Setting Up a Company in the UAE: Free Zone vs Mainland
A UAE company can be established either in a free zone or on the mainland, and since 1 June 2021 most mainland activities allow 100% foreign ownership — removing the old requirement for a majority Emirati shareholder. The right choice depends on where you sell, who your customers are, and your tax position.
Free zone
Free zones offer 100% foreign ownership, streamlined setup, and the possibility of a 0% corporate tax rate on qualifying income for a Qualifying Free Zone Person. The trade-off is that selling directly into the UAE mainland can create non-qualifying income and may require a distributor or a mainland branch.
Mainland
A mainland licence lets you trade freely across the UAE and bid for government contracts. Under Federal Decree-Law No. 26 of 2020, 100% foreign ownership is permitted for the large majority of commercial and industrial activities; only around seven strategic sectors (such as security, banking and insurance) still carry ownership or approval restrictions. Mainland income is taxed under the standard 9% / 0% corporate tax regime.
Tax and VAT apply either way
Whichever route you take, corporate tax registration is mandatory, and a standard VAT rate of 5% has applied since 1 January 2018 for businesses over the registration threshold.
Key figures
- 100% foreign ownership for most mainland activities since 1 June 2021 (UAE Government)
- Free zone: potential 0% corporate tax on qualifying income for a Qualifying Free Zone Person
- VAT standard rate 5% since 1 January 2018; corporate tax registration mandatory
Frequently asked questions
Should I set up in a UAE free zone or on the mainland?
Choose a free zone if you want potential 0% corporate tax on qualifying income and mainly trade internationally or with other free-zone businesses. Choose the mainland if you need to trade freely across the UAE or bid for government work; since June 2021 most mainland activities allow 100% foreign ownership.
Can foreigners own 100% of a UAE mainland company?
Yes, for the large majority of commercial and industrial activities since 1 June 2021 under Federal Decree-Law No. 26 of 2020. Around seven strategic sectors still carry ownership or approval restrictions.
By Vijay Dhawan, Managing Partner, LexVerge LLP. Last updated 2 July 2026. This article is general information, not tax advice; confirm the current position for your facts before acting.
