Mainland vs Free Zone in Dubai

What’s the Real Difference?

When people talk about starting a business in Dubai, the first big question is always:

“Should I open in Mainland or in a Free Zone?”

On paper they can sound similar. In reality, they are built for very different types of businesses.

Think of it like this:

• Mainland = best for businesses that want to sell inside Dubai and across the UAE

• Free Zone = best for businesses that trade with other Free Zones or export outside the UAE
  

Let’s break it down in normal language.

1. Where You Can Actually Do Business ( Mainland vs Free Zone)

Mainland

If your company is on the Mainland (onshore license):

• You can sell directly to customers in Dubai and anywhere in the UAE

• You can open retail shops, restaurants, cafés, salons, clinics, showrooms, burger joints, fashion stores, etc.

• You can sign contracts with local companies without needing a middleman

Basically, if you want a shop in a mall, a burger restaurant, a fashion brand store, or any walk-in business, you are in Mainland territory.

Free Zone

Free Zones are designed mainly for:

• Trading with other Free Zone companies

• Exporting goods outside the UAE

• Service or online businesses that don’t need a retail shop on the street
  

A Free Zone company cannot just open a retail shop in Dubai Mall or a street location in Deira or Jumeirah under its Free Zone license.

If a Free Zone company sells goods into the Mainland, then:

• As soon as the goods leave the Free Zone and enter the Mainland,

• There is normally a 5% customs duty on the value of the goods

• And usually a local mainland distributor or agent is involved
  

So Free Zones are not ideal for a fashion store, burger shop, supermarket, or any business that depends on walk-in local customers.

They are more suitable for wholesale, B2B, export, e-commerce, tech, consulting, trading hubs, logistics, etc.

2. Retail vs Wholesale / Export

This is one of the easiest ways to decide:

• If your business is retail, food & beverage, beauty, medical, real estate brokerage, or anything with a physical shop or local clients,→ Mainland is usually the correct structure.

• If your business is import-export, online services, international trading, or B2B dealing with other companies globally or in Free Zones,→ Free Zone can be a very good option.
  

3. Customs and the 5% Duty

This is where many people get confused.

• Goods stored and traded inside a Free Zone are not treated the same as goods inside Mainland UAE.

• When those goods enter Mainland UAE, they are treated as imports and a 5% customs duty is usually applied.

So if your plan is to bring containers, store them in a Free Zone, and then sell all of it to supermarkets in Dubai, you must calculate 5% customs duty when it enters Mainland.

If your plan is to import and then export to other countries, Free Zones can be very cost-efficient because the goods might never enter Mainland UAE at all.

4. Physical Presence and Image

Mainland

• You can have a proper office, showroom, or shop in the city.

• Better for brand visibility if your customer is in Dubai or the UAE.

• You can participate more naturally in the local economy.
  

Free Zone

• You usually get an office inside the Free Zone, flexi-desk, or shared space.

• That’s perfectly fine for back-office operations, online work, B2B, logistics, trading, or tech companies.

• But again, not ideal for consumer retail.
  

5. Cost and Setup

In general (very simplified):

• Free Zone

  • Often cheaper to start

• Mainland

  • Can be more expensive depending on office/shop size and location

  • But it gives you proper access to the entire UAE market.
    

Cost should not be the only factor. The main question is:

“Where are my customers? Free Zone / export, or people physically living in Dubai and the UAE?”

6. So Which One Is Right for You?

Mainland is better if:

• You want a restaurant, café, burger shop, bakery, salon, clinic, gym, fashion shop, retail brand, supermarket, etc.

• Your customers are mainly people living in Dubai or the UAE

• You need a physical shop or visible presence

• You do projects, services, or contracts inside the UAE
  

Free Zone is better if:

• You are doing import-export, international trading, online services, consulting, tech startup, logistics, or B2B

• You mainly deal with other Free Zone companies or overseas markets

• You do not need a retail shop in Dubai

• You want simpler setup and lower starting cost
  

Final Summary in One Sentence

• Mainland = full access to the UAE market, perfect for local retail, services, and anything customer facing.

• Free Zone = best for companies trading with other Free Zones or exporting, and not ideal for walk-in retail like fashion stores and burger shops because once goods exit to Mainland, 5% duty applies and you cannot simply open a local shop under that license.

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