The Minister of Finance (MoF) has clarified the qualifying and excluded activities carried out by Qualified Free Zone Persons (QFZPs) for corporate tax purposes.
Qualifying activities
The qualifying activities are as follows:
- manufacture of goods or materials;
- processing of goods or materials;
- holding shares and other securities;
- owning, managing and operating ships;
- reinsurance services subject to regulatory supervision by the competent authority of the United Arab Emirates;
- fund management services subject to regulatory supervision by the competent authority of the United Arab Emirates;
- wealth and investment management services subject to regulatory supervision by the competent authority of the United Arab Emirates;
- headquarters services to related parties;
- treasury and financing services to related parties;
- financing and leasing of aircraft, including engines and rotating components;
- distribution of goods or materials in or from a designated area to a customer who resells such goods or materials, or parts thereof, or who processes or modifies such goods or materials, or parts thereof, for the purpose of sale or resale;
- logistics services; and
- any activity ancillary to those listed above.
Excluded activities
The following activities are excluded:
- all transactions with natural persons, except for transactions relating to the following eligible activities:
- the ownership, management and operation of ships;
- fund management services subject to regulatory supervision by the competent UAE authority; and
- asset management and investment services subject to regulatory supervision by the competent authority of the UAE;
- financing and leasing of aircraft, including engines and rotating parts;
- banking activities subject to regulatory supervision by the competent authority of the United Arab Emirates;
- insurance activities subject to the supervision of the competent authority of the United Arab Emirates, except for reinsurance services subject to the supervision of the competent authority of the United Arab Emirates;
- financing and leasing activities subject to regulatory supervision by the competent authority of the State, other than treasury and related party financing services and the financing and leasing of aircraft, including engines and rotating parts;
- owning or operating real estate other than commercial real estate located in a free zone, provided that the transaction relating to such commercial real estate is carried out with other persons in the free zone;
- the ownership or operation of intellectual property; and
- any activity ancillary to the above (an activity is considered ancillary if it has no independent function but is necessary for the exercise of the main activity).
In addition, the Ministry of Finance has confirmed that a QFZP must meet the following two conditions, in addition to those set out in the CIT Act:
- its non-qualifying income must not exceed 5% of its total income during the tax period or AED 5 million whichever is less; and
- it prepares audited financial statements in accordance with Ministerial Decision No. 82 of 2023.
Decision No. 139 of 2023 on qualifying and excluded activities for the purposes of corporate income tax can be read on the official website of Ministry of Finance or be downloaded here