For Free Zone entities in the UAE, achieving Qualifying Free Zone Person (QFZP) status is the ultimate goal to unlock the 0% corporate tax rate. While the criteria for this status are multifaceted, the core pillar is engaging in Qualifying Activities.
With the enactment of Ministerial Decision No. 229 of 2025, the UAE has significantly modernized and expanded the scope of these activities, offering unprecedented flexibility for global trade and specialized services.
The Evolution of Qualifying Income
It is important to note that there is no single activity that automatically guarantees a 0% rate; instead, income must be classified as “Qualifying Income” according to the Federal Tax Authority (FTA). The 2025 update is particularly revolutionary for the commodities sector, as it removed the restrictive “raw form” requirement that previously hampered many trading houses.
Comprehensive List of Qualifying Activities for 2025
Under the updated framework, the following sectors and activities are eligible for the 0% tax rate:
1. Global Trade and Commodities
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Trading of Qualifying Commodities: This now covers a broad spectrum including energy, metals, minerals, agricultural products, and industrial chemicals. Thanks to MD 229/2025, these commodities no longer need to be in their “raw form” to qualify.
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Distribution and Logistics: Specifically for services conducted in or from Designated Zones, supporting the UAE’s role as a global supply chain hub.
2. Manufacturing and Industrial Growth
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Manufacturing or Processing: The physical transformation or processing of goods and raw materials remains a cornerstone of qualifying income.
3. Financial and Investment Services
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Wealth and Fund Management: Professional management of assets and investment funds.
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Reinsurance Services: Providing insurance coverage to other insurers.
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Holding Activities: Ownership of shares and securities held specifically for investment purposes.
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Headquarter and Treasury Services: Providing centralized financing or administrative support to related parties.
4. Transportation and Specialized Leasing
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Maritime Sector: Ownership, management, and the active operation of ships.
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Aviation Leasing: Specifically, the financing and leasing of aircraft.
5. Ancillary Activities
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The law also recognizes Ancillary Activities—those that are essential for, or closely related to, any of the primary Qualifying Activities mentioned above.
Strategic Impact of Ministerial Decision No. 229 of 2025
The 2025 update provides a more inclusive environment for integrated Free Zone businesses. By broadening the definition of commodity trading, the UAE has opened the door for processors and mid-stream traders who deal with refined or semi-finished materials to finally access the 0% rate.
However, this increased flexibility comes with a caveat: strict compliance is non-negotiable. Companies must still meet adequate substance requirements, maintain audited financial statements, and ensure their non-qualifying income stays below the de-minimis threshold.
Conclusion
The pathway to the 0% corporate tax rate is clearer than ever, but it requires precise alignment with the updated list of Qualifying Activities. Whether you are a commodity trader or a financial services provider, understanding the nuances of MD 229/2025 is vital for your 2025 tax strategy.
