Dubai is one of the most dynamic business hubs in the world, offering companies the flexibility to operate in either a free zone or the mainland. Many entrepreneurs first choose to set up their company in a free zone because of the ease of incorporation, full ownership, and lower running costs. However, as the business grows, many companies reach a point where they want to expand into local Dubai markets, work with mainland clients, participate in government contracts, or open physical offices in the city.
When this happens, the next logical move is transferring the free zone company into a mainland business. The process requires careful planning because Dubai does not offer a direct “conversion” option. Instead, you must follow a structured, step-by-step approach to legally shift your operations, obtain a mainland license, cancel or modify your existing free zone setup, and comply with all regulatory authorities.
This comprehensive guide explains everything you need to know about how to transfer a free zone company to a mainland business in Dubai including requirements, approvals, legal steps, costs, documentation, business restructuring, and post-transfer guidelines. Whether you’re expanding operations, entering new markets, or aligning with UAE corporate tax rules, this article will help you navigate the entire transition smoothly and confidently.
Why Businesses Transfer from Free Zone to Mainland
Before starting the transition process, it’s important to understand what motivates companies to move from a free zone entity to a mainland structure. The decision is usually influenced by expansion goals, operational freedom, and regulatory advantages.
Access to the UAE Local Market
The biggest limitation of free zone companies is that they cannot conduct direct business with mainland customers unless they work through a distributor. Mainland companies have the freedom to sell products or services directly anywhere in the UAE.
Ability to Work With Government and Semi-Government Entities
Government departments, public sector companies, hospitals, and ministries often require suppliers to hold a mainland license. Transferring allows you to participate in:
- Tenders
- Supply contracts
- Public service agreements
Opening Branches Across Dubai and the UAE
Mainland companies can freely open branches across different Emirates, increasing visibility and operational scale.
No Restrictions on Office Locations
Free zone companies must operate from within their free zone. Mainland licensing lets you rent office space anywhere in Dubai — including prime business districts and residential areas.
Unlimited Visa Quota (Based on Office Size)
Free zone companies often have limited visa quotas. Mainland companies, however, can obtain larger visa quotas depending on the size of their office.
Expanding to E-Commerce and Retail
Mainland licensing removes restrictions on:
- E-commerce deliveries
- Retail stores
- Restaurant operations
- Warehouses
- Showrooms
More Flexibility With Dubai Corporate Tax Requirements
Many companies shift to mainland to comply better with corporate tax structures and avoid potential cross-border complications within the UAE.
Understanding the Legal Difference: Free Zone vs. Mainland
To successfully transfer a company, you must first understand the structural and legal differences between the two jurisdictions.
Free Zone Business Setup
Free zones are designated economic zones that offer:
- 100% foreign ownership
- Tax benefits
- Simplified licensing
- Import/export advantages
- No currency restrictions
However, free zone companies cannot directly operate in the mainland without a local distributor or mainland branch.
Mainland Business Setup
Mainland companies are registered under the Department of Economy and Tourism (DET). They can:
- Trade anywhere in the UAE
- Rent offices anywhere in Dubai
- Serve government clients
- Hire more employees
Since 2021, many activities allow 100% foreign ownership even on the mainland.
Understanding these differences will help guide your transition strategy.
Can You Directly Convert a Free Zone License into a Mainland License?
The UAE does not offer a direct “conversion” or “migration” option.
Instead, you must follow one of two legal pathways:
Option 1: Open a New Mainland Company
This involves:
- Registering a new mainland license
- Canceling or downsizing your free zone company
- Transferring assets, employees, and contracts
This is the most common and recognized method.
Option 2: Open a Mainland Branch of Your Free Zone Company
Some free zones allow their companies to open a mainland branch if DET approves the activity.
This is suitable when you want:
- Partial mainland presence
- To maintain your free zone headquarters
- To retain free zone benefits
However, not all activities are allowed to open mainland branches.
Which Option is Best for You?
The ideal choice depends on your business goals:
Choose a New Mainland License If:
- You want full mainland operations
- You plan to close the free zone entity
- You want to expand into retail, logistics, or technical services
Choose a Mainland Branch If:
- You want partial mainland access
- You prefer to continue benefiting from your free zone advantages
- You want a gradual transition
Most businesses choose a new mainland license because it offers full operational freedom.
Steps to Transfer a Free Zone Company to a Mainland Business in Dubai
Below is the complete step-by-step process used today by companies transitioning from free zones to mainland. These steps ensure compliance with DET, free zone authorities, and UAE government departments.
Step 1: Assess Your Current Free Zone Structure
Before you begin transferring, evaluate your free zone entity:
- What is your legal structure?
- Does your free zone allow branch formation?
- Do you want to keep the free zone company active?
- Will you move employees and visas?
- Are there assets or contracts that need reassignment?
Some free zones have policies that affect how and when you can transfer or close your company.
Understanding your starting point helps you choose the right transfer model.
Step 2: Choose Your Mainland Business Activity
Your mainland license must match the nature of your business activity.
Dubai DET offers thousands of activities, including:
- Trading
- Consulting
- E-commerce
- Technical services
- Manufacturing
- Real estate
- Transport
- Advertising
- Retail
- Logistics
Choosing the correct activity code is essential because some activities:
- Require external approvals
- Don’t allow 100% ownership
- Require professional qualifications
A mismatch delays the entire process.
Step 3: Reserve a New Mainland Trade Name
The next step is to reserve a trade name under the mainland jurisdiction.
You may:
- Use the same name as the free zone company (if available)
- Choose a new name
- Add words like “LLC”, “Est.” or “Branch” depending on structure
Trade name approvals take a few minutes to 24 hours.
Step 4: Apply for Initial Mainland Approval
Initial approval is issued by DET.
This certificate confirms:
- Your business structure is accepted
- Your activities are approved
- You can proceed with setup
This is NOT a license yet — just permission to continue.
Step 5: Prepare the Memorandum of Association (MOA)
If you are forming an LLC or branch, you must sign an MOA.
Your MOA includes:
- Ownership shares
- Profit distribution
- Company objectives
- Partner names
- Liabilities and responsibilities
MOA must be notarized at a Dubai notary public or digitally signed.
Step 6: Secure an Office or Commercial Space
Mainland businesses require a physical office space with Ejari.
Your office determines:
- Visa quota
- Business eligibility
- License issuance
Mainland offices can be located anywhere in Dubai:
- Business Bay
- Sheikh Zayed Road
- Al Quoz
- Deira
- JLT
- Al Barsha
You cannot use free zone offices for mainland licensing.
Step 7: Obtain External Approvals (If Required)
Certain business activities require approval from:
- Dubai Municipality
- KHDA
- DHA
- RTA
- Civil Defense
- Ministry of Economy
- Telecommunications & Digital Government Authority
Missing approvals will delay the process.
Step 8: Collect Mainland License & Complete Payment
Once documents and approvals are submitted, DET will issue your:
- Trade License
- Company Registration
- Establishment Card
- Labor File (if required)
At this point, your mainland company is legally active.
Step 9: Manage the Free Zone Company Exit (If Closing)
If you’re transitioning fully to mainland, you must cancel or downsize your free zone entity.
The free zone exit process includes:
- Requesting cancellation
- Clearing outstanding fees
- Settling lease obligations
- Canceling visas (if necessary)
- Returning establishment cards
- Closing bank account or shifting it
Some free zones require:
- Board resolution
- Audit clearance
- NOC fees
Closing must be done cleanly to avoid future penalties.
Step 10: Transfer Employees to the Mainland Entity
Employee visa transfer involves:
- Canceling visas under the free zone
- Applying for new visas under the mainland company
- Updating labor contracts
- Updating Emirates ID
- Registering under the mainland labour system
Employees do not need to leave the UAE it’s an internal transfer process.
Step 11: Transfer Contracts, Assets, and Operations
To complete the transition, move operational components:
- Supplier agreements
- Bank accounts
- Insurance policies
- Vehicles
- Inventory
- Lease agreements
- Equipment
Banks may require additional documentation for switching corporate accounts.
Legal Requirements When Moving from Free Zone to Mainland
Dubai enforces strong compliance for mainland businesses.
You must follow:
UAE Labour Law
Covers employee rights, contracts, insurance, and working conditions.
UAE Corporate Tax Law
Mainland companies fall under standard corporate tax rules unless exempt.
Commercial Companies Law
Defines ownership rules, MOA structure, and company governance.
Dubai Municipality Regulations
Applies to businesses involved in food, construction, retail, beauty, and more.
Tax Implications When Moving to Mainland
The mainland falls under UAE federal tax structures, such as:
Corporate Tax
Most mainland companies are subject to:
- 0% tax up to AED 375,000
- 9% tax above AED 375,000
VAT
If annual revenue exceeds AED 375,000, VAT registration is mandatory.
Customs
Mainland companies follow standard UAE customs rules instead of free zone customs exemptions.
Employee Visa Transfer Guidelines
Step 1: Cancel the Free Zone Visa
Employees remain in the UAE on a grace period.
Step 2: Issue Mainland Employment Visa
Steps include:
- Entry permit (internal)
- Medical test
- Emirates ID application
- Visa stamping
Step 3: Update Labour Contract
Must follow mainland labour standards.
Cost of Transferring a Free Zone Company to Mainland
Costs vary based on free zone and business activity.
Typical Mainland Licensing Costs
- Initial approval: AED 120–300
- Trade name: AED 600–900
- License issuance: AED 10,000–15,000
- MOA notarization: AED 1,000–2,500
- Office rent: AED 15,000–50,000
- External approvals: AED 500–5,000
Free Zone Exit Costs
- Clearance fees: AED 1,000–3,000
- Visa cancellation: AED 200–700 per employee
- Lease cancellation (depends on contract)
Other Costs
- Document attestation
- Activity changes
- Bank account restructuring
- Immigration files
Transferring requires budgeting for both jurisdictions.
Post-Transfer Compliance Requirements
Mainland companies must follow ongoing compliance:
Corporate Tax Filing
Annual corporate tax returns required.
VAT Filing
Quarterly or monthly, if registered.
ESR (Economic Substance Regulations)
Applicable to certain activities.
AML/CFT
Mandatory for:
- Brokers
- Real estate
- Jewelry trading
- Financial services
License renewal
Annually through DET.
Maintaining Office Space
Physical office lease must stay active.
Advantages of Moving to Mainland After Transfer
Sell and operate anywhere in the country.
Greater Business Growth
Ability to serve individuals, companies, and government sectors.
More Visa Availability
Larger office means higher visa quota.
Improved Credibility
Mainland licenses hold stronger market trust.
Flexibility in Activities
Retail, services, contracting, and trading all possible.
Better Banking Options
More banks prefer mainland structures for corporate accounts.
Conclusion
Transferring a free zone company to a mainland business in Dubai is a strategic move that unlocks bigger opportunities, wider market access, easier licensing, and long-term growth potential. While the transfer process requires careful planning, proper documentation, and compliance with Dubai’s regulatory authorities, the transition becomes smooth when done correctly. From forming a new mainland entity and securing a physical office space to transferring employees, contracts, and operations, every step must be executed with accuracy. To avoid delays and ensure a seamless transition, many entrepreneurs rely on Business Setup Consultants who understand the regulations, approvals, and legal requirements across both jurisdictions. With the right guidance, your shift from free zone to mainland can help your business expand confidently and operate at a larger scale in Dubai’s competitive market.
FAQs
Can I convert my free zone company directly into a mainland company?
No. UAE law does not allow direct conversion. You must open a new mainland license or open a mainland branch of your free zone company.
Can I keep my free zone company active while opening a mainland company?
Yes. Many businesses keep both entities active to enjoy benefits of both jurisdictions.
Is it mandatory to close my free zone company when moving to mainland?
No. You may keep it active, close it, or downsize it depending on your business plan.
Do I need a new office for the mainland license?
Yes. Mainland companies require a physical office with Ejari.
Can I transfer my employees from free zone to mainland?
Yes. Their visas can be cancelled and reissued under the mainland entity.
Do I need external approvals for mainland licensing?
It depends on your activity. Some activities require approvals from DHA, KHDA, Municipality, RTA, etc.
Is mainland business more expensive than free zone?
Generally yes, due to office rent and DET licensing fees, but it offers much broader market access.
How long does it take to complete the transfer?
Usually between 7 to 30 days, depending on free zone clearance, office readiness, and approvals.
