New Resolution Offers Greater Market Access for Free Zone Businesses
Dubai has taken a bold step forward with Executive Resolution No. 11/2025, allowing free zone companies to establish branches in mainland Dubai. This groundbreaking decision provides exceptional operational flexibility while potentially subjecting these businesses to the 9% corporate tax rate for mainland operations.
What This Means for Free Zone Companies
Under the new framework, free zone establishments can now apply for a licence from the Department of Economy and Tourism (DET) to open mainland branches or request permits for specific activities. This represents a significant change from previous restrictions that limited market access for free zone companies.
“This is a game changer for Dubai since it will provide immense flexibility to several free zone companies to undertake permissible business activities in mainland Dubai with ease,” explains Nirav Rajput, partner at Aurifer Middle East Tax.
Tax Considerations for Expanding Companies
While this expansion opportunity is welcome news, free zone businesses should carefully consider the tax implications:
- Mainland branches will be subject to 9% corporate tax if annual income exceeds Dh375,000 ($100,000)
- Separate financial statements must be maintained for mainland operations
- All local, federal and regulatory compliance requirements apply to mainland branches
The UAE’s Corporate Tax Law allows qualifying free zone entities to benefit from a 0% corporate tax rate on qualifying income. However, non-qualifying income—including that generated by mainland branches—falls under the standard 9% rate.
Increased Investment Potential
Experts predict this policy change will stimulate economic growth across Dubai. “This will certainly lead to an increase in investments in mainland Dubai, boosting the economy and creating employment,” notes Rajput.
The resolution applies to all free zone establishments looking to operate outside their designated zones, with the exception of financial institutions licensed within the Dubai International Financial Centre (DIFC).
Compliance Requirements
Free zone businesses pursuing mainland operations should prepare for additional obligations:
- Compliance with all relevant federal and local laws
- Maintenance of distinct financial records for operations outside the free zone
- Adherence to DET-approved business activities (to be published within 6 months)
Expert Perspectives
Lara Barbary, partner at BSA Law, highlights how this change addresses a longstanding limitation: “Dubai’s free zones have long been a magnet for international businesses due to benefits including tax exemptions, full foreign ownership, and streamlined customs procedures. However, the geographical limitations have often been a barrier to further growth. Resolution No. 11 of 2025 dismantles that boundary.”
Nirav Shah, director of Fame Advisory DMCC, adds that these changes apply specifically to the Emirate of Dubai and do not alter requirements from other federal laws. “For example, tax law prescribes certain requirements for substance to be created in the free zone. This will stay and will not change due to the flexibility offered,” he explains.
Shah also suggests potential future improvements: “If we move to a common authority which issues licences, it may streamline lots of processes, and also offer cost-benefit to companies operating in Dubai. The need is to rationalise the applicable costs of doing business and make it more attractive, which will further boost overall business environment and employment opportunities.”
Key Takeaway
Dubai’s Executive Resolution No. 11/2025 removes significant barriers for free zone companies wishing to access the mainland market, offering substantial growth opportunities while introducing new tax and compliance considerations. Free zone businesses should carefully assess both the advantages and responsibilities of mainland expansion under this progressive framework.
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