Short answer
Mainland licences let you sell anywhere in the UAE and run employment through MOHRE. Free zone licences are cheaper to run and can qualify for a 0 percent corporate tax rate on qualifying income, but selling into the mainland usually needs a distributor or a branch, and employment runs through the zone authority instead of MOHRE.
Most owners are handed this choice on day one, before they know what any of it means, and it is expensive to reverse later. Here is what actually differs in practice.
Where you can sell
This is the real difference. A mainland licence lets you trade anywhere in the UAE, take government contracts, and open a shop or an office wherever your activity allows. A free zone licence is designed for business inside the zone and outside the country. Selling into the mainland usually needs a distributor, an agent, or a mainland branch, and service businesses are sometimes treated differently from goods.
If your customers are UAE companies and consumers, that constraint matters more than any saving on the licence.
Hiring and visas
| Area | Mainland | Free zone |
|---|---|---|
| Employment authority | MOHRE | The zone authority |
| Contracts | MOHRE registered | Zone registered |
| Wage protection | WPS through MOHRE | Varies by zone |
| Visa quota | Linked to office space | Set by the package you buy |
| Emiratisation targets | Applies at 50 or more staff | Generally outside the mainland target |
That last row is the one people miss. It changes your exposure to the AED 9,000 per month charge described in our Emiratisation guide. Work out your own position with the calculator.
Corporate tax and VAT
Both must register for corporate tax and both must file. The difference is the rate available. A qualifying free zone person can access 0 percent on qualifying income, with 9 percent on anything that does not qualify. The conditions are strict, they involve real substance in the zone and the type of income you earn, and assuming you qualify is not the same as qualifying.
VAT works the same either way: mandatory registration above AED 375,000 of taxable supplies in twelve months, voluntary from AED 187,500. Deadlines and penalties are in the corporate tax guide.
Cost and admin
- Free zone is usually cheaper to set up and renew, and the package bundles the office requirement.
- Mainland costs more and needs real premises, but removes the trading restriction.
- Both need proper books, both file corporate tax, and both get audited if the licence requires it.
How to choose, in one question
Who pays your invoices? If the answer is mostly UAE companies and UAE consumers, mainland removes friction you would otherwise pay a distributor to solve. If the answer is mostly clients abroad or inside your zone, free zone is usually cheaper and simpler, and the tax position can be better.
Everything else, the visa counts, the office, the audit, follows from that answer rather than driving it.
If you already picked
Nothing here means you chose wrong. It means the compliance calendar you inherited is different, and it is worth knowing which one you are on before a deadline finds you. Our accounting and HR services start by confirming exactly which rules your licence puts you under.