On 28 August 2025, a new Ministerial Decision was enacted in the UAE, clarifying the list of qualifying activities for corporate tax purposes. Free zone companies that earn income from these activities and meet other requirements are eligible for a zero-tax rate.
- New Ministerial Decision No. 229 replaces No. 265, effective retroactively from 1 June 2023.
- Expanded definition of Qualifying Commodities removes the "raw form" requirement and includes new items like industrial chemicals.
- Quoted price requirement changed: previously from recognised exchanges to a price listed by agencies defined in a separate decision.
- New activities include trading financial derivatives and structured commodity financing for QFZPs.
- Treasury services now include activities for the QFZPs' own account, such as cash management and financing.
- Wider distribution scope now covers public benefit entities, enhancing participation in charitable and community-focused efforts.
What’s changed for UAE free zone companies?
Ministerial Decision No. 229 of 2025 has replaced the previous Ministerial Decision No. 265 of 2023. The new decision is retroactive, taking effect from 1 June 2023 — the date the corporate tax was first introduced in the UAE.
The Decision lists 14 specific activities that allow a Qualifying Free Zone Persons (QFZPs) to be eligible for the zero-tax rate in the UAE. The primary change in the new Decision relates to the definition of “Qualifying Commodities”.
The definition of Qualifying Commodities
| Former definition | Current definition |
|---|---|
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Metals, minerals, energy and agriculture commodities that are traded on a recognised commodities exchange market in raw form.
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The following commodities provided a quoted price for such commodities exists:
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As a result, the definition of “Qualifying Commodities” has been expanded in several key ways:
- “Raw form” requirement removed: The previous rule that goods had to be in a “raw form” has been eliminated.
- New items added: The list now includes industrial chemicals, by-products, and “environmental goods” (which refers to marketable rights that contribute to positive environmental effects).
- Quoted price requirement: The condition that goods must be traded on a recognised commodities exchange market has been replaced with a requirement for a “quoted price.” This is defined as price for a qualifying or related commodity specified by a recognised commodity exchange market or a recognised price reporting agency. The list of recognised price reporting agencies is provided in a separate Ministerial Decision No. 230 of 2025.
Trading of Qualifying Commodities
The new Ministerial Decision also expands the scope of what is considered the trading of Qualifying Commodities. This now includes:
- the physical trading of Qualifying Commodities,
- associated financial derivatives trading used to hedge against risks involved in such activities and
- (new) associated structured commodity financing activity.
This latter option is possible provided that the activity is not carried out by a QFZP whose revenue from distribution, warehousing, logistics, or inventory management functions constitutes 51% or more of its revenue for the relevant tax period.
Structured commodity financing includes prepayment, factoring, forfaiting, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance and streaming financing.
Treasury and financing services
The new Ministerial Decision has expanded the scope of treasury and financing services as qualifying activities. They now include services carried out not only for related parties, but also for the QFZP’s own account (i.e., for itself).
These services may include:
- cash and liquidity management,
- financing,
- debt management,
- financial risk management
- related advisory services.
Distribution of goods or materials
Distribution in or from a Designated Zone may include the import, storage, inventory management, handling, transportation, and export of goods, materials, or components supplied to:
- customers who resell or process them for subsequent sale;
- (new) public benefit entities.
A public benefit entity is an organisation formed by private individuals or government or non-governmental bodies for carrying out charitable, social, cultural, religious, or other public benefit activities without the purpose of making a profit for distribution to private persons.
Income from intellectual property
The formula for calculating income from qualifying intellectual property has been corrected. The previous version, outlined in Article 4(2)(d) of the Ministerial Decision, contained a technical error in the definition of “Uplift Expenditures.” The correct definition is now “30% (thirty percent) of the Qualifying Expenditure”.
Income derived from the ownership or use of “qualifying intellectual property” is also considered qualifying income. It is calculated using a special formula that takes into account both the overall and qualifying expenditures of a QFZP.
Qualifying expenditures are expenditures incurred to fund research and development. These activities can be conducted by the QFZP itself, by any other person in the UAE, or by any person outside the UAE who is not a related party. To qualify, these expenditures must be directly connected to the creation, invention, or development of the intellectual property.
Key takeaways
The new Ministerial Decision No. 229 significantly broadens the definition of commodity trading as a qualifying activity for free zone companies, as well as the scope of treasury and financing services.
As a result of these changes, a greater number of UAE free zone companies will now be eligible for the zero corporate tax rate. However, some companies have already filed their initial corporate tax returns based on the previously existing regulations. Given the retroactive nature of the Decision, it remains unclear how these companies will be able to benefit from the newly introduced tax relief.
