The UAE Ministry of Finance has announced new corporate tax regulations for businesses operating within Free Zones. The updated rules, encapsulated in Ministerial Decision No. 229 of 2025, replace the previous 2023 guidelines and aim to provide clearer definitions of qualifying activities eligible for tax exemptions.
Key updates include:
- Expanded Scope of Qualifying Activities: The new regulations broaden the definition of qualifying commodity trading to encompass industrial chemicals, associated by-products, and environmental commodities, provided these are traded based on quoted prices.
- Clarification on Treasury and Financing Services: The updated rules offer greater clarity on the provision of treasury and financing services to related parties within Free Zones.
- Substance Requirements: To benefit from the 0% corporate tax rate, Free Zone entities must maintain adequate economic substance, including having a physical presence, employees, and active operations within the Free Zone.
- Compliance Obligations: Entities must register with the Federal Tax Authority, file annual tax returns, and maintain proper records to remain compliant.
These updates are part of the UAE’s ongoing efforts to align with international tax standards while maintaining the attractiveness of Free Zones for investors.
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