Ministerial Decision No. 229 of 2025 — Qualifying Activities and Excluded Activities for Free Zone Persons

Ministerial Decision No. 229 of 2025, issued on 28 August 2025 and effective from 1 June 2023, replaces Ministerial Decision No. 265 of 2023. It defines the qualifying activities and excluded activities for Qualifying Free Zone Persons (QFZP) under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law), and introduces updated rules for de minimis requirements and qualifying intellectual property income.

What Is a Qualifying Free Zone Person?

A Qualifying Free Zone Person (QFZP) is a juridical person incorporated in a UAE Free Zone that meets specific conditions under Article (18) of the Corporate Tax Law, including maintaining adequate substance, meeting de minimis thresholds, and deriving income primarily from qualifying activities. A QFZP benefits from a 0% Corporate Tax rate on qualifying income.

Qualifying Activities Under MD 229 of 2025

Article 2(1) of MD 229 of 2025 lists the following activities as qualifying activities when conducted by a QFZP:

• Manufacturing of goods or materials — production, improvement or assembly from raw materials or components.
• Processing of goods or materials — preparation, treatment, transformation or conversion for commercial or industrial use.
• Trading of Qualifying Commodities — physical trading of metals, minerals, industrial chemicals, energy, agriculture commodities and environmental commodities with a Quoted Price, plus associated financial derivatives and structured commodity financing. Note: this activity is disqualified if 51% or more of the QFZP's revenue comes from distribution, warehousing, logistics or inventory management.
• Holding of shares and securities for investment purposes — shares, equitable interests, negotiable/non-negotiable instruments, derivative instruments, financial commodities, held for an uninterrupted period of at least 12 months.
• Ownership, management and operation of Ships — international transportation of passengers, goods or livestock; towing; dredging; bareboat chartering. Excludes local transport, leisure, or floating hotels/restaurants/casinos.
• Reinsurance services — regulated under Federal Decree-Law No. 48 of 2023.
• Fund management services — portfolio management, risk management, discretionary/non-discretionary fund management, subject to Competent Authority oversight.
• Wealth and investment management services — discretionary/non-discretionary investment management and advisory services, subject to Competent Authority oversight.
• Headquarter services to Related Parties — senior/general management, captive insurance, administrative services, procurement, business planning, risk management.
• Treasury and financing services to Related Parties or own account — cash/liquidity management, financing, debt management, financial risk management, centralised payment and collection.
• Financing and leasing of Aircraft — financing, leasing, securitisation, granting rights to use aircraft engines and rotable components.
• Distribution of goods or materials in or from a Designated Zone — buying/selling tangible goods with importation through the Designated Zone, supplied to customers who resell/process or to public benefit entities.
• Logistics services — storage and transportation on behalf of another person without taking title, including cargo handling, warehousing, container storage, freight forwarding, customs brokerage.
• Ancillary activities to any of the above.

Excluded Activities Under MD 229 of 2025

Article 2(2) lists the following excluded activities — income from these activities does NOT qualify for the 0% rate:

• Transactions with natural persons — except for Ship management/operation, fund management, wealth management, and Aircraft financing/leasing.
• Banking activities — regulated financial activities under Federal Decree-Law No. 14 of 2018.
• Insurance activities — except reinsurance services and headquarter services.
• Finance and leasing activities — except Qualifying Commodity trading, Ship and Aircraft activities, and treasury/financing to Related Parties.
• Ownership or exploitation of immovable property — except commercial property in a Free Zone transacted with another Free Zone Person.
• Ancillary activities to excluded activities.

The 51% Revenue Rule for Qualifying Commodities Trading

A critical restriction: if a QFZP's revenue from distribution, warehousing, logistics or inventory management constitutes 51% or more of its total revenue for the relevant Tax Period, it cannot classify commodity trading as a qualifying activity. This rule prevents logistics-heavy entities from accessing the 0% rate through nominal commodity trades.

How MD 229 of 2025 Differs from MD 265 of 2023

MD 229 of 2025 supersedes MD 265 of 2023 with several key updates: (1) a refined definition of Qualifying Commodities including explicit reference to the GCC Common Schedule for Classification and Coding of Goods and the concept of Related Commodities and Associated By-products; (2) the 51% revenue threshold for commodity trading; (3) explicit structured commodity financing activity list (prepayment, factoring, forfaiting, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance, streaming financing); (4) a 12-month holding period requirement for investment securities; and (5) updated Qualifying IP income calculation using a modified nexus formula.

Frequently Asked Questions

Last Reviewed: May 2025 | Reference: Ministerial Decision No. 229 of 2025