On March 3, 2025, the Dubai Executive Council released Decision No. 11/2025 (the “Decision”), which introduces new regulations for free zone entities seeking to conduct their operations outside their designated free zones and within the Emirate of Dubai. This decision reflects Dubai's dedication to refining business frameworks, promoting economic transparency, and simplifying operations between mainland Dubai and various free zones.
SCOPE AND APPLICABILITY
The decision applies specifically to entities established within Dubai's free zones that intend to engage in business activities beyond these zones and within mainland Dubai. Notably, it has excluded financial institutions that are licensed to operate under the Dubai International Financial Centre (DIFC).
KEY PROVISIONS
Operating Activities Outside the Free Zone
Entities operating within free zones are authorized to expand their activities beyond the confines of these zones, contingent upon obtaining the required licenses or permits. These entities are obligated to comply with the pertinent federal and local regulations relevant to their selected activities and to maintain distinct financial records for operations conducted on the mainland, separate from those pertaining to the free zone accounts.
Licensing and Permitting Framework
1. Branch Establishment within Mainland Dubai
Establishments are permitted to establish a branch office on the mainland, contingent upon the prior approval from the relevant authorities, the validation of their free zone licenses, and the fulfillment of any additional requirements as stipulated by the Dubai Department of Economy and Tourism.
2. Branch Establishment with Headquarters in the Free Zone
Establishments can establish a branch physically headquartered in their original free zone but licensed specifically for mainland activities. Essential documentation includes articles of incorporation, current commercial licenses, and managerial identification, along with necessary approvals from licensing authorities and relevant governmental bodies.
3. Temporary Activity Permits
Temporary permits, valid for a duration of up to six months, may be issued for the execution of designated mainland activities, provided that appropriate documentation, valid free zone licenses, and compliance with department-specific requirements are presented.
Compliance and Oversight
Entities authorized under this Decision are required to adhere to strict oversight by both local and federal authorities. They must fully comply with all relevant local legislation, which includes undergoing routine supervision and inspection to ensure compliance with regulatory standards.
Fees and Financial Obligations
The Decision clearly outlines fees payable to the Department of Economy and Tourism:
- AED 10,000 annually for establishing and renewing a free zone headquartered mainland branch license.
- AED 5,000 for temporary activity permits, renewable accordingly.
Workforce Implications
Authorized entities can utilize their free zone-registered workforce in mainland Dubai while maintaining the benefits associated with their free zone status regarding employment conditions.
Regularization of Existing Activities
Entities that are presently engaged in activities on the mainland without the necessary explicit authorization at the time this Decision is enforced shall be granted a grace period of one year to rectify their statuses appropriately. The Director General retains the authority to extend this period for an additional year, should it be deemed necessary.
Economic Activities List
The Department of Economy and Tourism, in conjunction with licensing authorities, is assigned the responsibility of compiling and disseminating, within a six-month timeframe, a comprehensive list of economic entities eligible for licensing under this Decision. This initiative aims to provide clarity to free zone entities considering expansion into the mainland.
Conclusion and Practical Recommendations
The Dubai Executive Council Decision No. 11/2025 signifies a notable regulatory advancement that elucidates the framework for free zone entities seeking to transition into mainland operations. This decision facilitates procedural efficiency, distinctly outlines operational guidelines, and reinforces compliance structures. Furthermore, it serves as an essential element of the United Arab Emirates' overarching Foreign Direct Investment (FDI) strategy, designed to attract foreign investment. This decision may also directly influence the enforcement of new income tax regulations pertaining to revenue generated by onshore subsidiaries of free zone entities. It is recommended that entities promptly assess their operational conditions and solicit professional legal advice to ensure timely adherence to regulations and to leverage strategic growth opportunities afforded by this comprehensive regulatory framework.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
