The 14 Qualifying Activities That Earn a Free Zone Company 0%

The 0% rate available to a Qualifying Free Zone Person does not attach to the company. It attaches to income, and income qualifies in one of two ways: it comes from a transaction with another Free Zone Person who is the beneficial recipient, or it comes from a Qualifying Activity. The second route is governed by a closed list, and knowing what is on that list is the difference between a defensible position and an assumption.

The list now sits in Ministerial Decision No. 229 of 2025, which repealed Ministerial Decision No. 265 of 2023. It was issued on 28 August 2025 but takes effect from 1 June 2023 — the start of the free zone regime — so it governs tax periods that were already closed and filed when it was published.

The fourteen Qualifying Activities

Article 2(1) lists them as follows. The lettering matters, because the Excluded Activities in Article 2(2) cross-refer to these paragraphs, and several exclusions are disapplied for specific letters.

What the definitions actually add

Article 2(3) then defines several of the activities, and the definitions are not cosmetic. Three of them change who qualifies.

Manufacturing and processing

Manufacturing includes the production, improvement or assembly of products and materials from raw materials or components. Processing includes the preparation, treatment, transformation or conversion of goods into another form of good or material for commercial or industrial use or sale. Both are broader than the everyday meanings — assembly counts, and so does improvement — which brings in operations that would not describe themselves as manufacturers.

Trading of Qualifying Commodities, and the 51% test

This is the definition most likely to catch a company by surprise. Trading of Qualifying Commodities means the physical trading of Qualifying Commodities, the associated financial derivatives trading used to hedge the risks of that activity, and associated structured commodity financing — but the activity does not qualify where it is conducted by a Qualifying Free Zone Person whose revenue from distribution, warehousing, logistics or inventory management functions is 51% or more of its revenue for the tax period.

Qualifying Commodities themselves are defined by reference to a Quoted Price existing for them: metals, minerals, industrial chemicals, energy and agricultural commodities and associated by-products, excluding products packaged for retail sale; and environmental commodities such as carbon credits and renewable energy certificates. A commodity with no quoted price on a recognised exchange is not a Qualifying Commodity, however genuinely it is a commodity in commercial terms.

Structured commodity financing

The decision spells out what this includes: prepayment, factoring, forfaiting, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance and streaming financing. That list matters because every one of those arrangements would otherwise read as a finance activity, which is an Excluded Activity.

The activities defined by counterparty, not by function

Two entries qualify only in relation to Related Parties, and the restriction is easy to lose sight of when a business grows.

• Headquarter services qualify where provided to Related Parties. The same services provided to a third party are not within paragraph (i).
• Treasury and financing services qualify where provided to Related Parties or carried on for the company's own account. Third-party treasury or financing services fall outside, and are likely to meet the finance and leasing exclusion instead.

A group services company that starts charging an unrelated joint venture, or a treasury function that begins lending outside the group, has changed its tax characterisation without changing anything it would think of as its business.

Ancillary activities: real, but narrower than it reads

Paragraph (n) treats activities ancillary to any of (a) to (m) as qualifying. This is a genuine and useful provision — most real businesses do things around their core activity that would not survive on their own. It is not, however, a route to qualify an activity that is substantial in its own right. An activity that is a business line rather than a support function to a listed activity is unlikely to be ancillary to it.

The mirror image matters just as much: Article 2(2)(f) treats activities ancillary to Excluded Activities as excluded. Support functions inherit the character of what they support, in both directions.

Two entries that carry their own compliance

Paragraph (d), holding shares and other securities for investment purposes, is subject to a twelve-month holding-period test — securities sold inside twelve months do not meet it, and the income is non-qualifying.

Paragraph (l), distribution in or from a Designated Zone, now carries a separate procedural requirement of its own: for tax periods starting on or after 1 January 2026, an agreed-upon procedures report must be obtained from an auditor and filed with the FTA, failing which the activity is not treated as qualifying at all.

How to use the list

The useful exercise is not to ask whether your business sounds like something on the list. It is to take your revenue for the tax period, split it by activity, and assign each line to a paragraph — by letter. Revenue that cannot be assigned to a letter, or to something genuinely ancillary to one, is non-qualifying, and the total of it is what gets tested against the de minimis cap of the lower of 5% of revenue or AED 5 million.

That exercise is also the one the FTA can most easily replicate. A company that has done it has a position; a company that has not has an assumption.