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UAE issues 2 new decisions on corporate tax regime in free zones

Updated: Oct 14, 2023

The resolution includes determining the eligible income as well as excluded, qualifying activities


corporate tax regime in free zones
corporate tax regime in free zones


The Ministry of Finance on Thursday , 1 Jun 2023 released two new decisions that specify the main features of the corporate tax regime as it applies to juridical persons operating out of the free zones in the UAE.


These include Cabinet Decision No. 55 of 2023 on determining qualifying income as well as Ministerial Decision No 139 of 2023 on qualifying activities and excluded activities.

The ministry said the free zone tax regime is applicable only within the prescribed geographical areas of the free zone and is applicable only to income derived from activities performed in or from within a free zone.


However, businesses can contact free zone authorities to confirm whether that free zone is eligible for the zero rate.


The free zone corporate tax regime allows a qualifying free zone person to benefit from the zero per cent corporate tax rate on income earned from transactions with a person located in the mainland UAE or a foreign jurisdiction.


The free zone corporate tax regime is intended to apply only to income derived from activities that are performed exclusively in or from within a free zone. This is reflected in the definition of ‘qualifying income which includes income derived from transactions with other free zone persons as well as domestic and foreign-sourced income derived from conducting any of the qualifying activities listed in the ministerial decision.


The ministry also listed nearly a dozen qualifying activities which include the manufacturing of goods or material; the processing of goods or material; reinsurance services; holding of shares and other securities; ownership, management and operation of ships; fund management services; wealth and investment management services; headquarter services to related parties; treasury and financing services to related parties; financing and leasing of aircraft including engines and retables; distribution of goods or materials in or from a designated zone; logistics services; and any ancillary activities to the activities listed above.


The ministry added that income from certain specific excluded activities will not be treated as qualifying income regardless of whether the income is derived from a free zone person or as part of undertaking a qualifying activity.

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