Dubai's Game-Changer: New Executive Council Resolution Unlocks Mainland Access for Free Zone Companies

The newly issued Dubai Executive Council Resolution No. (11) of 2025 (the “Resolution”) will enable Dubai free zone entities to expand their business activities to mainland Dubai through the issuance of onshore licenses and activity permits. This is the latest move by the Dubai government to encourage business growth and investment in alignment with Dubai's D33 agenda which aims to double the size of Dubai’s economy and establish Dubai as a global business hub by 2033.

What this means for businesses

Under the provisions of the Resolution, entities established in Dubai free zones (other than financial institutions licensed to operate within the Dubai International Financial Centre (“DIFC”)) may apply to the Dubai Department of Economy and Tourism (“DET”) for one of three new types of licenses and permits:

• A license to establish a branch of the free zone entity in Dubai (onshore) (as per the existing branch establishment requirements)
• A license to establish a branch of the free zone entity with its headquarters in the free zone (one year validity with a AED10,000 issue/renewal fee)
• A temporary permit for the free zone entity to practice some activities within Dubai (onshore) (up to six months validity with an AED5,000 issue/renewal fee)

Issuance of the new licenses and permits will be subject to the approval of the DET and any other UAE authority which regulates the relevant business activity onshore in Dubai as well as submission of the prescribed corporate documents of the free zone entity. The list of commercial activities which can be carried out by free zone entities into mainland Dubai under the Resolution is expected to be released within the next six months.

The new regime opens up opportunities for business growth through access to a wider customer base, lower operational costs and greater efficiencies, while breaking down barriers within the Dubai business ecosystem.  As the Resolution is Dubai local legislation, Dubai free zone established businesses looking to operate outside the emirate of Dubai must obtain the necessary licenses and permits from the relevant authorities in the intended location, ensuring compliance with applicable regulations in those locations. Any establishment licensed to operate in Dubai under the Resolution will be subject to inspections in accordance with relevant federal and local laws, as well as procedures agreed between the DET and other relevant UAE licensing authorities.

Under previous regulations, the majority of Dubai free zone entities have been limited to carrying out their businesses from and within the free zones, unless they have completed the procedures and requirements to set up a subsidiary or branch office onshore in mainland Dubai with the required DET licenses, including maintaining physical business premises “onshore” in Dubai, a separate workforce, and any applicable capital requirements in the case of a subsidiary company. 

Limited exceptions to this have been available in Dubai under individual memorandums of understanding (“MoU”s) agreed in the period from 2017 to 2020 between the DET and each of the DIFC, Dubai Airport Free Zone (“DAFZA”), the Dubai Multi-Commodities Centre (“DMCC”) and Dubai Design District (“D3”) free zones, which provide regimes for qualifying free zone licensed entities to obtain dual licenses to operate in mainland Dubai. During this same period, the Abu Dhabi Department of Economic Development (“ADDED”) launched its Dual License Initiative which applies to all Abu Dhabi free zones and permits Abu Dhabi free zone companies to carry out their business activities in Abu Dhabi outside the free zone without the need for additional physical premises or a local service agent.

These dual licensing regimes were put in place before the relaxation of foreign ownership restrictions for UAE onshore companies under amendments to the UAE Commercial Companies Law in 2020. This latest Dubai Resolution comes hot on the heels of ADDED’s regulations issued in February 2025 allowing firms registered in other UAE emirates (including their free zones) to open branches in Abu Dhabi without requiring physical premises for the first year and is part of the general trend towards opening up the UAE market, removing barriers and encouraging investment and trade.

Implementation and key obligations on businesses 

List of Activities: The Resolution provides that the DET, in coordination with the relevant licensing authorities, will issue a list of economic activities that free zone businesses can conduct in Dubai. This list is expected to be issued within six months of the Resolution’s issue date  of 3 March 2025 and the permitted activities will depend on whether the free zone business holds a branch license in Dubai, an onshore branch with its physical headquarters in a Dubai free zone, or a permit for specific activities onshore.

Separate Financial Records: Under the Resolution, free zone businesses licensed or permitted under the Resolution to operate in mainland Dubai must maintain distinct financial records for its operations conducted outside the free zone. This is in line with the accounting requirements currently applied to branches of foreign companies incorporated onshore, further details are yet to be confirmed.

Corporate Tax Implications: Qualifying Dubai free zone companies can benefit from a 0% corporate tax rate on qualifying income, however, this tax treatment does not extend to any branch offices they may have in mainland Dubai (or the UAE more generally), which are subject to the standard 9% corporate tax rate unless the income is otherwise exempt. The requirement for separate financial records to be maintained for onshore business conducted by free zone entities under the new regime indicates this difference in tax treatment will also apply in respect of the new structures, even where there is no formal or physical branch established onshore. As such, while free zone businesses will need to consider additional tax compliance obligations, it does not appear that taxation will be a key driver in the decision to take up the opportunities offered under the Resolution.

Compliance Obligations: Free zone businesses operating onshore must still comply with relevant federal and local regulations for their activities, distinct from those within the free zone. This could raise compliance challenges depending on the activities and it will be important for businesses carrying out regulated activities to remain fully abreast of regulatory developments across both the mainland and the relevant free zone to ensure they comply with both as applicable.

One Year Transition Period: Existing businesses operating outside free zones and within the emirate of Dubai must comply with the provisions of the Resolution within one year, with an option for a one-year extension if approved by the Director General of the DET.

Capitalising on New Opportunities

The Resolution marks a significant advancement in enhancing the UAE's business landscape and reestablishes the competitiveness of Dubai’s commercial licensing frameworks within the UAE. It builds on Dubai’s moves to enhance integration throughout the emirate and its commitment to removing physical challenges and improving the ease of doing business through more business-friendly regulations and creating an enabling environment.

The new regime presents an opportunity for existing established businesses to expand their market reach, benefit from increased flexibility, enhance their brand visibility across the entire emirate and reassess their Dubai business structures to consider whether there any operational efficiencies, costs savings or growth opportunities to be capitalised on through a restructure of their corporate licensing arrangements, in particular for:

• groups already operating through multiple entities and physical sites across both Dubai free zones and onshore in mainland Dubai;
• businesses established onshore in mainland Dubai whose business activities may lend themselves to relocating to a free zone to benefit from the various incentives that come with a free zone operation and obtaining specific activity permits or a dual onshore branch license for the onshore operations that do not require a physical space in the mainland; and
• businesses established in free zones who may now have access to a wider customer base through dual licensing and special activity permits, including the full Dubai consumer base, government contracts, local businesses and non-free zone companies, opening up opportunities for revenue growth.

In light of the significant development represented by the new Resolution, Dubai’s enhanced business landscape is poised to attract not only inbound investment but will also foster greater opportunities for consolidation and collaborations within the emirate and the UAE as a whole. As highlighted in the recently published CMS Middle East M&A Report 2024/2025, the UAE continues to be a hub for mergers and acquisitions, with increasing activity expected in the coming years. This new Resolution serves as a catalyst for further growth, reinforcing Dubai’s position as a regional and global business hub and offering a wealth of opportunities for both existing companies and new market entrants. The continued evolution of Dubai’s regulatory environment is paving the way for an even more dynamic and interconnected business ecosystem.

If you would like to explore what new opportunities this development may present for your business, please feel free to reach out to our UAE team.

Co-authored by Louise Gunn, Associate