UAE Corporate Tax Update
A new Ministerial Decision No. 229 of 2025 regarding the qualifying and excluded activities for taxation purposes of a Qualifying Free Zone Person under the Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses in the UAE repealed Ministerial Decision 265 of 2023.
The key provisions revised by the Ministerial Decision No. 229 of 2025 are summarized as follows:
Commodities definition:
- Expanded scope now covers chemicals, by-products, and environmental commodities (carbon credits, renewable energy certificates).
- Explicit exclusion of retail-packaged goods.
- Requirement to be traded on an exchange market was removed. It is now sufficient that a price exists, either on an exchange or through a recognised price reporting agency (list determined by the Ministerial Decision 230) on the Qualifying Commodity or a Related Commodity. This eliminates doubt about mandatory exchange trading.
- The requirement for commodities to be in raw form was removed.
Qualifying Activities – Trading of Commodities:
- Expands the scope (structured financing) and imposes a revenue threshold test on the requirement of Physical trading and derivative hedging.
- This change substantially broadens the range of activities eligible for the 0% Corporate Tax rate.
- Structured commodity financing (prepayment, forfaiting, etc.) allowed. Restriction: not qualifying if 51%+ revenue is from distribution, warehousing, logistics, or inventory management.
Qualifying Activities –Treasury and Financing:
- Broader scope: treasury and financing services to Related Parties or for its own account.
- A Qualifying Free Zone Person may now conduct treasury and financing not only for Related Parties but also for its own account, broadening eligibility for the 0% rate. This aligns with the FTA’s earlier interpretation in its Guidance. Previously, such a reading was based only on the FTA’s position; now it is expressly confirmed by the Ministerial Decision.
Qualifying Activities –Distribution
- Decision 229 of 2025 adds public benefit entities as permitted customers. The term “public benefit entity” refers to an organisation formed by private individuals, government, or non-governmental bodies to carry out charitable, social, cultural, religious, or other public benefit activities without the motive of making a profit for distribution to private Persons.
- Former Decision 265 of 2023 Required activity in/from Designated Zone; imports must pass through Designated Zone; sales to resellers/processors only; however, the new Decision 229 of 2025 requires: activity in/from Designated Zone; imports must pass through Designated Zone; sales allowed to resellers, processors, or public benefit entities
Income Derived from Qualifying Intellectual Property
- IP Income Uplift Expenditures: whilst under Decision 265 of 2023, Uplift Expenditures are defined as “Qualifying Expenditure increased by 30%”; the new decision, Decision 229 of 2025, states that the Uplift Expenditures are defined as “30% of Qualifying Expenditure”. The 2025 clarifies that the uplift equals 30% of Qualifying Expenditure (0.30 × Qualifying Expenditure), removing an ambiguity in the 2023 wording that could be misread as 130% of Qualifying Expenditure.
The new Decision has expanded into and introduced further definitions in the area of competent authorities on the financial jurisdictions; Quoted Price, Associated By-product, Related Commodity, Common Schedule for Classification and Coding of Goods, and Excluded Activities – Finance and Leasing: excluded, except if it qualifies under the following sections of the Qualifying Activities:
- C: Trading of Qualifying Commodities;
- e: Ownership, management and operation of Ships;
- j: Treasury and financing services to Related Parties or for its own account; and
- k: Financing and leasing of aircraft.
Ministerial Decision No. 229 of 2025 marks a pivotal update in the UAE’s corporate tax framework, offering greater clarity and expanded benefits for Qualifying Free Zone Persons. Whether you’re involved in commodity trading, treasury operations, IP management, or distribution, these changes could significantly impact your tax position.
✅ Now is the time to reassess your business model and ensure alignment with the updated criteria. For a detailed understanding of how this decision affects your operations — and to explore strategies that maintain tax efficiency — consult with our experts today.
