The UAE Federal Tax Authority has published Tax Public Clarification – TAXP010, explaining how a business should determine whether it is located in a Free Zone or a Designated Zone for Corporate Tax, Excise Tax and VAT purposes.
The UAE’s Federal Tax Authority (FTA) issued Tax Public Clarification – TAXP010 on 2 October 2026. It sets out how a business can determine whether its location is a Free Zone or a Designated Zone under each of the three tax laws.
The clarification states that the definitions differ across the Corporate Tax, Excise Tax and Value Added Tax (VAT) laws. A business must therefore assess its location separately under each law to comply with the relevant rules. It identifies four categories: Corporate Tax Free Zone, Corporate Tax Designated Zone, Excise Tax Designated Zone and VAT Designated Zone.
Corporate tax
A Corporate Tax Free Zone is a defined geographic area in the UAE specified by a Cabinet decision, issued on the recommendation of the Minister. A Corporate Tax Designated Zone is a zone that appears in the List of Designated Zones under the VAT Law and is also recognised as a Free Zone under the Corporate Tax Law.
The clarification states that a VAT Designated Zone is not automatically a Corporate Tax Designated Zone. To qualify for Corporate Tax purposes, the location must be both a VAT Designated Zone and a Corporate Tax Free Zone.
A Qualifying Free Zone Person (QFZP) incorporated or registered in a Corporate Tax Free Zone may benefit from a 0% Corporate Tax rate on its Qualifying Income. It must meet all conditions under the Corporate Tax Law, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025.
The distribution of goods or materials is a “Qualifying Activity” only if it is conducted in or from a Corporate Tax Designated Zone.
If a QFZP fails to meet any required condition during a Tax Period, it loses QFZP status from the beginning of that Tax Period and for the following four Tax Periods.
Excise tax
An Excise Tax Designated Zone is a specific fenced Free Zone or approved geographic area supervised by a registered Warehouse Keeper. A fenced Free Zone must have three features:
- security measures restricting the entry and exit of individuals and the movement of Excise Goods;
- direct control and supervision by a customs department; and
- an approved Warehouse Keeper.
A geographic area that is not a Free Zone can also qualify. It must be defined, with strict security and movement controls and an appointed Warehouse Keeper, and the Warehouse Keeper must submit a registration application that the FTA approves.
VAT
A VAT Designated Zone is a specific fenced geographic area specified in Cabinet Decision No. 59 of 2017 and its amendments. In this clarification, the list of such zones is referred to as the “List of Designated Zones”.
Supplies within a VAT Designated Zone may be treated as taking place outside the UAE if three conditions are met:
- the zone is a specific fenced area with security measures and customs controls monitoring the entry and exit of individuals and the movement of goods;
- it maintains internal procedures for keeping, storing and processing goods; and
- the zone operator complies with all procedures set by the FTA.
Steps for businesses
The clarification points businesses to four steps:
- confirm with their Free Zone Authority whether their location qualifies as a Free Zone or Designated Zone separately for Corporate Tax, Excise Tax and VAT;
- check the List of Designated Zones published on the FTA website;
- for Excise Goods, verify with the Warehouse Keeper or Free Zone Authority that the location holds active FTA approval; and
- for Corporate Tax, ensure that distribution operations take place in or from a Corporate Tax Designated Zone to preserve eligibility for the 0% rate.
Businesses operating in either type of zone may refer to TAXP010 when assessing their position under each tax law.
