Dubai Expands Business Horizons For Free Zone Companies

Dubai has made significant strides toward enhancing its business climate with new regulations allowing free zone companies to operate across the emirate. Issued on March 18, 2025, by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, the resolution empowers businesses licensed within free zones to extend their reach beyond traditional boundaries, provided they obtain the necessary permits from the Department of Economy and Tourism (DET).

This regulatory shift is seen as pivotal for attracting investments and enhancing business flexibility, aligning perfectly with Dubai’s long-term vision encapsulated under its D33 Agenda. This agenda aims to double the emirate's economy to AED 32 trillion within the next decade, making Dubai even more appealing as a global economic hub.

Under the new rules, businesses operating within Dubai's free zones must comply with DET licensing requirements to set up operations on the mainland. Importantly, they are also required to maintain separate financial records for their activities within the free zones and on the mainland. Licenses issued under this new regulation will be valid for one year and are renewable, fostering sustained growth and compliance.

The move is particularly significant considering it opens up new opportunities for free zone businesses, allowing them to access mainland markets without the need for complete relocation. According to Jai Prakash Agarwal, Vice-Chairman at ICAI Dubai Chapter, this regulation expands flexibility for commercial enterprises but must be approached with caution, especially due to the current corporate tax regime established within the UAE.

Investors have responded positively to this initiative. Dubai consistently ranks as the world's top destination for greenfield foreign direct investment (FDI), recording 1,117 new projects worth AED 52.3 billion—a 33.2% increase from the previous year. The ability for free zone companies to tap directly from mainland markets will undoubtedly bolster investor confidence.

Businesses venturing to leverage the new regulations are advised to maintain clarity between their free zone and mainland operations, as confusion could jeopardize their corporate tax relief status. The UAE’s corporate tax regime offers 0% tax for free zone companies if they meet specific conditions; any mismanagement might result in losing this relief for up to five years.

Atik Munshi, Managing Partner at Finexpertiza UAE, pointed out, “Even before the new Dubai announcement, the UAE’s tax rules permitted free zone companies to have branches on the mainland. But due to procedural restrictions, the licensing authorities were not allowing branch licenses for most activities.”

Now, with the DET clarifying its stance, it is expected other emirates may follow suit, amplifying business opportunities across the country. “The 'Department of Economy & Tourism' must issue a list of economic activities businesses can conduct within Dubai within six months from the effective date,” Munshi added.

The resolution is not without exclusions, though. Financial institutions licensed under the Dubai International Financial Centre (DIFC) will not be able to operate under these new regulations, preserving some areas of Dubai for specialized financial activities.

While the new regulations mark progress, they also require businesses to adapt swiftly to comply with both local and federal laws, which will require diligent planning and transparency. Establishments operating outside the free zones must adhere to the new provisions within one year of the effective date, with the possibility of extension at the Director-General's discretion.

This reform is set to drive new investments, facilitate market expansion, and contribute significantly to the emirate’s ambitious economic growth plans. By enabling free zone companies to access mainland markets more seamlessly, Dubai upholds its position as both dynamic and competitive on the global stage. The ripple effects on investor confidence, economic diversification, and digital transformation are expected to pave the way for sustained growth and innovation.