On the 17th of March 2025, His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, in his capacity as Chairman of Dubai’s Executive Council, introduced a transformative resolution (No. 11 of 2025) permitting free zone businesses (excluding DIFC financial institutions), to operate in mainland Dubai. While this marks a pivotal shift in Dubai’s economic framework, stakeholders should note that the resolution has not been issued yet and key details remain pending, including the finalized list of permitted activities.
Below, we expand on the implications, challenges, and steps for businesses navigating this evolving landscape.
Key Provisions and Early-Stage Considerations
- Activity-Specific Permissions: The resolution currently only applies to specified economic activities. However, the Dubai Department of Economy and Tourism (DET) is yet to announce what activities will fall under the ambit of the resolution and will publish a list of specified economic activities within six months.
- Licensing: Free zone entities can apply for a renewable one-year mainland license or activity-specific permits through the DET.
- Compliance Window: Existing businesses operating outside free zones must align with the resolution within one year (extendable further for similar periods subject to approval from the Director General of the DET).
Benefits for Businesses
- Direct Access: Eliminates the need for local sponsors or intermediaries to serve mainland clients, much like certain dual-licensing free zones (e.g. DMCC).
- Hybrid Model: Combine free zone tax benefits with mainland market reach (e.g., retail, direct B2C services).
- Infrastructure Leverage: Utilize existing free zone offices while expanding mainland operations, reducing overhead.
Challenges and Regulatory Uncertainties
Despite the welcome change, the resolution is still in its nascent stages and requires further details to be issued as highlighted below –
1. Pending Activity List
- Early-Stage Limitation: Businesses will need to closely monitor the changes in this space given that the DET has not yet defined which activities will be permitted.
2. Compliance Burden
- Financial Segmentation: Despite having a free zone registered license, it will be mandatory that all financial records maintained by the business remain separate to indicate free zone and mainland financial records.
- Dual Regulations: The free zones and mainland have historically operated with separate laws and their application to entities within their respective zones. As such, with the new resolution coming into effect, further clarity will be needed to navigate overlapping free zone and mainland laws (e.g. VAT, employment norms).
What’s Next?
While the resolution is transformative for Dubai and is in alignment with the goals of the Dubai Economic Agenda, D33, undoubtedly consolidating its position among the world’s top economic cities, its full impact hinges on the DET’s forthcoming guidelines.
Al Midfa & Associates is tracking regulatory updates and will provide tailored strategies once the DET clarifies permitted activities.
At Al Midfa & Associates, we offer comprehensive services tailored to meet your needs, ensuring that your rights are protected at every step of the way. Please feel free to contact us.