Ministerial Decision No. 229 of 2025: Complete Guide to Qualifying & Excluded Activities Under UAE Corporate tax

Published: September 2025
By SAIF Chartered Accountants – Dubai, UAE

Introduction

Understanding Qualifying and Excluded Activities UAE Corporate tax is essential for businesses operating within the UAE’s corporate framework.

Companies must be aware of the implications of Qualifying and Excluded Activities UAE Corporate tax on their operations.

This article will explore Qualifying and Excluded Activities UAE Corporate tax in depth.

Qualifying and Excluded Activities UAE Corporate tax

In August 2025, the Ministry of Finance issued Ministerial Decision No. 229 of 2025, a crucial update to the UAE’s Corporate tax regime. This decision defines Qualifying Activities and Excluded Activities for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, including important information on Qualifying and Excluded Activities UAE Corporate tax.

For Free Zone businesses, this Decision is a game-changer. Whether your company can continue to benefit from the 0% corporate tax rate as a Qualifying Free Zone Person (QFZP) depends on whether your income is derived from qualifying or excluded activities, and whether you meet compliance conditions such as audited financial statements.

This comprehensive guide explains the new rules in plain language, provides examples, and offers practical insights for UAE businesses. By the end, you will know:

• Which activities count as Qualifying Activities.
• Which activities are now Excluded Activities.
• How the de minimis rule works.
• The treatment of intellectual property income.
• The compliance conditions for maintaining QFZP status.

At SAIF Chartered Accountants, we help UAE companies navigate these updates with corporate tax advisory, impact assessments, and annual audits to ensure compliance with Federal Tax Authority (FTA) requirements.

There are many nuances within Qualifying and Excluded Activities UAE Corporate tax that businesses must consider.

Background – UAE Corporate tax Framework

The UAE introduced Corporate tax in June 2023 under Federal Decree-Law No. 47 of 2022. This marked a historic shift, aligning the country with global tax standards while maintaining competitiveness.

Some Free Zone businesses qualify for a 0% Corporate tax rate if they are recognized as a Qualifying Free Zone Person (QFZP). To enjoy this benefit, they must earn income from approved activities and avoid restricted or “excluded” activities.

The concept of Qualifying and Excluded Activities UAE Corporate tax is central to tax compliance.

Initially, Ministerial Decision No. 265 of 2023 defined qualifying and excluded activities. However, the government has now repealed that decision and replaced it with Ministerial Decision No. 229 of 2025, effective 28 August 2025.

The update provides clearer definitions, broader scope, and tighter compliance requirements. Free Zone businesses must review their operations immediately to ensure they remain compliant.

The definitions outlined in Qualifying and Excluded Activities UAE Corporate tax are significant for tax planning.

What is Ministerial Decision No. 229 of 2025?

Proficient knowledge of Qualifying and Excluded Activities UAE Corporate tax is vital for financial success.

To maximise benefits, companies should focus on Qualifying and Excluded Activities UAE Corporate tax.

Ministerial Decision No. 229 of 2025 provides the official list of:

• Qualifying Activities – eligible for 0% corporate tax.
• Excluded Activities – not eligible, potentially triggering the standard 9% corporate tax.
• De Minimis rule – limits on non-qualifying income.
• Conditions for QFZPs – including mandatory audited financial statements.

This Decision repeals Ministerial Decision No. 265 of 2023 and takes effect retroactively from 1 June 2023.

Understanding Qualifying and Excluded Activities UAE Corporate tax is crucial for strategic planning.

Official UAE Ministry of Finance announcement and Federal Tax Authority guidance confirm the implementation.

Qualifying Activities Under UAE Corporate tax

According to Article 2 of the Decision, the following are Qualifying Activities for Free Zone companies:

1. Manufacturing of Goods or Materials

Insights into Qualifying and Excluded Activities UAE Corporate tax will be beneficial for stakeholders.

Producing or assembling products, from raw materials to finished goods.
Example: A Free Zone factory in JAFZA manufacturing packaging materials.

2. Processing of Goods or Materials

Transforming or converting goods for commercial sale.
Example: A company in Hamriyah Free Zone processing industrial chemicals.

3. Trading of Qualifying Commodities

Physical trading of metals, minerals, chemicals, energy, agriculture, and environmental commodities. Includes hedging and structured commodity financing.
Example: A DMCC commodities trader dealing in gold or oil futures.

4. Holding of Shares and Securities

Holding shares or financial instruments for at least 12 months for investment purposes.
Example: A DIFC holding company managing equity stakes in subsidiaries.

5. Ownership, Management & Operation of Ships

International transport of goods, passengers, and livestock. Includes towing, dredging, and leasing ships. Excludes leisure or local transport.

6. Reinsurance Services

Regulated reinsurance operations under UAE insurance law.

7. Fund Management Services

Portfolio management, risk management, and discretionary fund management under the oversight of UAE regulators.

To ensure compliance, organisations must grasp Qualifying and Excluded Activities UAE Corporate tax thoroughly.

8. Wealth & Investment Management Services

Advisory and portfolio management services licensed by regulators like the Dubai Financial Services Authority (DFSA) or Abu Dhabi Global Market (ADGM).

9. Headquarter Services to Related Parties

Administrative and strategic support to group companies (procurement, risk management, business planning).

10. Treasury & Financing Services

Providing liquidity, debt management, centralised payment, and financial risk management within a group.

11. Financing & Leasing of Aircraft

Leasing and financing of aircraft, engines, and components.

12. Distribution of Goods in Designated Zones

Includes import, storage, inventory management, and export of goods from Designated Free Zones.

13. Logistics Services

Freight forwarding, warehousing, customs brokerage, packing/unpacking, and related services.

14. Ancillary Activities

In summary, mastering Qualifying and Excluded Activities UAE Corporate tax is pivotal for your financial health.

Any activities that are necessary or incidental to the above Qualifying Activities.

Excluded Activities Under UAE Corporate tax

While some activities qualify for the 0% corporate tax rate, others are expressly Excluded Activities. If a Free Zone company engages in these, it risks losing its QFZP status.

1. Transactions with Natural Persons

Any transaction with an individual (not a company), except for:

• Ship ownership and operation,
• Fund management services,
• Wealth and investment management, and
• Aircraft financing/leasing.

Example: A Free Zone trading company selling directly to consumers in Dubai would be excluded.

2. Banking Activities

Providing regulated financial services such as lending, deposit-taking, and credit card issuance.

3. Insurance Activities

General and life insurance operations are excluded, except reinsurance services.

4. Finance & Leasing Activities

Providing loans or leasing assets is excluded, except where specifically permitted (treasury, aircraft leasing, commodity finance).

5. Real Estate Ownership or Exploitation

Owning or exploiting immovable property is excluded, except for commercial property in a Free Zone where both parties are Free Zone Persons.

6. Ancillary Excluded Activities

If an activity is directly connected to an excluded activity, it is also excluded.

Practical Example:

• A DIFC insurance company providing direct health insurance → excluded.
• A Free Zone developer leasing residential apartments → excluded.
• A DAFZA reinsurance company → qualifying.

De Minimis Rule: Non-Qualifying Income Threshold

To maintain QFZP status, non-qualifying income must not exceed:

• 5% of total revenue OR
• AED 5 million, whichever is lower.

If breached, the company loses QFZP status for that tax period and the next 4 tax periods.

Example:

• A logistics company with AED 100m revenue may earn up to AED 5m from non-qualifying activities.
• If it earns AED 7m, it loses QFZP status.

This rule forces companies to carefully monitor revenue streams and maintain accurate reporting.

Qualifying Intellectual Property (IP) Income

The Decision also clarifies when IP income qualifies for the 0% tax benefit.

Key Conditions:

1. Qualifying Expenditures – R&D expenses linked to IP creation/development.
2. Overall Expenditures – Total costs including IP acquisition.
3. Uplift Expenditures – Up to 30% of qualifying expenditure may be uplifted.
4. Documentation – Companies must prove:
   
   Ownership of IP.
   
   
   
   Link between R&D spend and IP income.
   
   
   
   Arm’s length principle for IP transactions.
   
   

Example:

• A Free Zone tech company that develops proprietary software through in-house R&D may benefit.
• If the IP was only acquired (not developed), income may not qualify.

Compliance Conditions for QFZPs

To retain QFZP status, companies must:

• Prepare audited financial statements (as per Annual Audit requirements).
• Meet the de minimis rule.
• Continue conducting only Qualifying Activities.

If these conditions are breached, the company ceases to be a QFZP and loses tax benefits for 4 years.

This is why regular audits and compliance checks with approved auditors in Dubai are critical.

Business Impact of Ministerial Decision No. 229 of 2025

The Decision has wide-reaching implications:

• Manufacturers & traders in Free Zones: Need to confirm revenue sources.
• Real estate companies: Must be careful with property ownership rules.
• Financial firms: Banks and insurers remain excluded.
• Tech/IP companies: Must align R&D with qualifying IP rules.

👉 For businesses, the message is clear: align with qualifying activities, or lose the 0% corporate tax advantage.

At SAIF Chartered Accountants, we help companies:

• Assess qualifying vs excluded activities.
• Perform QFZP Impact Assessments.
• Prepare statutory audited financial statements.

Frequently Asked Questions (FAQs)

1. What are Qualifying Activities under UAE Corporate tax?

These include manufacturing, processing, trading commodities, fund management, logistics, treasury services, and more.

2. What are Excluded Activities?

Banking, insurance, leasing, real estate (except Free Zone commercial property), and most transactions with natural persons.

3. What is the De Minimis Rule?

Non-qualifying income must not exceed 5% of total revenue or AED 5 million (whichever is lower).

4. What happens if a company fails QFZP conditions?

The application of Qualifying and Excluded Activities UAE Corporate tax has far-reaching consequences for reporting.

It loses QFZP status and becomes subject to 9% corporate tax for that year and the next 4 years.

5. When is Ministerial Decision No. 229/2025 effective?

It came into effect retroactively from 1 June 2023.

6. Do Free Zone real estate transactions qualify?

No, unless it’s commercial property leased to another Free Zone Person.

Conclusion

Ministerial Decision No. 229 of 2025 strengthens the UAE’s Corporate tax system by clearly defining Qualifying and Excluded Activities. Free Zone companies must reassess their operations, apply the de minimis rule, and ensure compliance through audited financial statements.

Guidance on Qualifying and Excluded Activities UAE Corporate tax is essential for effective compliance strategies.

Those who comply continue enjoying the 0% corporate tax rate, while non-compliant entities face a standard 9% tax.

With proper planning, advisory, and audits, businesses can remain compliant and benefit from the UAE’s globally competitive tax regime.

👉 Need expert help? Contact SAIF Chartered Accountants for corporate tax advisory, annual audits, and QFZP compliance services across UAE Free Zones.

For clarity on Qualifying and Excluded Activities UAE Corporate tax, consult with experts.

Be proactive in your understanding of Qualifying and Excluded Activities UAE Corporate tax.

Ultimately, adherence to Qualifying and Excluded Activities UAE Corporate tax will enhance company reputation.