The resolution includes determining the eligible income as well as excluded, qualifying activities
The UAE has taken another decisive step in shaping its corporate tax framework by issuing two important decisions on how the tax applies to companies operating in free zones. Announced by the Ministry of Finance on June 1, 2023, these changes provide clarity on qualifying income, qualifying activities, and excluded activities under the free zone tax regime.
For businesses in Dubai and across the UAE, understanding these updates is essential to remain compliant and fully leverage the 0% corporate tax benefits available to eligible companies.
Need clarity on how this applies to your free zone business? Click here to speak with Raes Associates on WhatsApp — our experts will guide you step-by-step.
Key Highlights of the New Corporate Tax Decisions
The updates were introduced through:
- Cabinet Decision No. 55 of 2023 – Defines qualifying income for free zone entities.
- Ministerial Decision No. 139 of 2023 – Lists qualifying activities and excluded activities.
These decisions apply to juridical persons operating within the prescribed geographical boundaries of UAE free zones. The benefits of the zero per cent corporate tax rate apply only to income earned from activities conducted in or from within a free zone.
What Counts as Qualifying Income?
According to the Ministry of Finance, qualifying income includes:
- Transactions with other free zone persons
- Income from domestic and foreign sources derived from qualifying activities
- Income from transactions with mainland UAE entities or foreign jurisdictions, where permitted
Important: Even if you operate entirely in a free zone, your business must register for corporate tax to avoid penalties.
For a detailed breakdown of how corporate tax works in Dubai this year, you can read our complete UAE Corporate Tax Dubai 2025 Guide.
Qualifying Activities in UAE Free Zones
Nearly a dozen business activities are recognized as qualifying under the new decision, including:
- Manufacturing or processing of goods/materials
- Reinsurance services
- Holding of shares and other securities
- Ship ownership, management, and operations
- Fund management and wealth/investment management services
- Headquarters, treasury, and financing services to related parties
- Aircraft financing and leasing (including engines and rotables)
- Distribution of goods/materials in or from a designated zone
- Logistics services
- Ancillary activities related to the above
Excluded Activities and the De Minimis Rule
Income from certain excluded activities will not be considered qualifying income, even if performed by a free zone person. The Ministry has also set a de minimis threshold of AED 5 million or 5% of total revenues, whichever is lower, for qualifying companies.
For businesses unsure about how exclusions apply to them, this is where having a trusted advisor becomes critical.
Want to check if your business qualifies for free zone tax benefits?
Message Raes Associates on WhatsApp now and get an expert consultation today.
Why This Matters for Your Business
According to market analysts, the UAE’s corporate tax structure, particularly its free zone exemptions, is designed to retain the country’s competitiveness as a global trade and finance hub. This mirrors incentives being offered by other GCC countries and ensures that Dubai remains an attractive base for international businesses.
For small businesses, some exemptions also apply outside the free zone structure. You can learn more in our article on UAE Corporate Tax Exemption on Small Businesses.
Partner with Raes Associates to Stay Compliant and Competitive
The corporate tax landscape in the UAE is evolving quickly. With penalties for non-compliance and opportunities for significant tax savings, now is the time to ensure your business structure is fully optimized.
Raes Associates specializes in helping businesses register, qualify, and benefit from the UAE’s tax regimes, including free zone corporate tax. Our team of experts ensures that your documentation, activity classification, and compliance measures are handled with precision.
Let’s get your business tax-ready today – Contact Raes Associates and take the first step toward securing your 0% corporate tax benefits
