Free Zones vs. Mainland in Saudi Arabia: 2025 Comparison Guide

A few years ago, entering the Saudi market was no small feat. There were opaque procedures, sponsor requirements, and delays that tested the patience of even seasoned investors. But now? That’s changed. Things are sharper, faster, and considerably more open than before. 

And if you’re serious about setting up a company in Saudi Arabia, the first fork in the road you’ll hit is this: Should you launch in a free zone, or register on the mainland? 

The Free Zone Proposition, still being Attractive 

Most people will agree that free zones are quite attractive. They carry a sense of insulation from the complexities of operating across a large, diverse national economy. They’re built for simplicity.

Government bodies managing these zones tend to be responsive, tech-forward, and eager to attract international ventures. Take NEOM, for instance. Once an ambitious blueprint, it’s now actively hosting companies in digital and tech sectors under more relaxed commercial rules. 

King Abdullah Economic City, too, has grown steadily especially for logistics and export-focused manufacturing. The incentives? Well, they're generous. Zero customs duties on most imports and re-exports. Long tax holidays up to 20 years in some cases. And most notably, no Saudi ownership requirements. In other words, you retain full control, without needing to team up with a local partner. That’s a dream for many founders, especially those used to operate in places where foreign ownership caps still exist. 

But It’s Not All Streamlined Glory

You see, the thing about free zones is that while they’re excellent for global-facing businesses those in trade, cloud tech, or light industry, they’re far less suited to companies that need to tap into the local Saudi consumer base. 

If you’re planning to open a storefront in Riyadh or serve private clients across the Kingdom, a free zone won’t cut it. You can’t sell directly into the wider Saudi market unless you go through a local agent or open a secondary mainland branch. And that adds friction. This restriction doesn’t make free zones bad; it just makes them specific. They’re a fit for some, not all. 

The Mainland Route Now More Accessible 

Here’s what quietly happened in the last couple of years: the Saudi mainland has become remarkably business friendly. The Ministry of Investment (MISA) has digitized a lot of the setup process. Licensing is faster. Approvals that used to take weeks now get done in days. 

Foreign ownership? In most industries, it's no longer capped. You can own your business outright, provided you're compliant and your documentation is in order. The days of needing a Saudi majority shareholder just to operate in Jeddah or Dammam are, for the most part, behind us. 

That’s a big deal. It levels the playing field in a way we hadn’t seen in the region for a long time. 

A Window into the Local Economy

The real advantage of being on the mainland is access. You’re in the thick of things. You can sell directly to local clients, bid for government projects, sign long-term contracts with Saudi corporations, and hire staff without intermediary complications. 

Need to open a branch in more than one city? Easy. Want to scale into retail or hospitality? Perfectly doable. The local market, once a maze of formalities, is now a landscape you can navigate if you’ve done your homework. 

That said, this path does come with structure. You’ll need to meet Saudization targets, yes, that means hiring Saudi nationals in proportion to your workforce. Corporate tax applies, and there’s no broad exemption like you might find in a free zone. 

Still, these obligations aren’t as daunting as they sound. Many businesses handle them as part of normal operations once they understand what’s required. 

Choosing Between Them Is About Fit, Not Favor 

One isn’t better than the other. That’s the truth. What matters is where your customers are, what your product or service demands, and how much operational flexibility you need. 

Let’s say you're building a fintech platform that caters mostly to international clients and is hosted in the cloud. A free zone might be perfect; you avoid red tape and enjoy tax savings.

But what if you're launching a specialty food brand and want to open locations across Saudi cities? Then the mainland is your game. You need physical access and room to grow where your customers live. The decision really comes down to scope and structure. Not just what your business is, but where you want it to be in two, five, or ten years. 

One More Thing to Think About

While it’s often positioned as an either-or decision, many companies are blending the two. They start lean in a free zone and, once demand builds, launch a branch on the mainland. 

This hybrid model can make sense if you’re testing the waters or running separate operational streams. But whatever your route, clarity matters early. Because unpicking the wrong setup later takes time and money, you probably don’t want to lose. 

The Bigger Picture in 2025

Saudi Arabia is moving. It’s pulling in capital, attracting ideas, and building infrastructure that will define how this region does business for decades. 

Foreign direct investment exceeded $30 billion in 2024, with a strong lean toward non-oil industries. Licensing platforms now operate in both Arabic and English. Real estate zones are ready for commercial use. Talent both local and international is looking for new challenges. In short, the ground is fertile. And it's being prepared with intent. 

So, if you're serious about scaling something meaningful here, get serious about the foundation you build on. Because the way you enter the market? It sets the tone for everything that comes after. And when you’re finally ready to start business in Saudi Arabia, make sure you're not just chasing incentives but positioning yourself where your business can thrive.

Gatestone Group works with international founders and firms to identify the right setup path free zone or mainland and manages the full process from legal formation to launch, tailored for success in Saudi Arabia’s 2025 regulatory landscape.