Can a free zone company sell to the mainland? The distributor and branch routes

Key Takeaways

• A free zone licence does not, by itself, authorise sales to mainland UAE customers. Free zone entities are licensed by their free zone authority, not the emirate's Department of Economy, and trading onshore without separate authorisation is a licensing breach.
• Three routes fix this: a mainland distributor or commercial agent, a mainland branch, or (in Dubai specifically since March 2025) a dual licence, branch licence or temporary permit under Executive Council Resolution No. 11 of 2025.
• Goods crossing from a free zone into the mainland trigger customs duty, typically 5% of the CIF value, declared through a separate import filing at the point of transfer.
• Mainland sales change your tax position too: they generally count as non-qualifying income for Qualifying Free Zone Person status, and enough of it costs you the 0% rate on everything, not just the mainland portion.

The short answer is no, not directly. A free zone trade licence covers activity inside your free zone, with other free zone entities, and internationally. It does not extend to onshore UAE customers. Reaching the mainland market legally means adding one of a small number of specific structures on top of the licence you already hold, and the options changed meaningfully in 2025.

The general rule: a free zone licence stops at the free zone gate

Free zones are separate regulatory jurisdictions within the UAE. Each is licensed and supervised by its own free zone authority (DMCC, JAFZA, IFZA, and so on) rather than by the Department of Economic Development (DED) or, in Dubai, the Department of Economy and Tourism (DET) that licenses mainland companies. That separation is the basis for the restriction: your free zone authority has no jurisdiction to authorise trading in a market it doesn't regulate.

The Commercial Companies Law, Federal Decree-Law No. 32 of 2021, is the federal statute governing how companies may be licensed and operate in the UAE (Norton Rose Fulbright, retrieved 2026-08-31). A more recent amendment closed a gap some free zone companies had been operating in: Federal Decree-Law No. 20 of 2025, in force from 15 November 2025, extended that law's reach to expressly cover free zone companies conducting onshore activities, while leaving each free zone's internal regime intact (Norton Rose Fulbright, retrieved 2026-08-31). Selling into the mainland without one of the authorisations below is now a federally defined breach, not a grey area.

None of this touches selling abroad, selling to other free zone entities, or most cross-border services billed to mainland clients from outside the UAE. The restriction is about a free zone entity billing and delivering to a mainland customer as though it held a mainland licence.

Three ways to reach mainland customers legally

A mainland distributor or commercial agent. Your free zone company sells goods wholesale to a UAE-licensed distributor, who resells under its own licence: your invoice goes to the distributor, never the end customer. This falls under Federal Law No. 3 of 2022 on Regulating Commercial Agencies, effective 15 June 2023 (UAE Legislation, retrieved 2026-08-31). Registered as a formal commercial agency rather than a plain distribution contract, the agent gains statutory termination and compensation protections, with disputes routed through the Commercial Agencies Committee, which is why many exporters deliberately keep the arrangement unregistered instead. This suits established wholesale channels; it suits you less if you need direct customer relationships or pricing control, since the distributor sits between you and the market by design.

A mainland branch. A free zone company can register a branch onshore, not a separately owned entity, but a licensed extension of the free zone parent trading under a mainland licence. Branches of 100%-foreign-owned entities generally skip the local shareholding structures older mainland LLCs needed before the 2021 ownership reform, so this route is far more usable than it was a decade ago. It gives full mainland trading rights, including government contract eligibility in most cases, at the cost of a second licence and renewal cycle.

Dubai's dual licence, branch licence and temporary permit. Executive Council Resolution No. 11 of 2025, effective 3 March 2025, lets free zone entities (DIFC companies excluded) operate in mainland Dubai under a DET regime without incorporating a separate mainland company (Reed Smith, retrieved 2026-09-05). A dual licence runs a mainland-facing branch while the company stays registered from its free zone office; a standalone branch licence covers a physical mainland presence; a temporary permit covers activities up to six months. Branch and dual licences run AED 10,000 a year, the permit AED 5,000. Eligible activities are DET-published rather than open-ended, and free zone companies already trading informally on the mainland had until 3 March 2026 to regularise. This is Dubai-specific: Abu Dhabi and Sharjah have not adopted an identical framework, so confirm the equivalent, if one exists, with that emirate's DED first.

E-commerce and services: what's different

Selling online doesn't sidestep the restriction. A free zone e-commerce licence covers international and free-zone-to-free-zone sales, but reaching a mainland buyer through your own site still needs one of the routes above, or a marketplace acting as the onshore party: listing on Amazon.ae or Noon works with either a mainland or free zone licence, with the marketplace functioning as an intermediary rather than removing the underlying rule. Pure cross-border services (consulting, remote software delivery, design work billed from outside the UAE) sit on firmer ground, since the restriction targets onshore trading rather than every commercial relationship with a mainland client. Some regulated professional activities still carry their own onshore licensing rules regardless of delivery method, so check the activity code rather than assume a services model is automatically exempt.

Customs duty: when the goods physically cross over

Goods inside a free zone are treated as outside UAE customs territory under the GCC Common Customs Law, which is why duty on imported inventory is suspended, not waived, while it stays there. The moment goods move into the mainland (via distributor or your own branch) that suspension ends: an import declaration is required at the point of transfer, generally filed by the local importer of record, and Dubai Customs applies a standard 5% duty on the CIF (cost, insurance, freight) value for most goods, with materially higher rates on a short exceptions list such as alcohol and tobacco (Dubai Customs, retrieved 2026-09-05).

VAT is a separate question, often conflated with duty. Only free zones meeting the Federal Tax Authority's "Designated Zone" criteria (fenced perimeter, controlled entry and exit, documented internal procedures) count as outside UAE territory for VAT; not every free zone qualifies (FTA Designated Zones VAT Guide, retrieved 2026-09-05). A Designated Zone transfer triggers import VAT alongside duty; otherwise VAT has typically already applied and the transfer is duty-only. Classification accuracy matters more since the UAE's move to twelve-digit HS codes, which carries retroactive duty exposure for miscoded shipment histories: the import logistics and customs guide covers that shift.

How mainland sales affect your tax position

Under Cabinet Decision No. 100 of 2023, a Qualifying Free Zone Person pays 0% corporate tax on qualifying income with no upper limit, but mainland sales generally fall outside that category (Ministry of Finance, retrieved 2026-08-31). Non-qualifying income up to a de minimis threshold (the lower of 5% of total revenue or AED 5 million) doesn't disturb your status; cross it and the entity loses that status for the whole period, with all income taxed at the standard 9% rate under Federal Decree-Law No. 47 of 2022 (UAE Federal Tax Authority, retrieved 2026-08-31). The mainland vs free zone business setup guide covers this threshold in full; model your revenue split against it on the corporate tax calculator before a growth quarter costs the 0% rate on everything.

Choosing a route

Match the structure to sales volume, not to whichever option is cheapest to set up. Occasional mainland sales of goods usually justify a distributor over a second licensed presence. Recurring revenue, direct customer relationships, or government contract eligibility push toward a branch or, in Dubai, a dual licence: both keep the customer relationship and margin with you. A temporary permit suits a defined, time-boxed project rather than an ongoing channel. Confirm the activity sits on your emirate's published eligible-activities list before committing capital. The growth strategy and trading track in the accelerator walks through sequencing this alongside the rest of a scale-up plan.

Frequently asked questions

Does Dubai's 2025 dual-licensing reform apply in Abu Dhabi or Sharjah too?

No. Executive Council Resolution No. 11 of 2025 is a Dubai Executive Council instrument covering mainland Dubai specifically. Other emirates have not adopted an identical dual-licence, branch-licence and temporary-permit framework. Check directly with the relevant emirate's Department of Economic Development before assuming the same structure applies elsewhere.

If I get a dual licence, do I still need a distributor?

No. A dual licence lets your free zone company sell directly to mainland Dubai customers through the branch it creates, without routing sales through a third party. You can still use a distributor for reach or logistics reasons, but it's no longer the only legal way to bill a mainland customer.

What happens if a free zone company sells to the mainland without authorisation?

It's a licensing breach that can trigger fines and, following Federal Decree-Law No. 20 of 2025, falls under the Commercial Companies Law's enforcement reach rather than being left to the free zone authority alone. Free zone companies trading informally on the Dubai mainland had until 3 March 2026 to regularise; that grace period doesn't reopen.

Does selling services to mainland clients carry the same restriction as selling goods?

The restriction bites harder on goods, since a physical delivery into the mainland is easy to trace back to a licence. Cross-border services billed from outside the UAE sit on firmer ground, but some regulated professional activities carry their own onshore licensing rules regardless of delivery method. Check your activity code rather than assume a services model is automatically exempt.

The bottom line

A free zone licence was never designed to cover mainland trading, and that hasn't changed: what changed in 2025 is how quickly you can add mainland access on top of it. Distributor agreements and mainland branches remain available everywhere; Dubai's dual licence and temporary permit routes make it faster and cheaper there specifically. Whichever path you take, treat the customs duty on goods and the qualifying-income threshold on tax as part of the same decision, not an afterthought once sales are already flowing.

Figures and legislative references were verified on 31 August 2026 against the sources cited above. Free zone activity lists and emirate-specific mainland-access rules change; confirm current eligibility with your free zone authority and the relevant Department of Economic Development before committing to a structure.