EVALUATING UAE FREE ZONES & MAINLAND FOR SOFTWARE DEVELOPMENT FIRMS: STRATEGIC & REGULATORY OVERVIEW

This article has been researched and written by the Business Development Team at Creation Business Consultants. AI has not been used in generating this article.

Free Zone vs. Mainland: What’s Best for Your Software Development Company in the UAE? For software development companies that would like to expand to the United Arab Emirates (UAE), free zones and mainland locations each have their advantages and can be more or less suitable depending on different strategic goals. Statista articles illustrate the UAE software landscape growing 5.25% year-on-year between 2024 & 2029, hitting $2.48 billion as the market value in 2029.

The software industry is predicted to have an average annual growth rate of +20.19% from 2025 to 2029, reaching a projected market volume of 2.17 billion US dollars. The application development software market is also growing steadily at the rate of 6.03% every year and by 2029 it will reach $ 0.67 billion. As the International Monetary Fund (IMF) projects UAE’s real GDP growth at 4% in 2024 and 4.2% in 2025, with such promising trends supported by a solid economic foundation, the UAE continues to be an attractive hub for tech investment.

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COMPARATIVE CONSIDERATIONS FOR FREE ZONES & MAINLAND:

Advantages	Free Zones	Mainland
Setup and Licensing	UAE free zones have a more streamlined and expedited business establishment process. This approach is aimed at licenses, immigration, and attracting foreign investment in these new zones in these single authority setups. In addition, free zones provide activity-based licenses to facilitate the establishment of tech companies, particularly for firms involved in software development. Some popular free zones that are good for software and tech companies are Dubai Internet City (DIC), and Dubai Silicon Oasis (DSO), with licenses for Software Development, IT Consultancy, Cloud Computing, etc.	To set up a company in the UAE mainland, the entity must go to the Department of Economic Development (DED) in the pertaining emirate for registration. You might also need to deal with other government entities, depending on the business activity. Although the process has been made simpler over the years, it may still be more complex than in free zones, as several departments may be involved. Software development companies on the mainland generally require a professional or commercial license, depending on the nature of their business.
Ownership	With 100% foreign ownership generally permitted within free zones, overseas tech companies such as software developers are particularly attracted to them, allowing absolute control of the company	Mainland companies were previously required to be 51% owned in the UAE by nationals. But new amendments to the Commercial Companies Law permit 100% foreign ownership in many business sectors, including but not limited to software development. Although these developments were positive, certain strategic sectors might still be subject to ownership restrictions, therefore, it is important for companies to check the updated regulations depending on their activity.
Market Access & Operations	Generally, free zones are oriented to companies wishing to establish themselves in its jurisdiction and export internationally. To conduct business with the mainland UAE market directly, you may require establishing a distributor, agent or even a branch or subsidiary so licensed for mainland. This presents an additional challenge for free zone companies looking to trade with local customers.	By operating in the mainland, you are able to access all of the UAE market without restriction. It enables businesses to deal with local clients, government agencies and participate in domestic tenders directly. Unlike the free zone, mainland companies don’t require intermediaries in order to conduct business, thus allowing them greater flexibility and sphere of influence in the UAE market.
Regulatory and Legal Frameworks	Like any business in the UAE, both free zones and mainland businesses must operate under the larger UAE legal framework, including Federal Decree-Law of 45 of 2021 concerning data protection and other relevant cybersecurity-related laws. But there are some important differences in the two regulatory systems: Certain free zones like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) function within their own separate regulatory and legal frameworks. These systems, which are based on common law principles, provide a distinctive legal landscape for businesses which differs from that found in the civil law system adopted in the mainland UAE. This can be especially beneficial for tech and finance companies as they start-up, all of whom require a legal framework that is internationally aligned.	UAE’s civil law system, the mainland legal framework. This system is highly efficient and accurate, but may provide less room for flexibility than the common law-based systems found in some free zones

LICENSE CATEGORIES FOR SOFTWARE DEVELOPMENT IN FREE ZONES & MAINLAND

Free Zones: They provide specific licenses for different services/ products related to software, aimed at the tech sector. Common activities include:
- Mobile App Development.
- AI and Machine Learning.
- Cybersecurity Software.
- Fintech Software.

There are various license categories specific to these sectors for each free zone, allowing tech companies the ability to opt for the best license.

Mainland: Licensing requirements vary based on the nature of business activities. There are several main types of licenses:
- Professional License: For corporates engaged in consultancy services, IT support, and some software development, primarily emphasizing the provision of professional services as their focus area.
- Commercial License: Appropriate for businesses that trade, develop and sell software products, or engage in other commercial software enterprise activities.
- Specialized licenses: In certain fields, such as AI or cybersecurity, you may need to obtain additional licenses depending on the emirate’s requirements and the activities being undertaken.

REGULATIONS ON DATA PROTECTION AND CYBERSECURITY APPLICABLE TO FREE ZONES & MAINLAND

Federal Decree-Law No. 45 of 2021: This law governs the processing of personal data in all business sectors on both free zones and mainland UAE. It defines the criteria for the processing and safeguarding of data, establishing itself as the cornerstone of data protection and privacy in the UAE, thus increasing levels of compliance among businesses against international data privacy standards.
Particular Free Zone Mandates: Some free zones such as Dubai International Financial Centre (DIFC) maintain independent data protection legislation. For instance, DIFC Law No. 5 of 2020 is stricter than the federal law, but only in relation to the DIFC jurisdiction. Additionally, companies doing business within DIFC must comply with DFSA cybersecurity regulations, which provide further guidance for protecting digital assets.
Mainland Cyber Security: For mainland companies, the UAE has federal cybersecurity laws in place that continue to be refined to deal with new digital security challenges. Those laws form a broad framework for protecting the safety and integrity of digital infrastructures.

DATA & CYBERSECURITY EXTERNAL COMPLIANCE APPROVALS

Telecommunications and Digital Regulation Authority (TDRA): The telecom software or cloud service companies handling sensitive data must get approval from TDRA to comply with UAE’s digital communications regulations.

For fintech software companies, especially if they will be dealing with payments or providing something in the financial technology space, you will require to get UAE Central Bank approval.

COMPARATIVE CONSIDERATIONS FOR FREE ZONES & MAINLAND

Authority	Key Benefits	Best For
DUBAI INTERNET CITY (DIC) &DUBAI SILICON OASIS (DSO) (FREE ZONES)	Tech-centric ecosystem with high operational & regulatory efficiencies DIC establishes relationships with the media and finance, whilst DSO encourages hardware and software development. R&D and innovation based	R&D and innovation based software companies with a global market.
ABU DHABI GLOBAL MARKET (ADGM) &DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC) (FREE ZONES)	Fintech & regtech focused frameworks. Strong innovation hubs. DIFC is perfect for financial software & enterprise solutions	Fintech, regtech & enterprise software companies aiming at the financial services sector
DUBAI & ABU DHABI (MAINLAND)	Transparent access to the UAE market. Nearby business districts, government entities and residential areas. Ideal for businesses catering to UAE customer	Businesses that depend on local clients, government contracts, and onshore operations.

What To Consider While Choosing from Free Zones or Mainland?

The important types of companies that occupy the free zones are companies that target export-oriented or international scopes, including tech, fintech, and software companies.

A mainland setup provides access to the UAE market — a wide scope for engaging with local clients, the government, and businesses in the UAE.

INFRASTRUCTURE AND TALENT AVAILABILITY (FREE ZONES & MAINLAND)

UAE has world-class infrastructure with high-speed internet, modern office spaces, and cutting-edge technology both free zones and mainland locations. They are well placed to cater to the needs of the tech businesses, most notably software development companies like us.

Skilled Talent Access: The different sets in both the zones also provide access to a skilled pool of talent. The UAE has extremely flexible visa policies that enable firms to hire talent from all over the world. Moreover, the country’s alliances with premier universities and research facilities contribute to a steady influx of talented individuals, from software engineers to data scientists and IT professionals.

CONCLUSION

The decision regarding UAE free zone or mainland setup for your software development company should ultimately be based on your specific business goals, target market, and operational needs.

Free Zones (DIC, IFZA DSO, ADGM, DIFC): Best for those businesses focusing on global exposure. Such areas provide a technology-driven environment, simplified licenses, and an emphasis on overseas trade.

Set up on the Main Land: Best suited for organizations that want to tap the top UAE market directly, want to avail government projects and combine strong ties with local clients.