Mainland vs free zone company setup in the UAE: how to choose

Published 9 November 2026 · 6 min read

For years the choice between mainland and free zone was mostly about ownership. That is no longer the main question. Today the decision turns on who your customers are, what activity you will carry out and which authority you want to deal with.

Mainland: full ownership for most activities

Federal Decree-Law No. 26 of 2020, which took effect in early 2021, opened mainland companies to full foreign ownership and removed the requirement for a majority Emirati shareholder or local partner. Those changes now sit in Federal Decree-Law No. 32 of 2021 on Commercial Companies.

The exception is activities of strategic impact. The Cabinet identifies them and sets their licensing requirements, which may include limits on foreign ownership. The official UAE portal lists examples such as:

• Security, defence and military activities
• Telecommunications
• Banking, financing, insurance and currency exchange
• Commercial agencies, Hajj and Umrah services, and fishing

How a mainland licence is obtained

Mainland licences are issued by the economic department of the emirate concerned. The standard route, as the UAE portal sets it out, runs through these stages:

1. Identify the business activity and choose a legal form.
2. Register a trade name and obtain initial approval. Foreign investors need security approval from the residency authority before this stage.
3. Prepare the memorandum of association, and a local service agent agreement where the licence type requires one.
4. Secure a business location and any additional government approvals.
5. Submit the documents and collect the licence.

The memorandum of association must be duly attested; UAE law firms, courts and notaries prepare and attest these documents.

Free zones: a separate jurisdiction

Free zone companies can be fully owned by foreign investors and are licensed by the authority of the zone where they are set up, each with its own rules. Common legal forms include the free zone establishment, the free zone company, the limited liability company and the branch of a local or foreign company, though not every zone registers every form. The UAE portal highlights customs advantages: no customs duty on goods imported into the zone, and none on goods stored there for re-export.

The trade-off is market access. Free zone companies are treated as outside the mainland jurisdiction, and direct sales into the mainland are generally not permitted. To sell locally, a free zone company usually works through a licensed mainland distributor or opens a mainland branch or company.

Questions that usually decide it

• Will most of your customers be on the UAE mainland, or abroad and in other free zones?
• Is your activity on the strategic impact list or subject to sector approvals?
• Do you need a particular free zone's ecosystem, regulator or customs regime?
• Will the shareholder be an individual or a foreign parent company?

The documents behind a corporate shareholder

When a foreign company is the shareholder, its constitutional documents, board resolutions and powers of attorney are issued abroad. The UAE Ministry of Foreign Affairs routes such documents through attestation and asks for them in Arabic or English, or with a legally certified translation. Under Federal Decree-Law No. 22 of 2022, UAE authorities may only authenticate translations produced by a translator or translation house on the Ministry of Justice list.