UAE Tax Updates (August, 2025)

Ministerial Decision No. 229 of 2025 – Qualifying & Excluded Activities for Free Zones

Effective Date: 1 June 2023 (retroactive)

Details:
This Decision repeals and replaces Ministerial Decision 265 of 2023 sets out which Free Zone activities qualify for 0% corporate tax, clarifies excluded activities, and updates compliance, de minimis, and IP requirements.

Key Provisions:

• Qualifying Commodities: Metals, minerals, chemicals, energy, agriculture, and environmental commodities (must have a quoted price on a recognized exchange).
• Qualifying Activities: Manufacturing, processing, trading qualifying commodities, holding shares, ship operations, reinsurance, fund/wealth management, HQ, treasury, aircraft leasing, Designated Zone distribution, logistics, and closely related ancillary activities.
• Excluded Activities: Most transactions with individuals, banking, insurance (except reinsurance), most finance/leasing, and non-qualifying property activities.
• Ancillary: Only activities necessary or minor and directly linked to a main qualifying activity are permitted.
• De minimis: Non-qualifying revenue must not exceed 5% of total or AED 5m, whichever is lower.
• Qualifying IP: Only income tied to R&D spend by the QFZP or non-related parties qualifies (30% uplift cap). Maintain robust records for IP ownership, expenditures, and income.
• QFZPs must meet de minimis and audit requirements or lose status for five years.

Impact:

• Expands clarity on Free Zone tax benefits and qualifying activities.
• Tightens compliance and audit obligations
• Excludes most retail and real estate activities from Free Zone tax benefits.
• Retroactive application may require review and adjustment of prior filings.

Compliance Tips:

• Monitor qualifying and non-qualifying revenue monthly to stay within de minimis limits.
• Maintain detailed records for IP, commodity trades, and Designated Zone transactions.
• Ensure timely preparation of audited financial statements.
• Review business models to avoid non-qualifying property and retail activities.

Applicability:

• Applies to Free Zone entities seeking 0% corporate tax on qualifying activities.
• Not suitable for businesses with significant excluded activities or those unable to meet de minimis or audit requirements.

Ministerial Decision No. 230 of 2025 – Recognised Price Reporting Agencies

Effective Date:
3 September 2025

Details:
Ministerial Decision 230 of 2025 designates specific entities as recognised price reporting agencies for the purposes of determining quoted prices for qualifying commodities under Ministerial Decision 229 of 2025 and the UAE Corporate Tax Law.

Key Provisions:

• Officially lists recognised price reporting agencies, including S&P Global Commodity Insights (Platts & Fertecon), Argus Media, ICIS, OPIS, RIM Intelligence, CRU Group, Quantum Commodity Intelligence, Fastmarkets, General Index, ICE, MONTEL, Spark Commodities, and Expana.
• These agencies are to be used for establishing quoted prices for qualifying commodities in tax and financial reporting

Impact:

• Provides legal certainty and consistency for commodity traders and Free Zone entities relying on quoted prices for tax purposes.
• Ensures alignment with international standards for price transparency and reporting.

Compliance Tips:

• Use only the listed recognised price reporting agencies when determining quoted prices for qualifying commodities.
• Maintain documentation evidencing reliance on these agencies for tax filings and compliance.
• Review internal policies to ensure awareness e of the approved agencies list.

Applicability:

• Applies to all Free Zone entities and other taxpayers determining qualifying commodity prices under Ministerial Decision 229 of 2025 and the UAE Corporate Tax Law.
• Relevant for businesses engaged in commodity trading, processing, or any activity requiring reference to quoted prices for tax purposes.

Public Clarification CTP007 – Financial Statements for Tax Groups (FTA)

Details:
FTA Public Clarification CTP007 explains how Tax Groups must prepare Aggregated Financial Statements (AFS) solely for corporate tax purposes and the related audit obligations complementing FTA Decision No. 7 of 2025.

AFS are prepared by aggregating annual standalone financial statements of all Tax Group members and eliminating intra-group transactions, under a special purpose framework aligned with IFRS/IFRS for SMEs except for specified deviations.

Key Provisions:

• Aggregated Financial Statements (AFS) are prepared by combining the annual standalone financials of all Tax Group members, eliminating only intra-group transactions, and applying uniform accounting policies and financial years. AFS must be presented in AED and include only pre-tax profit/loss (excluding UAE corporate tax balances).
• Certain IFRS consolidation effects (such as goodwill and fair value adjustments from business combinations involving separate legal entities) are excluded from AFS, while business combinations not involving a separate legal entity are fully aggregated. Investments in non-group entities are carried at cost less impairment.
• Intercompany balances, income, expenses, and unrealised gains/losses between Tax Group members are eliminated, except where a prior-period deductible loss exists, in which case eliminations are limited until the loss is reversed.
• Required disclosures include the aggregation methodology, group composition, key accounting policies, and supporting notes. Primary statements must include financial position, profit or loss, other comprehensive income, and changes in equity, with comparatives for prior periods (except the first).
• Where required, AFS must be audited under International Standards on Auditing (ISA) and submitted with the tax return within 9 months of period end.

Impact:
Increases administrative burden on tax groups while providing clarity on interpretation of Decision No. 7 of 2025.

Compliance Tips:

• Track intra-group transactions and prior-period deductible losses to apply the elimination exceptions correctly.
• Engage auditors early to plan special purpose audits; align to the 9-month submission deadline.
• For asset transfers within the group, monitor the 2-year clawback window and prepare for cost base adjustments if exits occur.
• Clarify internal arrangements for allocating group tax expense in member standalone financials, if desired.

Applicability:
All entities filing as tax groups under the CT Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.