Dubai Freezones: The Latest Government Reforms Entrepreneurs Need to Know

For decades, Dubai's business environment has operated on a dual-track system: the agile, foreign-owned free zones and the vast mainland market. A company chose one path, each with distinct advantages and limitations. That era has now reached a turning point.

In a landmark policy move, the Emirate has officially launched the Free Zone Mainland Operating Permit (FZMOP). This initiative allows free zone companies to conduct commercial activities directly within the Dubai mainland without needing to form a separate mainland entity. Introduced under the Dubai Executive Council Decision No. (11) of 2025 by His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, this reform signals a new phase of economic integration for the city.

Bridging Two Economic Worlds

Dubai's leadership has consistently worked to solidify the city's position as a global hub for entrepreneurship. The establishment of specialized free zones, dedicated to technology, media, finance, and logistics, has been a cornerstone of this strategy. These zones offer 100% foreign ownership, tax advantages, and streamlined administration, attracting a multitude of international companies.

However, a notable constraint existed. A free zone company was generally limited to operating within its zone or trading internationally. Engaging with the local Dubai market required setting up a separate mainland company or working through a local agent. This separation created operational friction, duplicated costs, and restricted free zone firms from easily participating in local projects or government tenders.

The Free Zone Mainland Operating Permit is the direct solution to this challenge. It represents a step towards unifying Dubai's economic ecosystem, fostering cross-sector collaboration, and offering investors unprecedented flexibility.

The Legal Framework

The reform is built on a solid legal foundation. Dubai Executive Council Decision No. (11) of 2025 provides the statutory authority for free zone establishments to conduct activities outside their zones under specific conditions.

The decision clearly outlines the roles of the Department of Economy and Tourism (DET), operating through its licensing arm, the DBLC, and the Dubai Free Zone Council (DFZC). These bodies are jointly responsible for implementing the permit framework, ensuring compliance, and coordinating with individual free zone authorities.

Under this resolution, free zone companies can access the mainland through one of three channels: establishing a formal mainland branch, setting up a branch operating from a free zone, or obtaining a temporary permit for specific activities. The FZMOP falls into this third category, which is a flexible, temporary authorization designed for market exploration and project-based work.

How the Free Zone Mainland Operating Permit Functions

The permit is designed for simplicity and accessibility. Eligible free zone companies can apply through the Dubai Business Registration and Licensing Corporation (DBLC) in coordination with their home free zone authority. Upon approval, the company can conduct its licensed activities on the mainland for up to 6 months, with the option to renew.

Currently, the permit focuses on non-regulated sectors, including technology, consultancy, design, marketing, and general services. This targeted approach allows Dubai to stimulate innovation and collaboration in key growth areas. The list of eligible activities is expected to expand as the regulatory framework matures.

Two critical operational provisions underpin the permit:

1. Financial Separation:Companies must maintain distinct financial records for their mainland and free zone operations. This ensures transparency, simplifies tax reporting, and facilitates proper auditing.
2. Workforce Flexibility:A significant practical benefit is the ability for businesses to use their existing free zone-registered workforce for permitted mainland operations, reducing administrative overhead and cost.

Tax Implications

The requirement for financial separation is particularly important for corporate tax compliance. Revenue generated from permitted mainland activities will be subject to the federal 9% corporate income tax. Conversely, income derived from operations within the free zone may continue to benefit from preferential tax treatment, provided the entity qualifies as a 'Qualifying Free Zone Person' under Federal Tax Authority regulations.

This clear distinction provides companies with the certainty needed to plan their finances and ensures the government can apply tax rules fairly and transparently.

Administrative Process and Fees

The application process requires companies to obtain approval from their respective free zone authority and to provide a valid trade license, along with other documents stipulated by the DBLC. Depending on the activity, additional approvals from sector-specific regulators may be necessary.

The fee structure is straightforward:

• The cost for issuing or renewing the temporary FZMOP is AED 5,000.
• Establishing a more permanent branch operating out of a free zone carries an annual fee of AED 10,000.

These fees are modest compared to the cost of establishing and maintaining a separate mainland company, making the permit a compelling option for market expansion.

The Strategic Impact on Dubai's Economy

The introduction of this permit is a pragmatic answer to long-standing structural barriers. Its effects are expected to be felt across the economy:

• For Free Zone Companies:New revenue streams become accessible. Businesses can now engage directly with local clients, bid on public sector contracts, and form partnerships with mainland entities, all while retaining their free zone benefits.
• For the Government:The policy encourages the formalization of business activities, increases transparency, and ensures appropriate taxation on mainland-derived revenues.
• For the Ecosystem:Startups and SMEs in free zones can test the mainland market with minimal risk, fostering entrepreneurship. The entire business environment becomes more fluid, integrated, and competitive.

This reform demonstrates Dubai's commitment to evolving its regulatory framework in line with the needs of modern global investors, who prefer flexibility, efficiency, and simplicity. The wall between the free zone and the mainland has not been torn down, but a major and highly strategic gate has been installed.