Under the UAE’s corporate tax framework, certain business operations are designated as qualifying activities — meaning income earned from them can benefit from preferential tax treatment, especially for qualifying Free Zone Persons (QFZPs) where a 0 % rate may apply on qualifying income. These activities are defined in Ministerial Decision No. 139 of 2023 and related Cabinet Decisions.
Understanding qualifying activities is important because income derived from these activities may be treated differently (and more favorably) than income from activities that are not qualified.
What “Qualifying Activities” Mean
Qualifying activities are specific types of business operations that, when conducted by a qualifying business (such as a Free Zone Person meeting eligibility requirements), generate qualifying income — often eligible for a reduced or 0 % corporate tax rate under the UAE Corporate Tax Law.
In simple terms:
The type of activity determines whether income from that activity can get preferential tax treatment.
Not all business activities automatically qualify — only those explicitly listed in the Ministerial Decision.
Main Qualifying Activities Under UAE Corporate Tax
Here are the core business activities that are generally treated as qualifying activities for UAE corporate tax purposes:
Manufacturing and Processing of Goods
Activities involving the transformation of raw materials into finished products.
Trading of Qualifying Commodities
Including trading of metals, energy products, and agricultural goods.
Holding Shares and Other Securities
Investing in shares, stocks, or similar financial instruments for investment.
Ownership, Management, and Operation of Ships
Business operations involving ships for transport or related functions.
Reinsurance Services
Reinsurance operations regulated under UAE financial law.
Fund and Wealth Management Services
Managing investment funds, wealth portfolios, or related financial services.
Headquarter Services to Related Parties
Central corporate support services provided within a group.
Treasury and Financing Services to Related Parties
Group financial support services like cash management or intercompany financing.
Financing and Leasing of Aircraft
Financing and leasing aviation assets, including planes and components.
Distribution of Goods or Materials
Distribution of products within or from a designated free zone to customers or resellers.
Logistics Services
Transportation, warehousing, freight forwarding, and related services.
Ancillary Activities
Activities that are closely related, support, and are integral to the main qualifying activity (but have no independent function).
How Qualifying Activities Affect Tax Treatment
Income generated from qualifying activities plays a central role in determining whether a business — especially a Free Zone Person — can benefit from 0 % corporate tax on qualifying income:
Qualifying Income: Revenue from qualifying activities with entities outside free zones (or as defined by specific rules) can be treated as eligible income for the 0 % tax rate.
Non‑qualifying Income: Income from activities not on the qualifying list (e.g., general consulting or non‑regulated services) is typically taxed at the standard rate (currently 9 %).
De Minimis Rule: If a small portion of a business’s revenue comes from non‑qualifying activities and meets the de minimis threshold (e.g., not more than 5 % of total revenue or AED 5 million, whichever is lower), it may still maintain qualifying status.
This structure incentivizes core economic activities while still allowing some flexibility for incidental income.
Why This Matters for Businesses
Understanding qualifying activities is key because it affects:
Tax planning strategies (especially in free zones)
Eligibility for preferential corporate tax rates
Compliance and filing obligations
Many businesses check whether their main operations fall under the qualifying list before setting up or restructuring their activities to optimize corporate tax outcomes.
Quick Recap — Examples of Qualifying Activities
Here’s a handy snapshot:
✔ Manufacturing and processing goods
✔ Trading qualifying commodities
✔ Holding investments like shares
✔ Maritime and logistics services
✔ Fund, wealth, and investment management
✔ Headquarters, treasury, and aviation financing services
✔ Distribution and logistics from designated zones
✔ Ancillary support to main activities
These activities form the backbone of what the UAE considers qualifying for favorable corporate tax treatment.
Final Thoughts
Understanding which business operations count as qualifying activities under UAE corporate tax is crucial for optimizing your tax strategy.
Fintrack Tax Consultants provide expert advice to help your business identify eligible activities, maximize benefits, and maintain compliance.
Our professional support allows you to make informed decisions and confidently plan for corporate tax, without the stress of navigating complex regulations alone.
