A Yacht and a Cargo Vessel Are Not the Same Asset

Two Qualifying Activities are defined by the asset rather than by the service. They share a structure — a broad description followed by tight boundaries — and they share two carve-outs that make them unusually valuable. They also fail in ways that have nothing to do with tax planning and everything to do with what the asset is actually used for.

Ships: what is in

Article 2(3)(e) of Ministerial Decision No. 229 of 2025 says ownership, management and operation of Ships includes the ownership, management and operation of Ships used in the international transportation of passengers, goods or livestock, towing activities and the provision of general assistance to Ships at sea, dredging activities at sea, and leasing and chartering of Ships on a bareboat basis used in the international transportation of passengers, goods or livestock.

A Ship is separately defined as any structure normally operating, or set for operating, in maritime navigation regardless of its power and tonnage. Size is expressly irrelevant.

Ships: what is out, and it is stated by name

Two of those bite harder than they look. Local transportation removes coastal and intra-UAE work, so the same vessel can be inside the activity on an international voyage and outside it on a domestic one. Leisure or recreational purposes removes charter yachts, which are a substantial part of the market and are often held in free zone structures.

The floating hotel, restaurant and casino exclusion rhymes with the immovable property rules, where accommodation is also excluded by name. A vessel used as accommodation is treated the way a building used as accommodation is treated.

Note also that the bareboat limb carries the international condition with it. Leasing and chartering on a bareboat basis qualifies where the vessel is used in international transportation of passengers, goods or livestock — so the charterer's use, not just the owner's contract, is part of the test.

Aircraft: the definition reaches into the asset

Article 2(3)(k) says financing and leasing of Aircraft includes the financing, leasing and securitisation of the financing and leasing of Aircraft, Aircraft engines or rotable components, granting the right to use Aircraft, Aircraft engines or rotable components in exchange for rental or other consideration pursuant to a finance lease, operating lease or other arrangement, and related advisory and agency services for the procurement, sale or leasing of Aircraft, Aircraft engines or rotable components undertaken by the Qualifying Free Zone Person.

The lease form is drafted openly: a finance lease, an operating lease or other arrangement granting the right to use in exchange for rental or other consideration. The activity does not turn on lease classification, which is a welcome contrast to how the same question is answered for accounting.

Both survive two Excluded Activities that would otherwise catch them

This is where the two entries earn their commercial value, and it applies to both.

Finance and leasing activities are an Excluded Activity. Article 2(2)(d) applies that exclusion without prejudice to the Qualifying Activities in paragraphs (c), (e), (j) and (k), which preserves both ships and aircraft leasing.

One transaction is not a business

The FTA Free Zone Persons guide uses this activity for its own warning, which makes it worth quoting in substance. Where a free zone person performs a solitary activity — its example is selling an aircraft — it may not constitute a Qualifying Activity unless that activity forms a natural and integral part of a coherent business the person conducts in relation to that and other Qualifying Activities.

A special purpose vehicle holding one asset, with no operating function, is exactly the fact pattern that warning describes. The activity has to look like a business rather than a holding arrangement, and the substance rules ask the same question from the other direction.

What to check

1. For each vessel, record the actual use, voyage by voyage where it varies, because international and local use are treated differently on the same asset.
2. Identify any vessel used for charter, leisure, or as accommodation or hospitality, and treat that revenue as outside the activity.
3. On bareboat charters, establish how the charterer uses the vessel, since the international condition attaches to the use.
4. For aircraft, confirm whether engines and rotable components are held or leased separately, because they are named in the definition in their own right.
5. Where advisory or agency fees are earned, check they are undertaken by the Qualifying Free Zone Person itself rather than by an affiliate.
6. Test whether the arrangement is a coherent business or a single transaction in a holding vehicle.

Ministerial Decision No. 229 of 2025 repealed Ministerial Decision No. 265 of 2023 and takes effect from 1 June 2023, so it governs Tax Periods that have already been filed. Confirm the position for your own facts before relying on it.