On 3 March 2025, the Executive Council of Dubai issued Decision No. 11 of 2025 (the "Decision"), introducing a new regulatory framework to govern the ability of companies licensed in Dubai's free zones to conduct business outside their respective zones and within the mainland of Dubai.
This marks an important milestone in the Emirate's continued efforts to modernise its economic landscape, offering more legal clarity and operational flexibility for free zone entities seeking to expand their commercial presence in the local onshore market, especially now that the historic foreign direct investment restrictions have been substantially lifted. It is worth noting that the Decision expressly excludes financial entities licensed in the Dubai International Financial Centre (DIFC), which remain subject to their own separate regulatory framework.
Under the Decision, free zone companies may now carry out onshore activities through one of the following three pathways: (i) obtaining a license to establish a branch within onshore Dubai (with a physical presence); (ii) obtaining a license to establish a branch that remains based in the free zone, but is authorised to operate onshore from its existing free zone premises (or without the requirement to have an office space in mainland); or (iii) acquiring a temporary permit to conduct specific onshore activities for a period not exceeding six months.
Each pathway is subject to specific procedural requirements, including prior approvals from relevant sector and licensing authorities, as well as competent government entities overseeing the regulated activity.
Importantly, companies engaging in onshore activities must maintain separate accounting records for such operations, presumably also enabling efficient planning and compliance with the newly introduced federal corporate tax regime and must adhere to all applicable federal and local legislation.
The Decision also permits eligible companies to utilise their existing free zone-registered employees for onshore activities, while continuing to benefit from free zone employment privileges and services. This is a notable development, particularly in the context of Emiratisation rules and workforce quotas, as companies may be able to conduct onshore business without hiring additional onshore-based employees or altering their existing labour structure.
From a cost perspective, the Decision sets an annual fee of AED 10,000 for establishing a free zone–based branch permitted to operate onshore, and a fee of AED 5,000 for obtaining a six-month temporary permit.
The Dubai Department of Economy and Tourism (DET), in coordination with the respective free zone authorities, is expected to publish a list of permitted economic activities that may be conducted onshore pursuant to the Decision. This list, anticipated within six months of the Decision's effective date, will be critical in defining the practical scope of its application and is expected to clarify which activities may or may not be permitted under the new framework.
Free zone entities currently operating onshore without the appropriate licenses must regularise their status within one year of the Decision's publication (i.e., by 3 March 2026). The DET retains discretion to extend this grace period where necessary.
While the Decision lays a solid regulatory foundation for the onshore operations, it is particularly notable for introducing two improvements to the current licensing landscape. While free zone companies could previously establish a branch onshore (option 1), the Decision adds two new, more flexible mechanisms; option 2 which involves licensing a branch that operates onshore from the company's existing free zone location without establishing a physical presence in mainland Dubai; and option 3 which allows temporary permits for short-term onshore activity. We anticipate, however, that implementation of the Decision will take time. The DET and other relevant government authorities will likely require a transitional period to develop the infrastructure, application procedures and inter-agency coordination mechanisms necessary to apply the framework effectively. As such, businesses should expect a phased rollout and are advised to closely monitor subsequent decisions, official announcements and the practical rollout of the application process.
In conclusion, Decision No. 11 of 2025 delivers additional certainty for free zone businesses aiming to operate onshore, aligning Dubai's regulatory environment with international best practices and promoting sustainable economic expansion and growth. However, the full impact of the Decision will only come into focus once the permitted activities list is published, and the implementation process is underway.
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