UAE business setup: mainland vs free zone
Where you set up in the UAE shapes who you can sell to, how much you own, and what you pay. The choice comes down to three structures — mainland, free zone and offshore — each with clear trade-offs. Here is how they compare, and what you’ll need in place once the licence is issued.
The three structures at a glance
- Mainland (onshore): licensed by the emirate’s Department of Economic Development (DED). Can trade anywhere in the UAE and bid for government work.
- Free zone: licensed by a free-zone authority (JAFZA, DMCC, RAKEZ, IFZA, SHAMS, and financial zones DIFC/ADGM). 100% foreign ownership with customs and setup benefits.
- Offshore: a holding/asset vehicle with no UAE operational presence — used for ownership and international structuring, not local trade.
Mainland — full market access
A mainland licence lets you trade directly across the UAE, open shops or offices anywhere, and take on government and large-enterprise contracts. Since the 2021 reforms to the Commercial Companies Law, 100% foreign ownership is allowed for most commercial and industrial activities — a local partner is no longer required for them, though a short list of strategic activities still has conditions. Mainland companies generally need physical office space sized to their visa quota.
Free zone — ownership & speed
Free zones offer 100% foreign ownership, fast setup, customs benefits and flexible office options — from a flexi-desk to a warehouse. The trade-off: a free-zone company selling into the UAE mainland market normally works through a local distributor or by opening a mainland branch. Free zones often specialise (DMCC for trading, JAFZA for logistics, twofour54 for media, DIFC/ADGM for finance), so the right zone depends on your activity.
Tax & compliance — both pay attention here
- UAE corporate tax is 0% on taxable income up to AED 375,000 and 9% above it. A Qualifying Free Zone Person can keep a 0% rate on qualifying income if it meets the conditions — otherwise free-zone profits are taxed like mainland.
- VAT of 5% applies to most goods and services regardless of structure; registration is mandatory above the AED 375,000 turnover threshold.
- All companies must keep proper accounting records for corporate tax and VAT — bookkeeping is no longer optional.
- Payroll for staff on MOHRE permits runs through the Wage Protection System (WPS).
After the licence: the system to run it
A licence is the start, not the finish. The moment you invoice, hire or hold stock, you need accounting, VAT-ready invoicing, payroll and inventory that work together. This is where an ERP earns its keep: Odoo scales from a single-licence startup to a multi-company group, keeps you VAT and corporate-tax ready, and runs WPS payroll — all in one place. Oakland, the UAE’s #1 Odoo Gold Partner, sets it up around how your business actually operates.
Related: UAE corporate tax calculator
Frequently asked questions
Can a foreigner own 100% of a company in the UAE?
Yes. Free-zone companies have always allowed 100% foreign ownership. Since the 2021 Commercial Companies Law reforms, mainland companies also allow 100% foreign ownership for most commercial and industrial activities, with conditions remaining on a limited list of strategic activities.
Mainland or free zone — which is better?
It depends on your market. Choose mainland if you need to sell directly across the UAE or win government contracts. Choose a free zone if you are export- or services-focused and want 100% ownership, fast setup and customs benefits. Many groups use both — a free-zone company plus a mainland branch.
Do free-zone companies pay corporate tax in the UAE?
Generally the 9% corporate tax applies above AED 375,000 of taxable income. A Qualifying Free Zone Person can keep a 0% rate on its qualifying income if it meets the conditions; income that does not qualify is taxed at the standard rate.
Can a free-zone company sell in the UAE mainland?
Not directly in most cases. A free-zone company usually sells into the mainland through a licensed local distributor or agent, or by opening a mainland branch. Selling within the free zone and internationally is unrestricted.
Do I need accounting software from day one?
Effectively, yes. UAE corporate tax and VAT both require proper accounting records, and VAT-compliant invoicing applies once you register. Starting on an ERP like Odoo means your books, invoices, inventory and payroll are clean and audit-ready as you grow — instead of an expensive clean-up later.
Just set up? Get the system right from day one
Oakland configures Odoo for new UAE companies — accounting, VAT and e-invoicing, inventory, and WPS payroll — so you scale on clean foundations instead of spreadsheets.