Dubai's Free Zone Mainland Rule: What It Means for DIFC and ADGM Structures

Take a DIFC technology consultancy whose clients are almost all Dubai businesses with mainland licences. For years that business had two unsatisfying choices: set up and run a second company on the mainland, or work carefully within what a free zone company may do for an onshore client. Since March 2025 there has been a third choice, and it is narrower than many of the headlines suggested.

Dubai Executive Council Resolution No. (11) of 2025 lets a company licensed in a Dubai free zone carry on activities on the Dubai mainland under a branch licence or a temporary permit issued by the Department of Economy and Tourism (DET). It does not cover financial firms licensed in the DIFC. It does not reach ADGM. And it says nothing about corporate tax, which for a Qualifying Free Zone Person is the part that needs the most thought.

What the Resolution actually says

Its full title is the Resolution Regulating the Conduct of Free Zone Establishments' Activities within the Emirate of Dubai. The text is on the Dubai Legislation Portal, and it is short enough to read in one sitting, which we would recommend before relying on anyone's summary, ours included. It was published in the Official Gazette on 3 March 2025 and came into force on the day of publication (Article 15). The government announced it on 17 March 2025 through the Dubai Media Office.

The provisions that matter most:

• Article 2: the Resolution applies to free zone establishments that want to operate outside their free zone, but not to financial establishments licensed to operate in the DIFC.
• Article 3: an establishment must hold a licence or permit, comply with federal and local law, and keep separate financial records for its activities outside the free zone. For activities in another emirate, it needs licences from the competent authorities there.
• Article 4: DET may grant a licence for a branch within the Emirate, a licence for a branch operating out of the free zone, or a permit for specific activities. Branch licences last one year and can be renewed for the same period.
• Articles 5 to 7: each route needs an application to DET, the prior approval of the free zone licensing authority, any other government approvals the activity requires, and a valid free zone licence. A temporary permit lasts no more than six months and is available only for activities on the DET list.
• Article 8: the company can use its existing workforce registered on the free zone portal and keep their free zone employment arrangements.
• Article 13: establishments already operating outside their free zone had one year from the effective date to comply, which the Director General may extend once for the same period.

Commentary from KPMG UAE, Reed Smith, CMS and Cleary Gottlieb read the text the same way.

Branch licence or temporary permit

One detail in Articles 5 and 6 is easy to skim past: the branch has no separate legal personality and is not independent of its parent. Contracts the branch signs are the free zone company's contracts, and its liabilities are the company's liabilities. That is also why the tax analysis below works the way it does.

Article 9 required DET, with the free zone licensing authorities, to issue a list of permitted activities within six months of the effective date, showing which activities need a branch licence and which can be done under a permit. Check the current DET list for your exact activity before you plan around it. A summary saying an activity is or is not covered is not a substitute.

DIFC companies: financial or not

The DIFC exclusion turns on whether you are a financial establishment, so the first job is to be clear about your own licence. A firm carrying on financial services under DFSA authorisation is outside the Resolution. A consultancy, software business or other non-financial company registered with the DIFC Registrar of Companies may be inside it, with the DIFC Authority as the licensing authority whose prior approval it needs.

There are cases in between. A group may have a DFSA-authorised firm and a non-financial service company side by side, or a non-financial entity whose activities touch regulated ones. If you are unsure how your entity is classified, our guide to DIFC licence types is a starting point, and the question to put to the DIFC Authority is simple: does it treat your entity as a financial establishment for the purposes of the Resolution?

Most of the structures we administer have no reason to use the Resolution at all. Holding companies and SPVs hold shares or assets. Foundations and family offices exist for ownership and governance. Funds invest. None of them trades with mainland customers, so nothing changes for them.

The businesses it suits are DIFC companies that are not financial entities and already have real mainland demand. For them the gain is practical: one company, one set of shareholders and one set of corporate records, rather than a second entity to form and maintain. Whether a free zone is right for such a business at all is a separate question, which we cover in our comparison of the DIFC and the UAE mainland and our note on when the DIFC is the wrong choice. The Resolution narrows the gap between the two. It does not close it.

ADGM entities are outside it

ADGM is in Abu Dhabi. The Resolution is a Dubai instrument covering establishments licensed by free zone authorities in the Emirate of Dubai, and Article 3 says that activities outside the Emirate need licences from the competent authorities where they take place. An ADGM company cannot use it as a route into the Dubai mainland, and a Dubai free zone company cannot use it to trade in Abu Dhabi. If an ADGM entity needs a Dubai presence, the right licensing path is a question for a qualified adviser. Our guide to ADGM and the DIFC in 2026 sets out how the two centres differ more generally.

The corporate tax cost

This is where an application made without analysis can do real damage.

Because the branch is part of the same legal person, its income is the free zone company's income. Under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022), a Qualifying Free Zone Person (QFZP) pays 0% only on qualifying income and the standard rate on the rest. The detail sits in Cabinet Decision No. 100 of 2023, and three of its provisions do most of the work here.

First, Article 1 defines a Domestic Permanent Establishment as a place of business or other form of presence of a QFZP outside the free zone in the UAE. A branch within the Emirate licensed under the Resolution will usually be one. Second, Article 5 says income attributable to a Domestic Permanent Establishment is taxable at the standard rate, computed as if the branch were a separate and independent related party of the free zone company. In practice that means arm's length pricing between head office and branch, and a defensible split of revenue and costs. Third, Article 4(3) leaves revenue attributable to a Domestic Permanent Establishment out of both sides of the de minimis calculation.

That last point is better news than many people expect. The de minimis test asks whether non-qualifying revenue exceeds the lower of AED 5 million or 5% of total revenue, and failing it, or any other QFZP condition, costs the company QFZP status for that tax period and the following four. Revenue properly attributed to a mainland branch does not count towards that limit. It is taxed at the standard rate, but it does not by itself put the 0% rate on the rest of the company's qualifying income at risk.

The risk moves to the edges. Mainland work that is not attributable to the branch, for example work the free zone company still invoices and performs from the free zone, is tested in the ordinary way: if it is not a qualifying activity and the customer is not a free zone person, it is non-qualifying revenue for the de minimis test. A branch operating out of the free zone, the second type of licence in Article 4, may not create a place of business outside the free zone at all, so whether it is a Domestic Permanent Establishment is a question of fact. Getting the attribution wrong in either direction is where we would expect problems.

So the question for a company with real mainland demand is less whether the Resolution lets it onshore and more how cleanly it can separate the branch's business from the free zone business, and whether standard-rate tax on the branch profits compares well with the alternative of a separate mainland company. Our guide to corporate tax for DIFC and ADGM holding companies and our explainer on the Qualifying Free Zone Person regime cover the underlying rules.

We would have that analysis done before the application goes in, not after the first return. GTAG, our sister company in the GTAG/Assetica group, delivers corporate tax analysis, and that is the route we would take.

The order we would work in

1. Confirm your classification. If you are a financial establishment licensed in the DIFC, stop here.
2. Confirm your licensing authority is a Dubai free zone authority. ADGM and other emirates' free zones are outside the Resolution.
3. Find your activity on the current DET list, and note whether it calls for a branch licence or a permit.
4. Ask whether any sector regulator must approve the activity as well as your free zone authority.
5. Model the tax: what the branch will earn, how revenue and costs will be attributed to it at arm's length, and what mainland work will remain in the free zone company and count towards the de minimis test.
6. Set up the accounts so onshore activity is recorded separately from the start, as Article 3 requires.
7. Seek the free zone authority's prior approval, then apply to DET.
8. If you were already operating outside your free zone before March 2025, check with DET where you stand on the Article 13 grace period, which ran for one year from the effective date unless extended.

How Atlas helps

Atlas Corporate Services is a DFSA-registered corporate service provider in the DIFC, and our part in this is limited. We do not arrange mainland trade licences. A branch licence or permit under the Resolution is applied for through your free zone authority and DET.

What we do is keep the DIFC or ADGM entity itself in good order while it takes on a branch: board resolutions approving the application, registers, annual filings and the corporate record that the DIFC Authority and DET will expect to see. Our company secretarial and governance service covers that work. The tax analysis is delivered with GTAG, our sister company in the GTAG/Assetica group.

This article is general information and does not constitute legal, tax or regulatory advice. The Resolution's conditions, the DET list of eligible activities and the corporate tax treatment of mainland income can change or depend on your facts. Confirm the position for your own company with a qualified adviser, and against the primary texts, before acting.