MD No. 229 of 2025: UAE Free Zone Qualifying Activities

Forklift unloading goods at an industrial warehouse loading dock, representing UAE Free Zone manufacturing and warehousing qualifying activities under Ministerial Decision No. 229

14 min read

Published: 15 August 2026
Last updated: 27 September 2026

Quick Answer

Ministerial Decision No. 229 of 2025 replaced Ministerial Decision No. 265 of 2023 and reset the list of Qualifying Activities and Excluded Activities that decide whether a Free Zone company can keep the 0% corporate tax rate as a Qualifying Free Zone Person (QFZP). It widened commodity trading to cover chemicals, by-products, and environmental commodities such as carbon credits and renewable energy certificates, confirmed manufacturing as a standalone Qualifying Activity, and set a new revenue guardrail: a QFZP cannot treat commodity trading as qualifying income if 51% or more of its revenue comes from distribution, warehousing, logistics, or inventory management instead of the trading activity itself. The decision applies retroactively from 1 June 2023, the same start date as the original Qualifying Free Zone Person regime.

If your Free Zone company trades commodities, manufactures goods, runs a warehouse or logistics operation, or holds environmental commodities like carbon credits, this decision changes what counts as 0% tax income for you starting from your very first tax period, not just going forward.

What Ministerial Decision No. 229 of 2025 Actually Is

On 28 August 2025, the UAE Ministry of Finance published Ministerial Decision No. 229 of 2025 Regarding Qualifying Activities and Excluded Activities for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. It repeals and replaces Ministerial Decision No. 265 of 2023, which had held this role since the Corporate Tax Law first took effect.

MD 229 sits underneath Cabinet Decision No. 100 of 2023, the decision that sets out the general conditions for a Free Zone Person to qualify for the 0% Corporate Tax rate. Cabinet Decision No. 100 defines who can be a Qualifying Free Zone Person; MD 229 defines what that person is allowed to earn 0% tax income from. A companion decision, Ministerial Decision No. 230 of 2025, covers Recognised Price Reporting Agencies used for commodity pricing and was published the same day.

Both MD 229 and MD 230 apply retroactively from 1 June 2023, the date the Corporate Tax Law’s Free Zone regime began. That retroactive effect matters: if your Free Zone company’s activities fall under the new rules, the new list is treated as if it always applied to your Qualifying Free Zone Person status, not only from the publication date forward.

Why This Replaced MD 265 of 2023

MD 265 of 2023 was the first version of the Qualifying and Excluded Activities list. In the two years it was in force, tax advisors and Free Zone businesses repeatedly flagged the same gaps: manufacturing was not clearly addressed as its own category, commodity trading was tied to a strict “traded on a recognised exchange” test that excluded commodities priced through other verified channels, and environmental commodities like carbon credits and renewable energy certificates were not mentioned at all despite becoming a real UAE Free Zone business line.

MD 229 closes those specific gaps rather than rewriting the regime from scratch. The core mechanics of the Qualifying Free Zone Person regime under Cabinet Decision No. 100 of 2023, the 0% rate on Qualifying Income, and the 9% rate on non-qualifying income above the de minimis threshold, are unchanged. What changed is the list of activities that generate that Qualifying Income.

What Is New: Qualifying Activities Added or Expanded Under MD 229

Manufacturing

Manufacturing of goods or materials is now treated as a Qualifying Activity in its own right under MD 229. A Free Zone manufacturer that produces physical goods for sale, whether industrial equipment, consumer products, or components sold to other businesses, can treat that manufacturing income as qualifying, provided the company otherwise meets the Qualifying Free Zone Person conditions under Cabinet Decision No. 100 of 2023, including the substance requirements and audited financial statements.

Warehousing and Logistics

Logistics services are listed as a Qualifying Activity in their own right under Article 2(1)(m) of MD 229. The Decision defines them as the storage and transportation of goods or materials on behalf of another person without taking title, including cargo handling, warehousing, container storage, transport agency services, customs brokerage, order and inventory management, freight forwarding and brokerage, document preparation, and packing and unpacking. Warehousing that supports your own buying and selling is different: it is treated under the distribution rules below, and it counts toward the 51% commodity trading test.

Commodity Trading: Wider Scope, Fewer Barriers

This is where MD 229 makes its biggest practical change:
– Expanded commodity categories. The list of Qualifying Commodities now explicitly covers chemicals, associated by-products, and environmental commodities including carbon credits and renewable energy certificates, categories that did not exist under MD 265.
– Exchange requirement removed. Under MD 265, a commodity generally had to be traded on a recognised exchange market for the income to qualify. MD 229 removes that requirement. It is now enough that a price exists for the commodity, either through a recognised exchange or through a Recognised Price Reporting Agency (the subject of the companion MD 230 of 2025) for the Qualifying Commodity or a Related Commodity.
– Retail-packaged goods explicitly excluded. MD 229 is explicit that retail-packaged goods do not qualify as commodity trading, closing a route some businesses had used to stretch the definition.
– New defined terms. MD 229 introduces formal definitions for terms including Quoted Price, Associated By-product, Related Commodity, and the Common Schedule for Classification and Coding of Goods, giving the FTA and taxpayers a shared technical vocabulary that MD 265 did not have.

Distribution From a Designated Zone

For distribution activity to qualify, the buying and selling of goods or materials must still be conducted in or from a Designated Zone, with goods entering the UAE imported through that Designated Zone and supplied either to a customer who resells, processes, or alters the goods for sale or resale, or to a Public Benefit Entity. This mirrors the Designated Zone conditions already used for VAT purposes, so a company already tracking its Designated Zone VAT position has most of the groundwork done for this test too.

Holding of Shares and Other Securities: The 12-Month Rule

MD 229 also confirms the holding of shares and other securities for investment purposes as a Qualifying Activity, covering shares or equivalent equity interests in another juridical person and negotiable or non-negotiable financial instruments (including derivatives) that are or can be traded, excluding instruments issued under a securitisation of receivables from a non-financial asset. Article 2(1)(d) of MD 229 sets a specific test for this: shares and other securities are only treated as held for investment purposes, and therefore qualifying, when held for an uninterrupted period of at least 12 (twelve) months. A Free Zone holding company that sells a stake before completing 12 months of uninterrupted ownership risks losing Qualifying Activity treatment on that disposal.

The New Guardrail: The 51% Commodity Trading Test

MD 229 introduces a specific anti-abuse test for commodity traders that did not exist under MD 265. A Qualifying Free Zone Person cannot treat its commodity trading income as a Qualifying Activity if 51% or more of its total revenue comes from distribution, warehousing, logistics, or inventory management rather than from the commodity trading itself.

In practice, this means a company structured primarily as a warehousing or logistics operator, with commodity trading as a minor or secondary revenue line, cannot claim the commodity trading Qualifying Activity treatment for that portion of income if the logistics-type revenue makes up the majority of the business. The Ministry designed this specifically to stop businesses from labelling themselves as commodity traders to access the wider commodity list while their real revenue comes from services the regime never intended to cover at 0%.

Free Zone companies close to this threshold should calculate their actual revenue split by activity type before relying on the commodity trading Qualifying Activity classification for their current tax period.

Complete List of Qualifying Activities Under MD 229 (Article 2)

Article 2(1) of MD 229 lists these Qualifying Activities for a Qualifying Free Zone Person. Income from them counts as Qualifying Income only if the company also meets every QFZP condition:

Manufacturing of goods or materials (production, improvement or assembly from raw materials or components)
Processing of goods or materials (preparation, treatment, transformation or conversion into another form for commercial or industrial use or sale)
Trading of Qualifying Commodities, meaning physical trading, associated hedging derivatives and structured commodity financing (prepayment, factoring, forfaiting, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance and streaming financing), subject to the 51% test
Holding of shares and other securities for investment purposes (held for an uninterrupted 12 months or more)
Ownership, management and operation of Ships used in international transport
Reinsurance services
Fund management services
Wealth and investment management services
Headquarter services to Related Parties
Treasury and financing services to Related Parties or for the company’s own account
Financing and leasing of Aircraft
Distribution of goods or materials in or from a Designated Zone
Logistics services
Any activity ancillary to items 1 to 13, meaning necessary for the main activity or so minor and closely related that it is not a separate activity

Source: Ministry of Finance, Ministerial Decision No. 229 of 2025. Qualifying Commodities are metals, minerals, industrial chemicals, energy and agricultural commodities with their Associated By-products (excluding products packaged for retail sale), plus environmental commodities such as carbon credits and renewable energy certificates, provided a Quoted Price exists. If you are unsure which of these 14 categories your income falls into, start with our QFZP guide and the QFZP qualifying income guide.

What Counts as an Excluded Activity Under MD 229

The Excluded Activities list, income taxed at the standard 9% rate even for an otherwise Qualifying Free Zone Person, carries over its core structure from MD 265 with some clarification:

Transactions with natural persons remain excluded, except for qualifying ship-related activities, fund management services, wealth and investment management services, and aircraft financing and leasing, which stay eligible even when the counterparty is an individual.
Banking, finance, and leasing activities remain excluded, without affecting the specific Qualifying Activities elsewhere in the decision that reference financing (such as treasury and financing conducted for a company’s own account, which stays qualifying under separate provisions).
Ownership or exploitation of immovable property remains excluded, other than Commercial Property located in a Free Zone where the transaction is with another Free Zone Person.
Any activity ancillary to an Excluded Activity is treated as excluded too, so a company cannot separate an excluded activity into smaller connected steps to claim qualifying treatment for part of it.

Compliance Conditions That Still Apply

MD 229 does not replace the general Qualifying Free Zone Person conditions in Article 18 of the Corporate Tax Law or Cabinet Decision No. 100 of 2023. A company relying on the new Qualifying Activities list still needs to:

Maintain adequate substance in the Free Zone.
Keep non-qualifying revenue within the de minimis threshold: non-qualifying revenue in a Tax Period must not exceed 5% of the Qualifying Free Zone Person’s total revenue for that period, or AED 5,000,000, whichever is lower.
Prepare audited financial statements in line with Ministerial Decision No. 84 of 2025.
Derive its Qualifying Income from a Qualifying Activity that is not also an Excluded Activity.

If a Qualifying Free Zone Person fails to meet these conditions at any point during a Tax Period, it ceases to be a QFZP from the beginning of that Tax Period, not just from the date of the failure. Article 5(2) of MD 229 adds that it also stays outside QFZP status for the four Tax Periods that follow, so a single breach can cost the 0% rate for five tax periods in total.

Who Should Review Their Position Now

Because MD 229 applies retroactively from 1 June 2023, Free Zone businesses in the following categories should re-check their Qualifying Income classification for tax periods already filed or in progress:

Commodity traders, especially in chemicals, environmental commodities, or goods previously excluded for not being exchange-traded.
Manufacturers operating from a Free Zone.
Warehousing and logistics operators who also carry out trading activity.
Any Free Zone company where warehousing, logistics, or inventory management revenue is close to or above 51% of total revenue alongside commodity trading.

A company that newly qualifies under MD 229 but treated the same income as non-qualifying under MD 265 in a prior filed return may have grounds to review that filing. A company that previously assumed its commodity trading qualified but is now caught by the 51% guardrail should reassess before its next filing to avoid an unexpected FTA audit finding.

Frequently Asked Questions

What is Ministerial Decision No. 229 of 2025?
It is the UAE Ministry of Finance decision, published 28 August 2025, that defines the Qualifying Activities and Excluded Activities for Qualifying Free Zone Persons under the Corporate Tax Law. It replaces Ministerial Decision No. 265 of 2023.

When does MD 229 take effect?
It applies retroactively from 1 June 2023, the same date the Free Zone Corporate Tax regime began, not from its 28 August 2025 publication date.

Does manufacturing now qualify for 0% Free Zone tax?
Yes. MD 229 treats manufacturing of goods or materials as a Qualifying Activity, provided the company also meets the general Qualifying Free Zone Person conditions under Cabinet Decision No. 100 of 2023.

What changed for commodity trading under MD 229?
The list of Qualifying Commodities now includes chemicals, by-products, and environmental commodities such as carbon credits and renewable energy certificates. The requirement that a commodity be traded on a recognised exchange was removed, so a verified price from a Recognised Price Reporting Agency is now sufficient.

What is the 51% rule under MD 229?
A Qualifying Free Zone Person cannot treat commodity trading as a Qualifying Activity if 51% or more of its total revenue comes from distribution, warehousing, logistics, or inventory management rather than the commodity trading itself.

Do retail-packaged goods qualify as commodity trading?
No. MD 229 explicitly excludes retail-packaged goods from the commodity trading Qualifying Activity.

Is warehousing on its own a Qualifying Activity?
Warehousing and logistics services connected to a genuine distribution or trading operation conducted from a Designated Zone can fall within the Qualifying Activities framework, but pure warehousing revenue that pushes a commodity trader over the 51% threshold can disqualify that portion of trading income.

What happens if a Free Zone company fails to meet the Qualifying Free Zone Person conditions?
It ceases to be a Qualifying Free Zone Person from the beginning of that entire Tax Period, not only from the date the condition was breached. Under Article 5(2) of MD 229 it also remains outside QFZP status for the four Tax Periods that follow.

Does MD 229 change the general Qualifying Free Zone Person conditions?
No. The substance requirements, de minimis threshold, and audited financial statement requirement under Article 18 of the Corporate Tax Law and Cabinet Decision No. 100 of 2023 remain unchanged. MD 229 only redefines which activities generate Qualifying Income.

Should I review past tax filings because of MD 229?
If your Free Zone company trades commodities, manufactures goods, or runs warehousing/logistics alongside trading, and this decision changes how your income should have been classified since 1 June 2023, review your position with a qualified advisor before your next Corporate Tax filing.

Is there a minimum holding period for shares to qualify under MD 229?
Yes. Under Article 2(1)(d) of MD 229, shares and other securities are only treated as held for investment purposes, a Qualifying Activity, when held for an uninterrupted period of at least 12 (twelve) months. Selling before that 12-month mark can disqualify the disposal from Qualifying Income treatment.

Qualifying Activities at a Glance

Category	Treatment Under MD 229
Manufacturing of goods or materials	Qualifying Activity
Commodity trading (chemicals, by-products, environmental commodities)	Qualifying, price via exchange or Recognised Price Reporting Agency
Retail-packaged goods	Not a Qualifying commodity trading activity
Distribution from a Designated Zone	Qualifying, subject to import/resale conditions
Logistics services for other persons (no title taken)	Qualifying Activity under Article 2(1)(m)
Warehousing/logistics tied to trading (under 51% of revenue)	Commodity trading can stay within Qualifying Activity treatment
Holding of shares/securities for investment purposes	Qualifying only if held for an uninterrupted period of at least 12 months
Warehousing/logistics at 51%+ of revenue alongside trading	Commodity trading loses Qualifying treatment
Transactions with natural persons (general)	Excluded Activity
Ownership of immovable property (non-Commercial Property, non-Free Zone counterparty)	Excluded Activity
Banking, finance, and leasing (general)	Excluded Activity

Get Your Free Zone Qualifying Activity Position Reviewed

MD 229’s retroactive effect means the classification you used for tax periods already filed since June 2023 may need a second look, especially if your Free Zone company trades commodities, manufactures goods, or combines warehousing with trading revenue. Qaspro Global’s UAE Corporate Tax team can review your current Qualifying Free Zone Person position against the updated MD 229 list and flag any exposure before your next filing deadline.

Contact Qaspro Global on WhatsApp at +971 55 153 9679 to review your Free Zone Qualifying Activities classification.

If you are relocating to the UAE to run or oversee a Free Zone business, our partner site Yalah Dubai has a guide on the UAE Retirement Visa eligibility rules for founders and directors planning their long-term residency alongside their company structure.

UAE Free Zone Qualifying Activities 2026: The Updated List Under Ministerial Decision No. 229 (Manufacturing, Warehousing and Commodity Trading Rules Explained)