UAE Free Zone Tax Rules Changed: MD 229 & MD 230 of 2025 Explained

Most rule changes apply forward. These do not. Because MD 229 and MD 230 take effect from 1 June 2023, they govern tax periods that have already been filed as well as those still to come.

Two consequences follow.

If you filed a return treating income as non-qualifying under the narrower MD 265 definitions, that income may now qualify. A corrected return through voluntary disclosure may reduce the tax paid — or restore a QFZP position that was given up unnecessarily.

If your position was borderline, it should be re-examined against the current list rather than the one in force when you filed.

Free zone companies with financial years ending 31 December 2025 are filing by 30 September 2026 and will apply the new rules directly deadline checker →.

Qualifying Commodities expanded. The most significant change. The previous "raw form" restriction has been removed, and the definition now covers industrial chemicals, associated by-products of qualifying commodities, and environmental commodities such as carbon credits — alongside the metals, minerals, energy and agricultural commodities already included. Eligibility depends on a Quoted Price existing for the commodity.

Quoted Price defined, and MD 230 lists the sources. A Quoted Price is the price of the commodity or a related commodity as specified by a recognised commodity exchange market or a recognised Price Reporting Agency. Ministerial Decision No. 230 of 2025 sets out which agencies and exchanges are recognised for this purpose — so pricing must be traceable to a named source, not an internal estimate.

Treasury and financing services broadened. Previously a Qualifying Activity only when conducted for related parties, this now also covers such activities conducted for the entity's own account.

Distribution activity widened. Distribution of goods or materials in or from a Designated Zone previously required that goods be sold to resellers. The scope now also includes sales to Public Benefit Entities. The underlying conditions remain: activities conducted in or from a Designated Zone, with goods entering the UAE through that Designated Zone.

De minimis carve-outs clarified. Certain revenue is excluded from both sides of the de minimis calculation — the non-qualifying revenue figure and the total revenue figure. This includes revenue attributable to domestic permanent establishments, foreign permanent establishments, non-commercial immovable property in free zones, and commercial immovable property transactions with non-free zone persons. The effect is to stop income already taxed at 9% from distorting the test.

Audited financial statements confirmed. MD 229 points to Ministerial Decision No. 84 of 2025 for the criteria. Note an important timing point: while MD 84 itself applies to financial years commencing on or after 1 January 2025, Qualifying Free Zone Persons are required to maintain audited financial statements for all tax periods commencing on or after 1 June 2023 audited financial statements requirement →.

The five QFZP conditions still stand: qualifying income, adequate substance in the free zone, audited financial statements, transfer pricing compliance, and the de minimis limit — non-qualifying revenue no more than the lower of 5% of total revenue or AED 5 million. Failing any condition still costs the 0% rate for that tax period and the four that follow QFZP conditions →.

The full Qualifying Activities list also still includes manufacturing, processing, holding of shares and securities, ship operation, reinsurance, fund and wealth management, headquarter services to related parties, aircraft financing and leasing, logistics services, and ancillary activities.

Commodity traders — the expanded definition is aimed squarely at you, and pricing must now trace to a recognised source under MD 230.

Free zone companies that filed FY2023 or FY2024 returns treating income as non-qualifying under the old definitions, particularly in chemicals, by-products, carbon credits, or treasury activity for own account.

Distribution businesses in Designated Zones selling to Public Benefit Entities, previously outside the scope.

Any QFZP without audited statements for periods from 1 June 2023 — this requirement runs earlier than MD 84's own commencement date.

Where a filed position is now wrong in your favour, the route is a voluntary disclosure through EmaraTax voluntary disclosure guide →. Where it is wrong against you, correcting it early is materially better than having it found later. Either way the analysis should be done before the next filing rather than alongside it missed a filing deadline →.