Starting a business in Dubai has long been an attractive prospect for entrepreneurs worldwide. But one recurring question remains: Do you still need a local sponsor to open a company in Dubai in 2025? The answer depends on your business activity, company structure, and chosen jurisdiction.
This guide breaks down the latest updates on UAE ownership laws, including the 100% foreign ownership provisions, and what they mean for entrepreneurs planning company registration in Dubai. We'll explore differences between mainland and free zone setups, and help you understand whether or not you need a local partner today.
What Is a Local Sponsor in Dubai?
Historically, a local sponsor in Dubai referred to a UAE national who held 51% ownership of a mainland company, while the foreign investor held 49%. This was required for most types of commercial licenses, excluding those set up in free zones.
The local sponsor arrangement applied primarily to mainland company formation in Dubai, and was a legal requirement to ensure compliance with the UAE Commercial Companies Law.
2025 Update: 100% Foreign Ownership Now Possible
As of the latest business reforms in the UAE, 100% foreign ownership is allowed in many business sectors on the mainland, eliminating the need for a local sponsor in most cases.
Here’s what changed:
- In June 2021, the UAE amended the Commercial Companies Law, allowing 100% foreign ownership for more than 1,000 commercial and industrial activities.
- This rule continues to apply in 2025, enabling foreign investors to fully own their businesses in various sectors without a UAE national as a partner.
- Some strategic sectors (like defense, security, and energy) may still require local ownership or special permissions.
This change has made company setup in UAE significantly more appealing to international entrepreneurs, reducing entry barriers and increasing flexibility.
Mainland vs Free Zone: Sponsorship and Ownership Compared
Understanding the differences between mainland and free zone business structures is key to determining your sponsorship needs.
1. Mainland Company Formation in Dubai
- Local Sponsor Requirement: Not mandatory for most business activities in 2025.
- Ownership: Up to 100% foreign ownership allowed for eligible activities.
- Scope: You can trade freely within the UAE market and work with government contracts.
- Office Space: Physical office is required.
- Licensing Authority: Department of Economy and Tourism (DET), formerly known as DED.
If your business activity is on the DET-approved list, you can enjoy full ownership without appointing a local sponsor. However, for some activities, particularly professional services, a Local Service Agent (LSA) may still be needed for administrative purposes (without owning shares).
2. Dubai Free Zone Company Registration
- Local Sponsor Requirement: Never required.
- Ownership: Always 100% foreign-owned.
- Scope: Business can operate within the free zone and export globally. A mainland license is needed to sell directly in the UAE market.
- Office Space: Often optional or included in packages.
- Licensing Authority: Respective free zone authorities (e.g., DMCC, Dubai South, DIFC, etc.).
Free zones remain a popular choice for businesses focusing on international trade, e-commerce, or consulting services, offering speed, affordability, and simplicity.
Activities That Still Require a Local Sponsor in 2025
Despite the liberalization of the laws, there are exceptions. Some business activities still require local sponsorship due to their sensitivity or strategic nature. These may include:
- Oil and gas exploration
- Military equipment manufacturing
- Security-related services
- Banking and finance (in some cases)
- Insurance and reinsurance
- Telecom and media
It's crucial to consult with a business advisor or check with the Department of Economy and Tourism to confirm the specific rules for your intended activity.
Benefits of Not Having a Local Sponsor
Going sponsor-free comes with significant advantages:
- Full control over your business operations, decisions, and profits.
- No revenue sharing or sponsor fees (previously charged annually).
- Greater investor confidence and transparency.
- Simplified exit strategies (easier to sell or transfer ownership).
Whether you choose mainland or free zone, these benefits can make a major difference in how you plan your company registration in Dubai.
What Is a Local Service Agent (LSA)?
Even though the traditional sponsor requirement is no longer mandatory for many, some professional businesses still need a Local Service Agent. LSAs:
- Do not hold equity in the business.
- Act as administrative representatives for government paperwork.
- Are compensated with a fixed annual fee, not a percentage of profits.
Typical for activities like legal consultancy, auditing, or medical services.
How to Set Up Your Business Without a Sponsor in 2025
If your activity qualifies for 100% foreign ownership, here’s a simplified roadmap for company setup in UAE mainland without a local sponsor:
- Choose your business activity and confirm it qualifies under DET’s foreign ownership list.
- Reserve your trade name and initial approval with DET.
- Prepare your documents, including passport copies, business plan, and tenancy contract.
- Submit your license application and pay the required fees.
- Open your corporate bank account and register for VAT (if applicable).
For Dubai free zone company registration, the process is even simpler, as it’s usually handled entirely online through the respective free zone portal.
Should You Still Consider a Local Sponsor?
In rare cases, some investors may choose to have a local partner voluntarily, such as:
- Gaining access to local networks or government contracts
- Needing help with cultural or market integration
- Entering restricted sectors where foreign ownership is limited
While optional in most cases, local sponsorship can still be strategic depending on your business goals.
Conclusion
In 2025, Dubai continues to solidify its status as a global business hub with investor-friendly reforms. For most entrepreneurs, you no longer need a local sponsor for mainland company formation in Dubai, thanks to the expanded list of fully foreign-owned activities.
Whether you’re planning to set up on the mainland or in a free zone, it’s essential to understand the legal and operational implications of your choice. Engaging with a professional consultant can save time and ensure that your company registration in Dubai goes smoothly and remains compliant.
FAQs
1. Can I own 100% of my mainland business in Dubai in 2025?
Yes, for most commercial and industrial activities, 100% foreign ownership is allowed. Some strategic sectors still require local participation.
2. Is a local sponsor still required for Dubai free zone companies?
No, free zone companies in Dubai have always allowed 100% foreign ownership and do not require a local sponsor.
3. What’s the difference between a local sponsor and a local service agent (LSA)?
A local sponsor owns a share in the business (historically 51%), while an LSA does not hold ownership but supports administrative tasks for certain professional licenses.