UAE Free Zone Corporate Tax Updates: What Businesses Need to Know

The Federal Tax Authority (FTA) has introduced significant changes to the corporate tax framework for UAE Free Zones through Ministerial Decision No. 229 of 2025 (MD 229) and Ministerial Decision No. 230 of 2025 (MD 230). These decisions repeal and replace Ministerial Decision No. 265 of 2023, reshaping how Qualifying Free Zone Persons determine their tax position.

The updates expand the scope of Qualifying Activities, refine the list of Excluded Activities, and introduce new pricing standards that align with international best practices. The goal is clear: to provide greater certainty, strengthen transparency, and ensure that Free Zone businesses remain globally competitive while adhering to the Companies Act 2013–aligned corporate tax system.

Importantly, these changes are retrospective from June 1, 2023, meaning Free Zone businesses must carefully review their current and past transactions to assess compliance and eligibility for the 0% corporate tax regime.

Key Changes in UAE Free Zone Corporate Tax Rules

The following table highlights the major updates introduced by Ministerial Decision No. 229 of 2025 (MD 229) and Ministerial Decision No. 230 of 2025 (MD 230) compared with Ministerial Decision No. 265 of 2023.

Key Changes Introduced by MD 229 and MD 230

The Federal Tax Authority (FTA) has introduced two major updates that reshape corporate tax compliance for Free Zone businesses:

• Ministerial Decision No. 229 of 2025 (MD 229):
  This repeals and replaces MD 265 of 2023, introducing revised definitions for Qualifying Activities, Excluded Activities, and Qualifying Commodities. The updates bring much-needed clarity for Qualifying Free Zone Persons (QFZPs), ensuring greater legal certainty and enabling businesses to plan their operations in a tax-compliant manner.
• Ministerial Decision No. 230 of 2025 (MD 230):
  Working in tandem with MD 229, this decision specifies the list of Recognised Price Reporting Agencies (PRAs) that companies must use to determine the fair market value of qualifying commodities. This step strengthens transparency, consistency, and alignment with international pricing standards.

These updates not only clarify the scope of eligible activities but also remove ambiguities in earlier legislation, giving Free Zone entities more confidence in their tax positions.

Importantly, both decisions have retrospective effect from June 1, 2023, meaning businesses—particularly those engaged in commodity trading—must reassess their activities and compliance strategies to ensure eligibility under the revised framework.

Expanded Scope of Qualifying Activities

The new framework under Ministerial Decision No. 229 of 2025 significantly broadens the scope of Qualifying Activities for businesses operating in UAE Free Zones, making it easier for companies to access the zero per cent corporate tax rate while ensuring compliance with global standards.

1. Qualifying Commodities Trading
The earlier scope was limited to metals, minerals, energy, and agricultural commodities in “raw form” traded on a Recognized Commodities Exchange Market. The removal of the “raw form” restriction now allows commodities to qualify as long as a Quoted Price exists. The definition has been expanded to cover:

• Industrial chemicals
• Associated by-products of qualifying commodities
• Environmental commodities, such as carbon credits and renewable energy certificates

In addition, structured commodity financing activities are now explicitly included. This covers prepayment, forfaiting, factoring, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance, and streaming financing. However, this activity will not qualify if more than 51% of revenue comes from distribution, warehousing, logistics, or inventory management functions.

2. Clarified Definitions
To reduce ambiguity, several new terms have been formally defined:

• Quoted Price – The price of a qualifying or related commodity as specified by a recognized exchange or reporting agency.
• Associated By-product – A secondary product created during production or extraction.
• Related Commodity – Any commodity listed in the same GCC classification chapter as a Qualifying Commodity with a Quoted Price.
• Recognized Commodities Exchange Market – Now expanded to include foreign-regulated markets.
• Competent Authority – Broader coverage, including the UAE Central Bank, SCA, DFSA, FSRA, and other Minister-approved bodies.
• Common Schedule for Classification and Coding of Goods – Adopted under Cabinet Decision No. 119 of 2024.

3. Treasury & Financing Services
The scope now extends beyond services to Related Parties and allows treasury and financing services for a company’s own account, offering greater flexibility to multinationals and holding groups.

4. Insurance and Reinsurance
These activities are now regulated under Federal Decree-Law No. 48 of 2023, replacing the outdated Federal Law No. 6 of 2007.

5. Distribution of Goods in Designated Zones
Distribution of goods or materials in/from Designated Zones will now qualify even when involving Public Benefit Entities (PBEs). For eligibility, distribution must be to resellers or PBEs.

Bottom Line: These changes give Free Zone companies wider opportunities to qualify for tax relief, while promoting transparency, flexibility, and alignment with international best practices.

Strategic and Economic Implications

1. Boosting Confidence and Clarity
The new ministerial decisions provide businesses with greater certainty, eliminate ambiguities in the law, and streamline compliance. This clarity is critical for enabling tax-compliant operational planning and long-term business confidence.

2. Driving Economic Growth and Diversification
Free Zones remain central to the UAE’s economic diversification strategy. Hosting thousands of global companies, they attract foreign investment, foster innovation, and provide a competitive business environment. The updates reinforce the UAE’s positioning as a global hub for trade, finance, and emerging industries.

3. Alignment with International Standards
The decisions align the UAE’s tax framework with global best practices, including the OECD’s Base Erosion and Profit Shifting (BEPS) guidelines. This ensures international credibility while maintaining the country’s attractiveness for multinational groups.

4. Preserving Free Zone Benefits
By setting transparent qualifying criteria and fair pricing rules, the Ministry of Finance has reaffirmed the continuation of Free Zone benefits such as:

• 100% foreign ownership
• Full repatriation of profits
• No customs duties
• No personal income tax
• Fast-tracked business setup

These updates strengthen the case for businesses to operate within Free Zones while retaining their zero-tax incentives.

5. Compliance and Reassessment
The retrospective application of the rules from June 1, 2023, places renewed emphasis on compliance. Businesses—particularly commodity traders—must reassess their activities and documentation to ensure eligibility. Non-compliance could lead to disqualification from the tax exemption for four subsequent years. Early reassessment is therefore critical to safeguard benefits.

6. Enhanced Digital Reporting and Oversight
The decisions also highlight enhanced digital reporting obligations and periodic reviews by the Ministry of Finance. These measures are designed to streamline compliance, improve monitoring, and maintain alignment with evolving global tax and economic priorities.

How Businesses Can Ensure Compliance

To move beyond explanation and help businesses take action, here’s a practical compliance checklist in light of MD 229 and MD 230:

1. Detailed Review Protocol

• Review all revenue streams since June 1, 2023, to check if they fall under expanded Qualifying Activities (industrial chemicals, structured financing, distribution to PBEs, etc.).
• Verify whether commodities traded or financed have a Quoted Price from a Recognised Price Reporting Agency or Commodities Exchange Market.
• Assess treasury and financing services to determine if activities for the company’s own account now qualify.
• Re-examine contracts, agreements, and insurance/reinsurance activities for alignment with updated regulations, including Federal Decree-Law No. 48 of 2023.

2. Internal Process Adjustments

• Update accounting and compliance systems to reflect new activity classifications.
• Ensure documentation and reporting formats align with new digital reporting obligations.
• Train compliance and finance teams on the updated framework to avoid misclassification.

3. Professional Consultation

• Engage tax advisors and legal experts to validate eligibility under the revised rules.
• Seek guidance specifically for structured commodity financing activities, which can be complex and subject to disqualification if revenue sources are not compliant.

Why this matters: Because the changes apply retrospectively, overlooking past transactions could risk losing eligibility for the 0% tax rate—not just now, but for up to four years.

Conclusion

The UAE’s Ministerial Decisions No. 229 and 230 of 2025 mark a turning point for Free Zone businesses. By expanding qualifying activities, clarifying definitions, and introducing transparent pricing standards, the government has reinforced its commitment to supporting economic growth while aligning with international tax practices.

For Free Zone entities, the message is clear: the 0% corporate tax rate remains a powerful incentive—but only for those who can demonstrate compliance under the new framework. With the rules applying retrospectively from June 1, 2023, businesses cannot afford to delay.

Now is the time to review operations, update internal processes, and seek expert guidance to ensure eligibility and avoid penalties. Companies that act early will not only safeguard their tax benefits but also strengthen their credibility in the UAE’s evolving, globally competitive business environment.

Why Filing Buddy is Your Trusted Partner for UAE Free Zone Corporate Tax Compliance

The new ministerial decisions (MD 229 & 230 of 2025) are already in effect — retrospectively from 1st June 2023. That means Free Zone businesses must act fast to reassess eligibility and ensure compliance, or risk losing their 0% corporate tax benefits for up to four years.

At Filing Buddy, we specialize in UAE corporate tax, Free Zone compliance, and advisory services. Our experts help you review your transactions, update your processes, and file accurately in line with the latest FTA requirements. With us, you stay compliant, penalty-free, and fully eligible for Free Zone tax incentives.

✅ End-to-end UAE Free Zone corporate tax compliance support

✅ Expert review of your activities under MD 229 & 230

✅ Guidance on commodity trading, structured financing & distribution rules

✅ Digital reporting & documentation compliance made easy

✅ 100% assurance of peace of mind with FTA-aligned filing

Call us at: +971 527782820

Email us at: dubai@filingbuddy.in

Or simply fill out the form on our website, and one of our experts will contact you.

Safeguard your 0% Free Zone tax benefits. Filing Buddy is your trusted partner for UAE Free Zone corporate tax compliance.

FAQs

Q1. From when are the new rules under MD 229 and MD 230 effective?

The changes are retrospective from June 1, 2023. Businesses must review both past and current activities to ensure compliance.

Q2. What are “Qualifying Activities” under the new framework?

Qualifying Activities now cover a broader range, including industrial chemicals, environmental commodities (carbon credits, renewable energy certificates), associated by-products, structured commodity financing, treasury services for own account, and distribution to Public Benefit Entities (PBEs).

Q3. What happens if my business fails to meet the qualifying criteria?

If a Qualifying Free Zone Person fails to meet the conditions, it could lose eligibility for the 0% tax rate for up to four subsequent years. That’s why reassessment and compliance checks are critical.

Q4. How do the new rules affect commodity trading businesses?

The term “raw form” has been removed, and trading is now allowed if a Quoted Price exists on a recognised commodities exchange or price reporting agency. This significantly broadens the scope for commodity traders.

Q5. Do I need to update my reporting and compliance processes?

Yes. The new framework introduces enhanced digital reporting obligations and requires updated documentation and classifications. Businesses should adjust internal processes and seek professional consultation to stay compliant.