UAE issues Ministerial Decision No. 229 of 2025 on Free Zone corporate tax activities, effective from 1 June 2023.
The UAE Ministry of Finance ( MOF) issued Ministerial Decision No. 229 of 2025 on 28 August 2025, which repeals Ministerial Decision No. 265 of 2023. The decision provides detailed guidance on qualifying and excluded activities under the Free Zone corporate tax regime established by Federal Decree-Law No. 47 of 2022.
The decision defines the scope of qualifying activities eligible for the 0% corporate tax rate in Free Zones. These include manufacturing and processing, commodity trading, holding of shares and securities, shipping, aircraft leasing and financing, fund management, reinsurance, wealth management, headquarter services, treasury functions, logistics services, and distribution of goods from designated zones.
Excluded activities cover transactions with natural persons (with limited exceptions), banking, insurance other than reinsurance and headquarter services, certain financing and leasing activities, and ownership of immovable property outside approved Free Zone commercial property.
The rules introduce a de minimis threshold, requiring that non-qualifying revenue remain below 5% of total revenue or AED 5 million, whichever is lower. Intellectual property income qualifies only under the nexus approach, linking it directly to eligible research and development expenditures.
Free Zone entities are required to maintain audited financial statements. Non-compliance with the conditions will result in the loss of Free Zone tax benefits for the current tax period and the subsequent four tax periods.
The decision takes effect retrospectively as of 1 June 2023.
