1. New Ministerial Decision No. 229 of 2025
The UAE Ministry of Finance has issued a new ministerial decision, No. 229 of 2025, replacing the previous Decision No. 265 of 2023. This update redefines the scope of qualifying activities within the tax framework of free zones and provides greater clarity on excluded activities.
Expansion of Qualifying Commodity Trading
The updated rules expand the definition of “qualifying commodity trading” to include:
- Industrial chemicals
- By-products of qualifying commodities
- Environmental commodities
These categories are now formally recognized, provided that a documented price is available for them.
3. Removal of Previous Restrictions
The earlier restriction that limited commodity trading to goods “in raw form” has been removed. This adjustment gives companies greater flexibility to trade in goods that have been processed or refined, not just raw materials.
4. Recognition of Price Reporting Agencies
A complementary decision also establishes recognized price reporting agencies. These agencies will provide verified pricing benchmarks for qualifying commodities, ensuring transparency and consistency in valuation.
What This Means for Free Zone Businesses
- Broader Business Opportunities: Companies in free zones can now engage in a wider range of trading activities, such as chemicals, by-products, and environmental commodities, while still maintaining their tax advantages.
- Clearer Regulatory Framework: By removing previous limitations and defining price reporting standards, the government provides a more predictable and transparent environment for business operations.
- Stronger Competitiveness: These changes reinforce the role of free zones as central pillars of the UAE’s economic diversification and investment strategy.
Wider Context: Tax Framework in Free Zones
- 0% Tax Rate applies to qualifying income for eligible free zone entities, provided they maintain substantial presence, comply with transfer pricing rules, and meet audit and reporting requirements.
- 9% Tax Rate applies to non-qualifying income, such as certain domestic transactions or excluded activities.
These updates highlight the UAE’s commitment to maintaining a dynamic, transparent, and investor-friendly tax environment. By broadening the scope of qualifying activities and providing clearer rules, the government strengthens the attractiveness of its free zones as global hubs for business and investment.
