Dubai’s New Resolution: Free Zone Businesses Can Expand to the Mainland – What Does This Mean for Corporate Tax?

Introduction to Dubai Resolution 11 of 2025

Dubai Resolution 11 of 2025 marks a transformative change in the UAE’s regulatory framework by allowing free zone companies to establish branches on the mainland without the need for a local partner. Traditionally, free zone companies operated under a set of regulations that confined them to specific economic areas with limited interaction with the broader UAE market. This resolution not only simplifies the expansion process but also aims to stimulate greater economic integration by bridging the gap between the free zones and the mainland.

Context and Rationale of Dubai Resolution 11 of 2025

• Economic Integration:
  Dubai’s move is designed to create a seamless economic environment where free zone companies can access the mainland market directly. By eliminating the historical requirement of having a local partner, the resolution encourages innovation, competition, and an overall increase in business activities across regions.

• Attracting Foreign Investment:
  This policy shift is part of Dubai’s broader strategy to remain competitive on a global scale. By making it easier for businesses to expand their operations into the mainland, Dubai is positioning itself as an even more attractive destination for international investors who are seeking flexibility, transparency, and strategic market access.

• Regulatory Modernization:
  The resolution underscores the UAE government’s commitment to modernizing its regulatory framework. By streamlining the approval process and reducing administrative burdens, Dubai is paving the way for a more agile business environment that can quickly adapt to emerging global trends and investor needs.

Key Highlights of the Resolution

1. Expansion Flexibility under Dubai Resolution 11 of 2025:

   • What’s New:
     Previously, free zone companies faced restrictions that limited their operational scope to designated free zones. With Resolution 11 of 2025, these companies now have the opportunity to establish branches on the mainland, thereby gaining a direct pathway to a larger customer base.
   • Strategic Advantage:
     This flexibility allows businesses to tailor their operations more dynamically by leveraging mainland infrastructure, diverse talent pools, and localized market insights.

2. Licensing & Compliance:

   • Regulatory Process:
     Companies wishing to operate a mainland branch must secure the necessary approvals from the Dubai Department of Economy and Tourism (DET). This ensures that all business activities align with local regulations and market standards.
   • Ensuring Fair Competition:
     By maintaining stringent licensing requirements, the government aims to safeguard both local and international markets, ensuring fair competition and compliance with established economic policies.

3. Sectoral Exclusions:

   • Targeted Industries:
     Although the resolution broadly benefits most free zone businesses, certain sectors—such as financial institutions operating within specialized zones like the Dubai International Financial Centre (DIFC)—remain excluded. This is designed to maintain strict oversight over industries that are critical to national financial stability.
   • Policy Rationale:
     The exclusion of these sensitive sectors underscores a balanced approach: while promoting business growth, the government also protects sectors where risk management and regulatory compliance are paramount.

Detailed Implications for Corporate Tax under Dubai Resolution 11 of 2025

The introduction of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) set a new corporate tax landscape by imposing a 9% rate on mainland businesses, while Qualifying Free Zone Entities (QFZEs) can continue to benefit from a 0% tax rate on eligible income. Dubai Resolution 11 of 2025 brings important tax considerations into the picture for free zone companies that expand into the mainland.

1. Tax Exemptions for Free Zone Entities

• Preservation of 0% Tax Benefits:
  Under the existing framework, QFZEs that engage exclusively in transactions within free zones can retain a 0% tax rate. This tax incentive is a cornerstone of the free zone model, designed to attract global investment by reducing operational costs.

• Impact of Mainland Activities:
  If a free zone company begins generating income through its mainland branch, that portion of income is likely subject to the 9% corporate tax rate. This necessitates a strategic approach where companies clearly delineate their operations to maximize tax benefits.

2. Operational and Tax Structure for Mainland Branches

• Mainland Branch as an Extension:
  When a free zone company opens a mainland branch, it is treated as an extension of the parent company. This means that revenue earned from mainland-based activities will be considered part of the overall income and could be taxed accordingly.

• Balancing Dual Operations:
  Companies must now manage a dual operational structure: one that continues to benefit from the free zone’s tax exemptions, and another that may incur a tax liability on the mainland. This duality requires careful planning to ensure that the overall tax burden is optimized.

3. Strategic Considerations and Benefits

• Market Expansion and Revenue Growth:
  Despite the potential tax implications, the strategic advantages of mainland expansion are significant. Access to a broader market and diverse clientele can lead to increased revenues, which may well offset the additional tax costs.

• Enhanced Brand Presence:
  Establishing a mainland branch can elevate a company’s profile, making it more competitive in a dynamic business environment. It signals a commitment to innovation and growth, which can be attractive to both customers and investors.

• Operational Efficiency:
  With the ability to operate on the mainland, businesses can streamline their supply chains, optimize resource allocation, and leverage a wider range of local partnerships, all of which contribute to improved operational efficiency.

Conclusion: Strategic Opportunity with Informed Tax Planning

Dubai Resolution 11 of 2025 represents a forward-thinking initiative that aligns with the UAE’s broader economic vision. By allowing free zone companies to establish mainland branches, the resolution not only enhances market access but also reinforces the government’s commitment to creating a more integrated and competitive economic landscape.

However, the resolution also introduces complexities in tax treatment. Companies must be proactive in reassessing their corporate tax strategies to navigate the dual tax environment—balancing the benefits of 0% taxation for qualifying free zone activities against the 9% rate applicable to mainland income.

Key Takeaway of Dubai Resolution 11 of 2025:
Businesses looking to capitalize on this policy change should engage in detailed tax planning and legal consultations. Expert advice is critical to ensure that expansion strategies align with regulatory requirements and optimize the overall tax position.

In summary, while Dubai Resolution 11 of 2025 opens up promising avenues for business expansion, it also requires companies to carefully evaluate and adapt their operational and tax frameworks. By doing so, they can fully leverage the benefits of both the free zone and mainland environments, ensuring sustainable growth in a rapidly evolving economic landscape.

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*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the the recent Dubai Resolution 11 of 2025.