Free Zone Company with a Mainland Branch in 2026: Where the CCL, Corporate Tax and VAT Collide
Ask three free zone advisors whether a company can take on mainland work without losing its free zone status, and expect three conflicting answers. Branch structures, separate LLCs, and outright warnings against mainland revenue all surface as recommendations, each one accurate within a narrow context, none of them addressing the full regulatory picture.
That picture changed materially in March 2025. The Department of Economy and Tourism (DET) began licensing free zone companies to operate branches in mainland Dubai, with branch-level profit subject to a 9% tax rate while the parent company’s free zone income continues to qualify for 0%, provided the structure meets specific conditions.
Setting up a branch office in Dubai, in other words, is not the automatic tax exposure many business owners assume, it is more of a structural choice, and the mechanics that follow determine whether that choice holds up under scrutiny.
What Changed in the Companies Law, and Why Your Free Zone Licence Is No Longer the Whole Story
Federal Decree-Law No. 20 of 2025 amended the commercial companies law UAE businesses have operated under since 2021 (Federal Decree-Law No. 32 of 2021). It was issued on 1 October 2025.
Here’s the part that matters for you: the amendment confirms free zone companies as holding UAE nationality, and it states plainly that where a free zone company carries out activity in the mainland, through a branch, a representative office, or otherwise, that activity falls under the CCL and the federal laws that apply to mainland companies.
Inside your zone, your free zone authority’s regulations still govern you. Step outside it, and mainland law applies on top. Both regimes run at once.
One honest caveat: the exact effective date is reported differently across law firm briefings.
The same law also introduced Article 15, a re-domiciliation mechanism – a company can now move its registration between emirates, between mainland and free zone, and between free zones, while keeping its legal personality intact. Keep that one in mind. It’s your fourth route, and it shows up again below.
Three Routes Into Mainland Dubai (and a Fourth People Forget)
Open mainland branch in Dubai and you’re choosing from three DET-licensed paths under Executive Council Resolution No. 11 of 2025, plus one structural alternative.
Route 1 – Mainland branch licence. Your branch is licensed to operate within the emirate as an extension of your free zone establishment.
Route 2 – Branch operating out of the free zone. A dual-licence setup: your headquarters stays in the zone, but the branch is authorized to trade into the mainland.
Route 3 – Temporary permit. For specific, time-bound activities. This is the route to open a branch office in Dubai without committing to a full annual licence, it runs for up to six months.
Route 4 – Separate mainland LLC, or re-domiciliation under Article 15. Instead of branching at all, some companies form a standalone mainland entity, or re-domicile the free zone company itself onto the mainland.
DIFC-licensed financial institutions sit outside Routes 1 through 3 entirely — they answer to their own regulator.
Across ADEPTS’ own free zone clients who have made this move, the branch-licence route (Route 1 or 2) for company-setup is the one most companies pick below roughly AED 10 million in projected mainland revenue. Past that threshold, more clients shift toward a separate mainland LLC or re-domiciliation, mainly because it simplifies bookkeeping once mainland activity stops being occasional and starts being the main event.
The Decision Matrix: Pick Your Route by What You Actually Do
| Activity Type | Best Route | CT Effect | VAT Effect | Watch Out For |
| Occasional mainland project, under six months | Temporary permit | No PE if genuinely short-term | Covered under existing TRN | Renewal cap — permits do not roll indefinitely |
| Ongoing mainland service delivery | Branch operating out of free zone | Domestic PE, 9% on branch profit | One TRN, combined threshold | Separate books required from day one |
| Distribution of goods into the mainland | Mainland branch licence | Domestic PE, 9% on branch profit | 5% VAT on the import leg | Designated Zone rules don’t shield goods once moved |
| Government or public sector contracting | Mainland branch licence | Domestic PE, 9% on branch profit | Standard-rated supply | Tender eligibility may require a physical mainland presence |
| Regulated activity (health, education, finance) | Separate mainland LLC | New taxable person, 9% | Standalone TRN if outside the group | Sector regulator approval sits above DET approval |
| Mainland retail or physical premises | Mainland branch licence | Domestic PE, 9% on branch profit | Standard-rated, TRN combined | Tenancy and Ejari requirements apply to the branch |
| Holding or IP-owning structure | Re-domiciliation (Article 15) | Depends on final structure | Depends on final structure | Get corporate tax advice before moving IP |
| Activity outside Dubai | New emirate-specific licence | Domestic PE if UAE-wide structure | Combined threshold still applies | Resolution 11 is a Dubai instrument only |
Documents You Need Before You Start
Opening a branch office in Dubai means assembling a specific document set before DET will even look at your application:
- Free zone parent company documents – trade licence, MOA, incorporation certificate
- Board resolution authorizing the branch and naming a manager
- Attested and legally translated corporate documents
- No Objection Certificate (NOC) from your free zone authority
- National service agent position, where the activity requires one
- Office or tenancy contract in the mainland
- Regulator approval, if the activity is a regulated one
The document rejected most often isn’t the board resolution or the NOC. It’s the attestation chain on the parent company’s MOA – done through the wrong embassy sequence, or missing the UAE Ministry of Foreign Affairs stamp entirely. That single step adds two to three weeks when it’s caught late.
The Step-by-Step Process
How to open a branch office in Dubai follows a set sequence, and skipping the order costs you time, not money.
Step 1 – Free zone NOC. Your free zone authority confirms it has no objection to the branch. Typically 3–5 working days.
Step 2 – DET initial approval and trade name. DET checks the proposed activity and name against its registry. Usually 2–3 working days once documents are complete.
Step 3 – Activity match against the DET eligible-activities list. Not every free zone activity has a mainland equivalent open to branching – DET was required to publish this list within six months of Resolution 11 taking effect, so confirm your activity is on it before you go further.
Step 4 – Documentation and attestation. The slowest step by far, running anywhere from one to four weeks depending on where the parent documents originate.
Step 5 – Premises. Ejari registration or a mainland tenancy contract, required before licence issue.
Step 6 – Licence issue. DET issues the branch licence — annual for Routes 1 and 2, up to six months for Route 3.
Step 7 – CT and VAT position update. Register the branch’s activity with the FTA and confirm how it feeds into your existing corporate tax and VAT filings.
Step 8 – Bank and books. Open a mainland-facing bank account and set up separate accounting for the branch from the first transaction.
ADEPTS’ own timeline across recent branch registrations runs 4–6 weeks end to end, closer to the government’s stated minimums than the 8–10 weeks some competitor guides quote, mainly because we front-load Step 4 instead of leaving attestation until the licence stage.
What It Costs in 2026
Cost of setting up a branch office in Dubai breaks into a government fee layer and a set-up layer most published fee schedules leave out.
| Fee | Authority | When Payable | Frequency |
| Branch operating out of free zone — licence | DET | On issue and renewal | Annual — AED 10,000 |
| Temporary permit | DET | On issue | Per permit — AED 5,000 |
| Trade name reservation | DET | Application | One-off |
| Notarization and legal translation | Notary Public / licensed translator | Before submission | One-off |
| National service agent fee | Local agent | Annual, where applicable | Annual |
| Office tenancy / Ejari | Landlord / DET | Before licence issue | Annual |
The branch office license Dubai cost on the government schedule stops at the AED 10,000 or AED 5,000 licence fee. What it doesn’t show: notarization and translation typically add several thousand dirhams depending on document volume, and a national service agent, where the activity requires one, is a recurring annual cost, not a one-time fee. Budget the full package, not just the DET line item, before you commit to a route.
What the Branch Does to Your 0% Rate?
Here’s the correction: a mainland branch does not destroy your Qualifying Free Zone Person (QFZP) status. That belief sends companies into unnecessary restructuring, and it’s the single most common misunderstanding seen in client files.
A branch outside the free zone is treated as a Domestic Permanent Establishment (PE). Its income is calculated as though it were a separate, independent person, and taxed at 9%. That’s the branch’s tax bill, not your whole company’s.
Under Cabinet Decision No. 100 of 2023, that Domestic PE’s revenue is excluded from both sides of the de minimis calculation that determines whether you keep QFZP status. In other words: properly branched mainland income doesn’t count against you at all.
What actually breaches de minimis, the lower of 5% of total revenue or AED 5,000,000 is non-qualifying revenue from mainland customers that is not run through a licensed branch or PE. Sell into the mainland informally, without the DET structure behind it, and that’s the revenue that puts your 0% rate at risk.
The cost of a breach is steep and it isn’t a one-year problem: 9% on all your income, for the tax period of the failure and the four tax periods after it. Five years, not one.
A quick illustration: a free zone company earning AED 8 million a year opens a mainland branch generating AED 1.2 million in branch profit. That AED 1.2 million is taxed at 9%, roughly AED 108,000, as the PE’s own liability. The remaining AED 6.8 million in qualifying free zone income keeps its 0% rate, because the branch revenue never touches the de minimis test at all.
The FTA treats a legal entity and all of its free zone branches collectively when assessing QFZP status, a mainland branch, by contrast, is assessed on its own as a domestic PE. That distinction is exactly what clients learn the hard way and that is exactly what the ADEPTS corporate tax team caters to.
The VAT Asymmetry: One Taxpayer for VAT, Two for Corporate Tax
Your branch is a separate taxpayer for corporate tax and the same taxpayer for VAT. That split trips people up constantly.
A branch of a UAE-incorporated company isn’t a separate legal person for VAT purposes. Your parent company’s existing TRN covers it. One registration, one return, one combined revenue threshold across the whole UAE operation, you never register the branch separately.
Designated Zone status is a goods concept, not a blanket services exemption. Services supplied within or from a Designated Zone are, in most cases, treated the same as mainland services for VAT. Move physical goods from a Designated Zone into the mainland, and that’s treated as an import – 5% VAT, typically under reverse charge for the mainland recipient.
If you choose a separate mainland LLC over a branch instead, VAT grouping is available across mainland and free zone entities under common control, per Article 14 of the VAT Decree-Law. That’s worth discussing with your advisor if Route 4 is on the table.
The Accounting Split Nobody Plans For
Resolution 11 requires separate financial records for your mainland operations, not a suggestion, a requirement. Corporate tax then requires the PE’s profit to be calculated on a separate-entity basis, with transfer pricing sitting between the branch and its free zone parent.
When companies keep one set of books across both, the cleanup is rarely quick. The FTA asks for a clean attribution of revenue and cost to the branch specifically, and auditors reject commingled ledgers outright – ADEPTS has seen cleanup projects run four to eight weeks once a branch has operated for a full year without separate books.
E-invoicing lands on top of this. Ministerial Decisions No. 243 and 244 of 2025 set a Peppol-based five-corner model, PINT AE (UBL 2.1 XML) format only – no PDFs means no scans. The voluntary phase opened 1 July 2026, with mandatory go-live from 1 January 2027 for larger businesses. For the full mechanics, see our e-invoicing guide for large taxpayers.
Dubai Only: What About Abu Dhabi, Sharjah and the Northern Emirates
Resolution 11 of 2025 is a Dubai-specific instrument, issued by Dubai’s Executive Council. A branch office in UAE territory outside Dubai, Abu Dhabi, Sharjah, or any other emirate, needs its own, separate licensing process through that emirate’s economic department.
Branch office setup in UAE emirates other than Dubai typically follows a broadly similar shape – free zone NOC, mainland authority approval, documentation – but the fees, timelines and eligible-activity lists differ by emirate. How to open a branch office in UAE outside Dubai specifically is worth a dedicated conversation with your advisor rather than assuming Resolution 11 applies; it doesn’t.
If Your Parent Is a Foreign Company Instead of a Free Zone Company
How to setup Indian company branch in UAE, or a branch for any foreign parent, runs a different path from the free zone scenario above. Three things differ:
The branch itself registers for VAT if it has no other UAE presence, there’s no existing parent TRN to fall back on. The attestation chain runs longer, since documents originate outside the UAE and need consular legalization before reaching the UAE. And the permanent establishment analysis becomes a foreign-PE question under the relevant double tax treaty, not the domestic-PE mechanics that apply to a UAE free zone parent.
One point worth stating plainly: the FTA’s position is that holding a trade licence alone doesn’t automatically create a taxable presence. It’s a facts-and-circumstances test – what the branch actually does determines the tax outcome, not what its licence says.
How ADEPTS Handles This for You
Choosing between a branch licence, a dual licence, a temporary permit, and a full re-domiciliation isn’t a paperwork decision. It’s a structuring decision with a five-year tax consequence if you get it wrong.
ADEPTS supports this end to end:
- Legal structuring and entity selection – matching your revenue profile and activity type to the right DET route
- Corporate tax position review – confirming your Domestic PE calculation and QFZP status stay intact
- VAT treatment mapping – combined TRN filings, Designated Zone questions, import VAT on goods movement
- Branch bookkeeping split – separate ledgers built correctly from your first mainland transaction
- Audit readiness – so your separate financial records hold up when the FTA or an auditor asks for them
Our legal structuring services team has worked through this exact decision with dozens of Dubai free zone companies moving into mainland work – including the re-domiciliation route under the new business restructuring consultancy offering, for companies who decide a branch isn’t the right fit at all.
You don’t have to guess which of the four routes fits your business. Talk to ADEPTS before you file with DET, not after.
FAQs:
Yes. A temporary permit under Resolution 11 of 2025 lets you carry out specific mainland activities for up to six months without committing to a full annual branch licence — useful for one-off projects or short-term contracts.
No. A mainland branch is a Domestic Permanent Establishment taxed separately at 9% on its own profit. Its revenue is excluded from your de minimis test under Cabinet Decision No. 100 of 2023, so your remaining qualifying income keeps its 0% rate.
Your qualifying free zone income is unaffected by a properly licensed branch. What is not qualifying is non-qualifying mainland revenue that bypasses the branch structure and breaches the de minimis ceiling of the lower of 5% of total revenue or AED 5,000,000.
No. Your existing parent company TRN covers the branch. VAT is filed as one combined return across your whole UAE operation — you never register a branch separately for VAT.
A branch operating out of the free zone costs AED 10,000 annually to issue or renew. A temporary permit costs AED 5,000, valid for up to six months rather than a full year.
Government-published timelines suggest faster, but realistically expect 4–6 weeks from free zone NOC to licence issue, with document attestation as the step most likely to run long.
It depends on your activity. Some licensed activities require a national service agent; many standard commercial and professional branch licences don’t. Your DET activity classification determines this — check it before assuming either way.
Yes, and it’s one of the main commercial reasons companies branch in the first place. A licensed mainland branch or a mainland LLC gives you eligibility that a pure free zone licence typically doesn’t for public sector tenders.
The one-year regularization window that opened with Resolution 11 on 3 March 2025 has closed. If you’ve been operating informally, get your position reviewed immediately — unlicensed mainland activity is exactly the kind of revenue that can breach your de minimis threshold and put your 0% rate at risk.
It depends on scale. Below roughly AED 10 million in mainland revenue, a branch is usually simpler and cheaper to run. Above that, a separate mainland LLC – or re-domiciliation under the new Article 15 mechanism – often makes more sense for bookkeeping and long-term structuring.
References
- Gibson Dunn. “Recent Amendments to the UAE Commercial Companies Law.” Gibson Dunn, December 2025. https://www.gibsondunn.com/recent-amendments-to-the-uae-commercial-companies-law/.
- Clyde & Co. “UAE Companies Law Amendments 2025 — Key Changes and Practical Implications.” Clyde & Co, December 11, 2025.
https://www.clydeco.com/en/insights/2025/12/uae-companies-law-amendments-2025-key-changes. - Government of Dubai. “Executive Council Resolution No. (11) of 2025 Regulating the Conduct of Free Zone Establishments’ Activities.” Dubai Legislation.
https://dlp.dubai.gov.ae/Legislation%20Reference/2025/Executive%20Council%20Resolution%20No.%20(11)%20of%202025%20Regulating%20the%20Conduct%20of%20Free%20Zone%20Establishments%E2%80%99%20Activities.html. - Ministry of Economy and Tourism. “Ministry of Economy and Tourism Reviews New Amendments to the Commercial Companies Law and Their Pivotal Role in Enhancing Competitiveness of the UAE’s Business Environment.” UAE Ministry of Economy and Tourism.
https://www.moet.gov.ae/en/-/ministry-of-economy-and-tourism-reviews-new-amendments-to-the-commercial-companies-law-and-their-pivotal-role-in-enhancing-competitiveness-of-the-uae-s-business-environment. - Federal Tax Authority. “Free Zone Persons — Corporate Tax Guide (CTGFZP1).” Federal Tax Authority, May 20, 2024.
https://tax.gov.ae/Datafolder/Files/Guides/CT/Free%20Zone%20Persons%20-%2020%2005%202024%20final%20for%20GCD.pdf. - u.ae. “Steps to Start a Business on the Mainland.” UAE Government Portal.
https://u.ae/en/information-and-services/business/doing-business-on-the-mainland/steps-to-start-a-business-on-the-mainland. - Reed Smith. “New Era for Free Zone-Mainland Integration: Dubai’s Executive Council Resolution.” Reed Smith.
https://www.reedsmith.com/our-insights/blogs/viewpoints/102l0qt/new-era-for-free-zone-mainland-integration-dubais-executive-council-resolution/. - e-invoicing.org. “UAE E-Invoicing Mandate: Status, Deadlines and Phases.” e-invoicing.org.
https://e-invoicing.org/uae/.
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