Free zone or mainland in Dubai: which structure fits your business

It is the sentence we repeat most often, and the one people hear least. A licence does not authorise “consulting” or “trading” in general: it authorises specific activity names, listed by the jurisdiction, one by one. A firm that sells management consulting and also resells software carries on two activities. If the second is not on the licence, it is not covered — and that usually comes to light at the worst moment: at the bank, at the audit, or in a dispute with a client.

The second variable is market access. A free zone company is established within a perimeter that gives it its own framework and, often, a lower cost. That perimeter is also a limit: for most activities, it cannot invoice a client on the domestic market directly without a distributor, agent, branch or second licence. This does not cut it off from the country. It means the detour has a cost, and that cost must be compared with a mainland licence before you choose, not after.

The third variable surprises everyone: the visa quota does not follow your activity, it follows your space. On the mainland, the number of residence permits the company can sponsor is linked to the premises leased and the registered lease. In a free zone, it is linked to the package. A team that grows from three to eight people does not need a different licence: it needs a different office, and that is the budget line that quietly blows up.

Last comes substance. Corporate tax, the qualifying free zone regime, the tax residency certificate and opening a bank account all rest, to different degrees, on the same question: does the company really exist where it says it does? Premises, people, decisions taken on the ground. A structure chosen only on its headline price fails on this point, and the failure shows twelve to eighteen months later.

The questionnaire does not apply a score: it applies four rules, in this order. A regulated activity overrides everything else and suspends the recommendation, because the sector regulator then decides the jurisdiction. Next comes pure holding — no visa, no office, no revenue — which describes an offshore vehicle. Next comes selling to the UAE domestic market, which calls for a mainland licence. Everything else points to a free zone.

Corporate tax exposure is calculated in two bands. The revenue you enter is converted into profit using the net margin set in the assumptions, 30% by default. The part of that profit below the AED 375,000 threshold is not taxed; the part above it is taxed at 9%. The scale is marginal, so there is no cliff edge. A warning: taxable profit is not the accounting margin. It results from adjustments that only your accounts can produce.

One threshold is not an official figure but our own judgement, and it is better to say so: above six visas, the tool says the quota stops being a line in the package and becomes the first criterion for choosing. That is what we see in client files, it is not a legal rule, and you may disagree.

Every rate and every threshold is shown in the form, editable, and never collapsed. The VAT registration threshold is left empty by default: it is revised from time to time, and we will pre-fill it once it has been re-checked with the Federal Tax Authority. The five cost fields stay empty for the same reason. The “Reset” button restores the starting values; it does not validate them.

Every value used here — threshold, rate, banking lead time, the editorial visa-quota threshold — has a line in our verification register, with the status “to verify”. They are working values. They will be confirmed, corrected or removed, and this page will be updated with them.

The state of the questionnaire lives in the page address. You can send it to your accountant or lawyer: they will see exactly your answers, assumptions included.

A tool that claimed to decide on its own would be a dishonest tool. Here is what this one does not do, and what you will need to deal with elsewhere.

• It does not read your jurisdiction’s list of activities. Yet that is the point that decides in the end. Until the exact name of your business has been found on an official list, the recommendation remains a working hypothesis.
• It does not deal with your personal tax position. It flags that the country you are leaving has its say. It does not calculate exit tax, tax on dividends or controlled foreign company rules.
• It ignores the permanent establishment question. Selling from Dubai to clients concentrated in one country can create a permanent establishment there, and so a local tax obligation. That is a tax-treaty question, not a licence question.
• It does not model VAT transaction by transaction. Zero-rating, exemption and place of supply are decided at invoice level, never at company level.
• It does not price the exit. Deregistration, visa cancellation, lease termination: these costs exist and almost never appear on an entry quote.
• It knows neither your bank nor its current appetite. Acceptance policies change, including from one quarter to the next and from one jurisdiction to another.
• The price of a free zone depends on the zone, the activity and the package chosen. A fee shown here would be wrong for most readers, and out of date for the rest.

Nothing above is legal or tax advice. Depending on your personal situation, the conclusions may change entirely: have them checked before you file an application.