The Federal Tax Authority (FTA) has issued Ministerial Decision No. 229 of 2025 (MD 229) and Ministerial Decision No. 230 of 2025 (MD 230), introducing major revisions to the scope and definitions of Qualifying Activities and Excluded Activities applicable to Qualifying Free Zone Persons. These new decisions supersede and annul Ministerial Decision No. 265 of 2023, specifically by refining the concept of Qualifying Commodities and broadening the list of eligible activities, while also offering greater clarity for the practical implementation of Corporate Tax provisions within Free Zones.
Ministerial Decision No. 229 of 2025
| Topic | Details |
| Definitions | Qualifying Commodities are redefined to include metals, minerals, industrial chemicals, energy, agriculture commodities, and their associated by-products, as long as a “Quoted Price” for them exists. Environmental commodities like carbon credits and renewable energy certificates are also considered Qualifying Commodities. A “Quoted Price” is a price for a commodity that is specified by a Recognized Commodities Exchange Market or a recognized price reporting agency. An “Associated By-product” is an incidental or secondary product made during the production or extraction of a commodity. |
| Qualifying Activities | A Qualifying Free Zone Person’s activities are considered qualifying if they include: · Manufacturing, · Processing, or · Trading Of Qualifying Commodities. · Holding Shares and Securities for Investment. · Owning And Operating Ships. · Providing Reinsurance, · Fund Management, · Wealth And Investment Management, · Or Headquarter Services to Related Parties. · Treasury And Financing Services to Related Parties or For the Person’s Own Account, Financing and Leasing of Aircraft, · Distribution Of Goods in Or from A Designated Zone, · And Logistics services. · Any activity that is ancillary to these is also considered a qualifying activity. |
| Excluded Activities | The following activities are excluded: · Transactions with natural people (with limited exceptions), · Banking activities, · Insurance activities (with exceptions for reinsurance and certain headquarter services), · Finance and leasing activities (with exceptions). · Ownership or exploitation of immovable property is also an excluded activity, unless it is commercial property in a Free Zone and the transaction is with another Free Zone Person. |
| De Minimis Rule | The de minimis requirements are satisfied if a Qualifying Free Zone Person’s non-qualifying revenue in a tax period does not exceed the lower of 5% of their total revenue or AED 5 million. |
| IP Income | The decision provides a formula for determining the Qualifying Income from intellectual property. It is based on “Qualifying Expenditures” and “Overall Expenditures” for research and development activities. It also specifies a 30% “Uplift Expenditure” that can be applied, but only to the extent that the uplifted amount does not exceed the total “Overall Expenditures”. |
| Other Conditions | A Qualifying Free Zone Person must also prepare audited financial statements in accordance with Ministerial Decision No. 84 of 2025 If a Free Zone Person fails to meet the conditions at any time, they will lose their Qualifying Free Zone Person status for that tax period and the following four tax periods. |
| Repeals | Ministerial Decision No. 265 of 2023 is repealed by this decision. |
Ministerial Decision No. 230 of 2025: This decision specifies the list of “Recognised Price Reporting Agencies” that companies can use to determine the fair market value for qualifying commodities. The document lists the following agencies as recognized:
“Free Zone businesses engaged in commodity trading should reassess their eligibility in light of the new decisions effective from 1st June 2023. To evaluate the impact on your business, please provide us with the list of commodities you trade, so we can determine whether they qualify and ensure you can benefit from the 0% Corporate Tax rate.”
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