UAE Free Zones & Corporate Tax: What’s in Scope?
Free Zones in the UAE have special tax designations where entities conducting Qualifying Activities may benefit from reduced or zero corporate tax under Federal Decree-Law No. 47 of 2022. Recently, the Ministerial Decision No. 229 of 2025 clarified “Qualifying Activities and Excluded Activities” in Free Zones; Decision No. 230 of 2025 specified Recognised Price Reporting Agencies. (mof.gov.ae)
Qualifying Activities now include:
- Trading of industrial chemicals, metals, minerals, energy and agricultural commodities, and associated by-products (once a Quoted Price exists).
- Treasury and financing services for related parties.
- Some activities in designated zones that distribute goods or materials, including to public benefit entities, without breaching the de minimis threshold. (mof.gov.ae)
Price Reporting Agency (PRA) Requirements
- To trade commodities under the “Qualifying Activity”, you must use a Recognised Price Reporting Agency—only those listed under Decision No. 230 qualify. Using non-recognised agencies can render an activity non-qualifying and eliminate tax benefits. (mof.gov.ae)
Setting Up in a Free Zone: Best Practices
- Choose the correct zone and activity
- Free Zones differ: some allow trading, some only service provision. Your chosen Free Zone must permit the activity and meet the qualifying criteria.
- Ensure commodity pricing clarity
- For commodity trading: ensure the commodity has a quoted price. Align contracts and trade flow to tie into recognized pricing sources.
- Document treasury & financing
- If you plan internal financing (treasury) among related parties, ensure that Free Zone entity’s activities follow arm’s-length principles and are properly documented to avoid disqualification.
- De minimis limits apply for cross-zone distributions—make sure your numbers are within thresholds.
Example Scenario
A UAE Free Zone company wants to trade agricultural commodities (e.g., grains), metals, or mineral by-products. Under the updated Decision No. 229:
- If there’s a quoted price on a recognised commodity exchange, that trading qualifies.
- If it’s a small-scale distributor to public benefit entities and volume is minor, de minimis rules apply so that benefit is retained.
- If financing related-party services are provided, ensure they align with Free Zone rules.
Caution Points
- Non-recognized PRA usage can disqualify your activity.
- Free Zone entities must still comply with UAE corporate tax filings and thresholds—even those receiving benefit under qualifying activity.
- Watch out for how future updates may tighten definitions (e.g., what qualifies as associated by-products).
Final Takeaways
- When setting up, seek legal and tax support to carve out structure—ensuring your planned Free Zone activity fits the qualifying definitions.
- Confirm that PRAs are recognized and maintain good documentation and sourcing.
- Be proactive—qualifications depend on evolving regulations; what works now may change tomorrow.
Bottom line: For companies in Free Zones, understanding the new rules on Qualifying Activities and PRAs is critical to preserving the favorable tax treatment afforded under UAE corporate tax law.