Lakshmi Omanakuttan March 13, 2026 The UAE, known for its wide range of business setup and growth opportunities, offers a dual licensing regime that plays an important role for businesses seeking to expand across multiple jurisdictions within the country. Dual licensing allows a company incorporated in a free zone to operate its activities on the mainland without the need to establish a separate entity. This innovative approach to expansion, developed through partnerships between free zones and the mainland Departments of Economic Development (DED), enhances the UAE’s business landscape and creates new growth opportunities. While this structure offers commercial advantages, it also gives rise to important tax implications that require careful assessment. What is Dual Licensing? Dual licensing is a regulatory approval that allows free zone companies to conduct business operations outside their designated free zone and expand their activities into the mainland through an additional licence issued by the relevant mainland authorities. Under this structure, the company typically holds: a free zone licence issued by the free zone authority in which the company is incorporated; and a mainland licence issued by the relevant Department of Economic Development (DED), permitting the company to undertake approved activities on the mainland. Generally, a free zone company can only operate within its designated free zone or conduct business internationally. However, under the dual licensing regime, a free zone company can obtain permission to conduct specific approved activities on the mainland, subject to regulatory approvals. This removes the requirement to set up a separate mainland entity to do business locally, as the mainland operations are typically treated as a branch of the free zone entity. This opens the wider UAE market to businesses, including opportunities to participate in government tenders. Companies with dual licensing may continue to benefit from applicable free zone incentives, including a potential 0% corporate tax rate on qualifying income, subject to the UAE Corporate Tax regime and Qualifying Free Zone Person (QFZP) status, as well as Value Added Tax (VAT) benefits, subject to the applicable thresholds. Tax Implications Although the dual licensing structure provides businesses with a broader avenue to expand their operations in a cost-effective manner, companies remain subject to corporate tax and VAT in accordance with their applicability under UAE law. Importantly, dual licensing does not create a separate tax regime or confer double tax benefits. Corporate Tax Under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, a “taxable person” is determined by reference to its legal status and the economic activities it conducts. Where a legal entity holds more than one licence, the Federal Tax Authority considers the entity to be a single taxable person for the purposes of determining corporate tax registration, reporting obligations, and compliance requirements. Free zone entities may qualify for a 0% corporate tax rate on qualifying income if they meet the conditions applicable to a Qualifying Free Zone Person (QFZP). However, income derived from mainland activities may be subject to the standard 9% corporate tax rate, depending on the nature of the income and compliance with the applicable regulatory conditions. The March 2026 Registration Deadline 31 March 2026 is a significant date for taxable natural persons, including freelancers, sole practitioners, consultants, and influencers, whose business turnover exceeds AED 1 million during the 2025 calendar year. It is mandatory to register for corporate tax before 31 March 2026, regardless of profit, even if the person ultimately qualifies for a 0% tax rate. Failure to register may result in a fixed administrative penalty, typically AED 10,000, although waivers may apply if the tax return is filed within seven months after the end of the tax year. Value Added Tax (VAT) Similarly, dual licensing does not remove the obligation to register for VAT. If the company’s taxable supplies exceed the mandatory registration threshold, VAT registration is required. Businesses operating under a dual licensing structure must ensure proper invoicing, reporting, and compliance with VAT regulations in respect of both free zone and mainland activities. Key Considerations Corporate Tax Impact: Engaging in mainland operations through a dual licensing arrangement may affect a company’s QFZP status and expose certain income streams to the standard 9% corporate tax rate if not structured carefully in accordance with the relevant corporate tax provisions. 31 March 2026 Deadline: Any taxable natural person whose turnover exceeds AED 1 million during the relevant calendar year is required to register for corporate tax by 31 March 2026, where applicable. VAT Exposure: VAT registration remains mandatory where taxable supplies exceed the prescribed registration threshold. Companies must ensure compliance with VAT obligations across both free zone and mainland operations. Dual licensing is a strategic mechanism that allows free zone companies to expand and operate their businesses in the UAE without the need to establish a separate legal entity on the mainland. While this structure provides commercial flexibility and broader market access, it is crucial for businesses to comply with regulatory requirements and ensure compliance with corporate tax and VAT registration and filing obligations. Companies, as well as any taxable natural person conducting business in the UAE, must also ensure timely registration for corporate tax, particularly in light of the 31 March 2026 deadline, where applicable, in order to avoid administrative penalties.
