Introduction
Dubai has grown into a major global business hub, strategically located between East and West and supported by strong infrastructure, pro-investor policies, and global connectivity. While free zones and offshore entities have attracted investors through tax and ownership benefits, they also limit market access within the UAE. In contrast, a mainland company allows businesses to operate across the country, bid for government contracts, and expand without restrictions. Recent reforms, including the move to permit 100% foreign ownership in several sectors, have further strengthened the appeal of this model. This note sets out the legal framework, compliance requirements, and key advantages of establishing a mainland company for long-term growth.
Legal Regime Governing Mainland Companies in Dubai
The establishment and operation of mainland companies in Dubai are principally governed by the UAE Commercial Companies Law (Federal Law No. 2 of 2015, as amended by Federal Decree-Law No. 26 of 2020). This law provides a comprehensive statutory framework regulating corporate entities, including requirements related to capital, ownership, management, and dissolution. It emphasises flexibility in corporate structures and has introduced significant reforms, such as permitting 100% foreign ownership in specific sectors, streamlining the business environment.
Alongside the federal law, regulations promulgated by the Dubai Department of Economy and Tourism (“DET” ), formerly known as the Dubai Economic Department (“DED”), play a pivotal role. The DET oversees the issuance of trade licenses, monitors compliance with commercial regulations, and supervises business activity approvals within the Dubai mainland. These regulations ensure that companies adhere to sector-specific conditions and maintain operational standards in line with Dubai’s strategic economic objectives.
Moreover, mainland companies are subject to other relevant regulatory regimes, including the UAE Labour Law, governing employment contracts and workers’ rights; immigration laws regulating visas and work permits for expatriate employees; and the Federal VAT Law (Federal Decree-Law No. 8 of 2017), which mandates VAT registration and compliance for qualifying businesses. Together, this legislative and regulatory framework underpins the robust governance of mainland companies, ensuring legal certainty and fostering an environment conducive to sustainable business growth.
III Ownership Structure and Corporate Control
Dubai’s mainland company setup has witnessed transformative reforms, particularly post-2020, permitting 100% foreign ownership in many business sectors. This landmark change departed from the longstanding requirement that a UAE national must hold a minimum 51% ownership stake in mainland companies. The new regime allows full foreign ownership without the compulsory need for a local Emirati partner, enhancing corporate autonomy and attracting global investors.
Previously, companies in the Dubai mainland operated under a model where a local service agent or an Emirati shareholder was mandatory, depending on the type of business activity. Service agents typically functioned as intermediaries without equity, while Emirati shareholders held substantive ownership. The reforms have limited these requirements, allowing foreign entrepreneurs complete ownership, except for businesses in strategic sectors where special conditions may still apply.
Regarding entity types, several legal forms exist for mainland company registration. The most common is the Limited Liability Company (“LLC”), which provides a flexible management structure with shareholder liability limited to their shares. Sole establishments cater to individual businesspersons conducting professional activities. Civil companies are suitable for professionals and service providers, allowing shared ownership among licensed practitioners. Public and private joint stock companies cater to larger enterprises, offering share issuance and greater regulatory compliance but enabling extensive capital mobilisation. These diverse options accommodate various business needs aligned with Dubai’s growth ambitions.
IV Licensing and Business Activities
In Dubai, mainland companies must obtain trade licenses aligned with their specific business activities, categorised broadly into Commercial, Professional, Industrial, and Tourism licenses. Commercial licenses cover trading activities, import/export, and general business sales; Professional licenses apply to service providers, consultants, and freelancers; Industrial licenses govern manufacturing and production; while Tourism licenses cater to travel agencies, hotels, and related services.
Selection of the appropriate business activity is critical for legal compliance, as each activity is linked to specific regulatory conditions and licensing fees. Misclassification or unauthorised activities can result in penalties or license suspension, emphasising the importance of precise business activity declarations during the setup phase and beyond.
Specific sectors, such as finance, healthcare, real estate, and the legal profession, are subject to heightened scrutiny requiring special governmental approvals or permits before licensing. For example, financial services must meet regulations set by the Dubai Financial Services Authority and other federal bodies, while healthcare establishments require clearance from the Dubai Health Authority. Compliance with these sector-specific regulations ensures operational legitimacy and protects both business interests and consumer rights in highly regulated markets.
V Comparative Advantage of Mainland Setup
One of the foremost advantages of establishing a mainland company in Dubai is unrestricted market access. Unlike businesses in free zones, mainland companies have the legal right to trade directly within the UAE market and provide services across all emirates without geographical limitations. This freedom enhances scalability and broadens commercial reach.
Mainland companies also enjoy exclusive eligibility to participate in government tenders and contracts, a significant revenue avenue given Dubai’s dynamic public sector investments. Additionally, they can form partnerships with local firms, leveraging local market knowledge and networks, thus facilitating a smoother business operation and expansion.
From a fiscal perspective, Dubai remains attractive for its 0% personal income tax, promoting wealth retention for entrepreneurs and employees. However, since June 2023, a 9% corporate tax has been introduced on business profits exceeding the prescribed threshold, with specific sectors and small businesses benefiting from exemptions. Moreover, the UAE’s extensive network of Double Taxation Avoidance Treaties (“DTAA”) offers tax efficiency and legal certainty in cross-border transactions.
Finally, the mainland setup provides advantages in talent acquisition and infrastructure. There are no fixed limits on employee visa quotas, subject to compliance with office space requirements, facilitating recruitment from a global talent pool. Coupled with Dubai’s state-of-the-art infrastructure and strategic geographic location at the crossroads of Asia, Europe, and Africa, businesses are well-positioned to capitalise on international trade and supply chain opportunities.
VI Compliance and Legal Obligations
Setting up a mainland company in Dubai involves several critical registration steps governed by the Department of Economy and Tourism (“DET”). The process begins with reserving a unique trade name aligned with regulatory guidelines. Following this, an initial approval certificate is obtained, confirming the authority’s acceptance of the intended business activity. A Memorandum of Association (“MoA”) must then be drafted and notarised, detailing shareholder rights and corporate governance. Securing a physical office lease that meets Dubai’s commercial real estate standards is mandatory before the final trade license is issued, authorising whole business operation.
Once operational, mainland companies face ongoing compliance obligations to maintain legal status. VAT registration is compulsory for businesses exceeding the mandatory turnover threshold, requiring proper invoicing, record-keeping, and periodic filing with the Federal Tax Authority. Since June 2023, corporate tax filing has become a key responsibility, ensuring adherence to the 9% corporate tax regime and applicable exemptions. Additionally, companies must comply with Economic Substance Regulations (“ESR”), which are aimed at affirming substantial economic presence in the UAE, particularly for relevant sectors.
Anti-Money Laundering (“AML”) obligations apply to specific regulated sectors, imposing due diligence and reporting requirements. Labour and immigration laws govern employment contracts, visa issuance, and end-of-service benefits for expatriate staff. Adherence to these frameworks is essential to avoid penalties and ensure smooth business operations in Dubai’s competitive market.
VII Challenges and Legal Risks
Running a mainland company in Dubai comes with its own challenges. The framework is often updated, so businesses need to keep track of legal changes and sometimes rely on professional advice to stay compliant. Costs are also higher than in free zones, since companies must maintain physical office space and cover visa-related expenses. This can put pressure on startups or smaller firms with limited budgets. Another change has been the introduction of a 9% corporate tax in 2023, ending Dubai’s long history of being almost tax-free. Companies now need to plan their finances carefully and meet new filing obligations to avoid penalties. On the legal side, businesses may face unfamiliar territory in areas influenced by Sharia law, especially when it comes to disputes. Many firms prefer arbitration for commercial matters because it is faster and more private, but this option needs to be built into contracts from the start. To grow sustainably, companies must be aware of these risks and prepare early to manage them effectively.
Conclusion
Setting up a mainland company in Dubai gives businesses the chance to tap into both the local market and wider global opportunities. Unlike free zones, it allows full freedom to operate anywhere in the UAE, take part in government projects, and expand across different sectors without major restrictions. With reforms such as 100% foreign ownership in many industries and clearer corporate laws, the mainland option has become even more appealing to international investors. These changes reflect Dubai’s broader aim of building a more open, innovation-driven economy. At the same time, businesses must navigate a complex legal and regulatory system. Careful due diligence and the right professional advice are essential to stay compliant, manage risks, and make the most of the growth potential that a mainland setup offers.
