Freezone vs Mainland in 2025: Discover the pros, cons, costs, and tax implications to make the best decision when launching a business in the UAE.

1. What’s the difference between Freezone and Mainland?

When setting up a company in the UAE, one of the first decisions is choosing between a Freezone and the Mainland.

• Freezone: These are special economic zones designed to attract foreign investors by offering full foreign ownership, simplified business setup, and various tax incentives. Ideal for international trade, e-commerce, freelancing, and service-based businesses.

• Mainland: Refers to the area under the jurisdiction of the Department of Economic Development (DED). It allows companies to operate freely across the UAE, deal directly with local clients, and take part in public or private sector projects.

2. Freezone Benefits & Limitations in 2025

Benefits:

• 100% foreign ownership with no local sponsor required.

• Quick and simple setup process.

• Lower startup costs compared to Mainland options.

• 0% Corporate Tax if your company qualifies as a "Qualified Free Zone Person" and engages in eligible activities.

Limitations:

• Cannot invoice Mainland clients directly unless using a local distributor or opening a branch in the Mainland.

• Limited access to government tenders and some B2B opportunities.

• Potential credibility concerns with certain banks or larger partners.

3. Mainland Benefits & Constraints

Benefits:

• Full access to the UAE market with no geographic limitations.

• Eligible to sign government contracts and operate in sectors with high local demand.

• More freedom in managing your business operations, hiring, and expanding.

Constraints:

• Physical office space is mandatory to obtain a license.

• Setup procedures may take longer than in Freezones.

• Licensing and overhead costs are generally higher than Freezones.

4. Cost Comparison in 2025

In Freezones, annual license fees can start at AED 5,500, and business visas typically cost AED 3,000 to 5,000 per employee. You can also use virtual office options, making it more affordable.

In the Mainland, licenses usually range between AED 15,000 and 25,000, with visa costs around AED 5,000 to 7,500 per employee. A physical office is required, which adds to the total cost.

5. Tax Implications in 2025

The Corporate Tax of 9% applies to both Mainland and Freezone companies. However, qualified Freezone companies with eligible activities can still enjoy 0% tax.

The 5% VAT applies to all businesses once their annual revenue exceeds AED 375,000, regardless of their structure.

6. How to choose the best option in 2025?

Your ideal structure depends on your target market and business model:

• Targeting international clients, doing freelancing, or running an online business? → Go for a Freezone.

• Want to sell locally, open a physical store, or serve UAE-based clients? → Choose Mainland.

• Need to build strong credibility with banks or large institutions? → Mainland is recommended.

Still unsure which option fits your project?
At SLM Consultants, we provide tailored advice based on your goals, industry, and budget. Contact us now for expert support in launching your business in the UAE.