22 August 2026 · Activities
Qualifying vs Excluded Activities
Whether income gets 0% often comes down to the activity behind it, not just the free zone licence itself. Ministerial Decision No. 265 of 2023 fixes the list: qualifying activities include manufacturing and processing, trading of qualifying commodities such as metals, minerals, energy and agricultural products with a quoted exchange price, holding of shares and securities, ownership and operation of ships, reinsurance, fund and wealth management, headquarter and treasury services to related parties, aircraft leasing, and distribution of goods from a designated zone to resellers. Excluded activities — most banking and insurance, income from immovable property other than limited commercial property to free zone persons, and transactions with natural persons — do not qualify for 0% even inside a free zone, no matter how strong your substance is.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Activities that keep 0%
These are the activities Ministerial Decision No. 265 of 2023 treats as genuinely free-zone in nature, and each carries its own conditions. Getting the classification right at formation, and revisiting it whenever the business model changes, is one of the biggest single drivers of your effective tax rate.
- Manufacturing, processing and assembly of goods or materials.
- Trading of qualifying commodities — metals, minerals, energy and agricultural products with a quoted exchange price.
- Holding of shares and other securities for investment purposes.
- Ownership, management and operation of ships; reinsurance services.
- Fund, wealth and investment management; headquarter, treasury and financing services to related parties.
- Financing and leasing of aircraft, including engines and rotable components; distribution from a designated zone to resellers.
Activities taxed at 9%
Some activities are carved out no matter how much substance you have or how the rest of the business is structured. Once income falls into one of these categories, that slice sits outside the qualifying regime even while the rest of the company stays at 0%.
- Most banking and insurance activities, with limited exceptions.
- Income from immovable property, other than limited commercial-property income from other free zone persons.
- Transactions with natural persons, subject to specific exceptions in the rules.
- Certain intellectual-property income that falls outside the qualifying regime.
- Any activity not on the Ministerial Decision No. 265 of 2023 list, by default.
Mixing qualifying and excluded activities
A DMCC trading company earns AED 12 million from qualifying-commodity trading with overseas buyers and AED 300,000 from a small consultancy contract with a UAE individual. The commodity trading is a qualifying activity, so that AED 12 million can sit at 0%. The consultancy fee is a transaction with a natural person — an excluded category — so it becomes non-qualifying income that must be tracked against the de minimis limit; it does not, on its own, force the whole company to 9%, but it is capable of doing so if it grows.
- Classify every revenue line by activity, not by customer or contract name.
- A qualifying-looking contract can still contain excluded elements — read the substance of the deal.
- Non-qualifying income only costs you 0% once it breaches the de minimis limit, not the moment it appears.
- Reclassify at least annually; activity mix drifts as a business grows.
Where founders get the activity test wrong
Activity classification is where most QFZP reviews find problems, usually because a company assumes its trade licence description is the same as its tax activity classification. The two are not the same thing, and the FTA looks at what the company actually does, not what the licence says.
- Assuming a "general trading" licence automatically means qualifying-commodity trading.
- Treating all distribution as qualifying, when sales to end consumers rather than resellers are excluded.
- Ignoring the beneficial-recipient test on related-party qualifying income.
- Reclassifying only after a tax period has closed, instead of tracking activity mix in real time.
- Assuming logistics or support services always qualify, when they must be genuinely ancillary to a qualifying activity.
Related guides
Frequently Asked Questions
For free zone companies checking their activity mix against the Ministerial Decision No. 265 of 2023 list before a tax period closes.
Is trading a qualifying activity?
Trading of qualifying commodities — metals, minerals, energy and agricultural products with a quoted exchange price — can qualify, along with distribution of goods from a designated zone to resellers. General mainland retail or wholesale to individual consumers typically does not, because it falls outside the Ministerial Decision No. 265 of 2023 list.
Does selling to individuals qualify?
Transactions with natural persons are generally excluded from qualifying income, subject to specific exceptions in the rules. If a meaningful share of revenue comes from individual customers, track it separately and measure it against the de minimis limit rather than assuming it automatically pushes the whole company to 9%.
Is property income ever 0%?
Only limited commercial-property income earned from other free zone persons within a free zone can qualify; most immovable-property income, including residential rent and mainland commercial property, is excluded and taxed at 9%. This is one of the narrowest carve-outs in the regime.
Can one company have both qualifying and excluded activities?
Yes, and most free zone companies do. The qualifying activities sit at 0%, the excluded and other non-qualifying activities are measured against the de minimis threshold, and if that threshold is breached the whole entity — including the qualifying slice — moves to 9%.
Does holding shares always qualify?
Holding of shares and securities qualifies when it is genuinely for investment purposes. A holding structure used to disguise an operating trade, or where the free zone entity does not hold real economic ownership, is unlikely to hold up as a qualifying activity under review.
What does "distribution from a designated zone" actually cover?
It covers goods distributed from a UAE designated zone to resellers who will sell them on, not to end consumers. Selling the same goods directly to the public from the same warehouse is a different, non-qualifying activity, even though the goods and location are identical.
How often should we review our activity classification?
At least once a tax period, and immediately after any change to the business model, customer base or licensed activities. Activity mix drifts faster than most founders expect, and a stale classification is a common cause of an unwelcome FTA finding.
Can Exiloz confirm our activities qualify?
Yes. We map every revenue stream to the qualifying and excluded activity lists, flag anything ambiguous, and quantify exactly how much of your income sits at 0% versus 9% before you file.
Check your activity mix
Exiloz maps your activities to the Ministerial Decision No. 265 of 2023 qualifying and excluded lists, flags any grey areas, and tells you exactly what proportion of your income is really at 0% before you file.