What is the difference between mainland, free zone and offshore?
The difference is who registers the company and where it is allowed to do business. A mainland company is licensed by the economic department of its emirate. A free zone company is licensed by the authority of the free zone it sits in. An offshore company is registered by JAFZA, RAK ICC or Ajman Free Zone. JAFZA issues a certificate of incorporation, not a license, and states that its offshore company cannot conduct commercial activity with persons within the UAE.
The table sets the three side by side.
| Point | Mainland | Free zone | Offshore |
|---|---|---|---|
| Registered by | The economic department of the emirate. In Dubai, the Department of Economy and Tourism (DET) | The free zone's own authority, for example DMCC or JAFZA | JAFZA, RAK ICC or Ajman Free Zone |
| What you receive | A trade license | A free zone license | From JAFZA, a certificate of incorporation, not a license |
| Where it can trade | In its emirate, across the UAE and abroad | Inside the free zone and abroad. Mainland sales need a distributor, a branch or a permit | Outside the UAE. JAFZA requires licenses or permits from the competent authorities before any business activity in the zone or elsewhere |
| Foreign ownership | Up to 100%, except a short list of strategic activities | 100% | JAFZA accepts one or more shareholders, individuals or companies |
| Residence visas | Yes. In Dubai there is no fixed cap: the number follows the premises and the activity | Yes. The number depends on your package and office | Not as a rule. A JAFZA offshore company that owns freehold property may apply for its members |
| Office | A leased physical address, registered with Ejari in Dubai | From a flexi desk to a full office or warehouse | A registered office, usually at the registered agent's address |
| Corporate tax | 0% on taxable income up to AED 375,000, 9% above it | 0% on Qualifying Income for a Qualifying Free Zone Person, 9% on its other taxable income | No official text names offshore companies. Article 11 treats a company incorporated under UAE legislation as a Resident Person |
What can a mainland company do?
A mainland company can sell to customers anywhere in the UAE. Invest in Dubai, the DET portal, states that a mainland company has no territorial restriction: it can operate within the UAE, including the free zones, and outside it.
Full foreign ownership of mainland companies was first permitted by Federal Decree-Law No. 26 of 2020. The governing law is now Federal Decree-Law No. 32 of 2021 on Commercial Companies. Its Article 10(3) lets each emirate set a ratio of UAE national participation, so full foreign ownership is the default and not an unconditional right. Cabinet Resolution No. 55 of 2021 lists seven activities with a strategic impact. For six of them, among them military and security activities, banking and telecommunications, the sector regulator sets the permitted foreign shareholding. Services related to fisheries must be 100% nationally owned.
The law sets no fixed minimum capital for a limited liability company (Article 76). What a mainland company does need is a physical address. In Dubai the lease must be registered with Ejari.
Good to knowThe Ministry of Economy and Tourism states that investors can have full ownership in all five legal forms in the Commercial Companies Law, the limited liability company among them. The Ministry also states that the national agent requirement still exists for sole establishments, subject to local legislation. Official pages do not agree on civil companies owned by non GCC nationals.
What can a free zone company do?
A free zone company can trade inside its free zone and internationally. The UAE government portal lists up to 100% foreign ownership in free zones and 100% profit repatriation among the country's investment incentives.
The same portal states that goods imported into a free zone carry 0% customs duty, and that goods stored there for re-export carry none. Duty applies once goods move into the mainland market.
The limit is local sales. The government portal states that a free zone company must work through a licensed mainland distributor or set up a mainland branch or company, and that direct mainland sales are generally not permitted without the required mainland licenses or approvals. In Dubai only, Executive Council Resolution No. 11 of 2025 lets a free zone company apply to DET for a branch license or a permit of up to six months. The resolution does not apply to financial establishments licensed in the DIFC. The permit is open to companies holding a Dubai Unified License, and its first phase covers non-regulated activities.
What is a UAE offshore company used for?
The registries describe an offshore company as a vehicle for holding assets or for sitting above other companies. Ajman Free Zone lists the uses of its offshore entity as holding companies, special purpose vehicles, real estate holding, parent company structures and international trading. JAFZA lists international trade, holding companies, owning real estate, registration of copyrights and patents, and international consulting services.
Ajman Free Zone also states that the product comes with no visas and no office space, and that it does not suit a business that needs local UAE operations or trades directly within the UAE market.
JAFZA registers offshore companies in Dubai under its Offshore Companies Regulations 2023. A JAFZA offshore company must have a registered agent unless it keeps an office in the zone, and it must obtain the appropriate licenses before it carries out business activities in the zone or in any other jurisdiction.
Good to knowRules differ by registry. JAFZA requires an annual audit and accounting records kept for 10 years. The RAK ICC regulations we read, dated 2018, require records to be kept for at least five years. Ajman Free Zone does not publish its offshore rules.
How does corporate tax apply to each structure?
The Corporate Tax Law does not treat the three structures in the same way. Under Federal Decree-Law No. 47 of 2022 the rate is 0% on taxable income up to AED 375,000 and 9% above it.
A free zone company is a taxable person. It pays 0% only if it is a Qualifying Free Zone Person, and only on Qualifying Income. Its other taxable income is taxed at 9%, and the Federal Tax Authority states that a Qualifying Free Zone Person does not get the AED 375,000 band. Every Free Zone Person must register and file a return.
For offshore companies the position is a reading of the law, because no official document names them. Article 11 treats a juridical person incorporated under UAE legislation as a Resident Person, and Article 12 taxes a resident juridical person on income from inside and outside the UAE. Every taxable person must register with the Federal Tax Authority (Article 51).
Good to knowThe 0% rate belongs to the Qualifying Income of a Qualifying Free Zone Person, not to free zone companies in general. Confirm how the law applies to your company with a qualified tax adviser.
What do the sources say for each kind of business?
The starting point is where the customers are. The list sets out what the official sources say for four common cases.
- Customers in the UAE: a mainland company has no territorial restriction.
- Clients abroad or in a free zone: a free zone company can trade inside its free zone and internationally.
- Holding shares, property or intellectual property: JAFZA lists holding companies, owning real estate and registering copyrights and patents among the uses of an offshore company.
- Consultancy from a free zone: consultancy is not on the list of Qualifying Activities in Ministerial Decision No. 229 of 2025, and transactions with natural persons are an Excluded Activity, with limited exceptions.
Good to knowThe choice is not permanent. Since the 2025 amendment to the Commercial Companies Law, a company can transfer its registration from one licensing authority to another, including from a free zone to the mainland, and keep its legal personality (Article 15 bis).