• The new decisions introduce an Intellectual Property regime which follows the Organisation for Economic Co-operation and Development (OECD) modified nexus approach.
  • The new decisions clarify the activities in scope for both Qualifying Activities and Excluded Activities.
  • The trading of Qualifying Commodities has been included as a Qualifying Activity.

Abu Dhabi, UAE: The UAE Ministry of Finance has issued Cabinet Decision No. 100 of 2023 on Determining Qualifying Income, as well as Ministerial Decision No.265 of 2023 on Qualifying Activities and Excluded Activities.

His Excellency, Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said: “Free zones are central to the UAE's economic growth, attracting foreign direct investment as well as fostering a favorable business environment. These new decisions reflect the continued significant role of free zones in the UAE’s economic diversification strategies and commitment to aligning with international taxation standards. The certainty of a competitive Corporate Tax regime and offering a special regime for free zones cements the UAE’s position as a leading global hub for business and investment and drives its sustainable development agenda.”

Under the revised Cabinet Decision, the scope of Qualifying Income is extended to include the amount of Qualifying Income derived from the ownership or exploitation of Qualifying Intellectual Property calculated based on the methodology of the OECD’s modified nexus approach, which is prescribed in Ministerial Decision No.265 of 2023.

Ministerial Decision 265 of 2023 on Qualifying Activities and Excluded Activities also lists the trading of Qualifying Commodities as a Qualifying Activity, which allows for the free zone 0% corporate tax rate to apply to income earned from the physical trading of metals, minerals, energy, and agricultural commodities that are traded on a recognized stock exchange, as well as the associated derivative trading income used to hedge against, the risk of such trading activities.

Additionally, the Ministerial Decision clarifies the intended scope of Qualifying Activities and Excluded Activities thereby providing clarity and certainty to free zone businesses.

All Cabinet Decisions and Ministerial Decisions relating to the Corporate Tax Law are available on the Ministry of Finance's website: www.mof.gov.ae.