, loss of QFZP status, and contract liability risks.
Do I need to close my free zone company to set up on the mainland?
No. This is the most significant change under the new law. Previously, free zone companies had to liquidate and re-incorporate as mainland entities. Under the 2024 amendments, you can retain your free zone registration while adding a mainland branch or dual license. Your legal identity, existing contracts, and commercial history are fully preserved. If you do decide to close your free zone entity entirely, our company liquidation guide covers the full process, costs, and tax clearance requirements.
Conclusion: Act Before the Deadline
The UAE’s new rules for free zone to mainland expansion represent a significant opportunity for businesses looking to grow. The removal of liquidation requirements, the introduction of flexible licensing options, and the preservation of commercial identity make this the most business-friendly framework the UAE has ever offered.
However, the March 2026 compliance deadline means that businesses cannot afford to wait. Whether you need a branch license, dual license, or short-term permit, the time to act is now.
At Qaspro Global, we help free zone companies navigate the expansion process — from choosing the right structure and setting up compliant accounting systems to managing your FTA registration and maintaining QFZP status. Contact our team today to discuss your mainland expansion strategy.
Related Reading
- Cheapest Business Setup in Dubai 2026: Full Cost Guide
- Golden Visa Dubai 2026: Requirements, Cost & How to Apply
- Golden Visa Cost UAE 2026: Full Fee Breakdown
- Complete Guide to Business Setup in Dubai 2026: Costs, Steps & Requirements
- Qualifying Free Zone Person (QFZP) UAE – Corporate Tax Guide
- Free Zone VAT Exemption UAE – What Business Owners Must Know
- Company Liquidation UAE 2026: How to Close Your Business