The UAE is once again setting a global benchmark for transparent, business-friendly tax regulations. With the introduction of Ministerial Decision No. 229 of 2025 and Ministerial Decision No. 230 of 2025, the Ministry of Finance has provided much-needed clarity and expanded opportunities for companies operating within Free Zones.

These reforms are not merely procedural updates—they represent a transformative step toward making the UAE one of the most competitive and compliant business environments globally.

What’s New with MD 229 & 230?

The new decisions replace outdated guidelines and refine how qualifying activities and pricing mechanisms are treated under the corporate tax framework. They offer comprehensive explanations and provide businesses with the certainty required to plan, expand, and comply confidently.

MD 229 of 2025 – Expanded Qualifying Activities

Broadened Commodity Trading Scope

Businesses can now engage in trading industrial chemicals, by-products, and environmental commodities, as long as there’s a quoted price. This widens the scope of eligible trade activities and brings the UAE’s framework closer to global standards.

MD 229 also clarifies that certain activities remain excluded, such as banking, insurance, real estate, and public utility services. Companies engaging in these will not qualify for Free Zone tax benefits.

Treasury and Financing Services Recognised

Companies offering treasury services to related parties or for internal financing now qualify for tax benefits, allowing more flexibility in structuring operations.

For example, a Free Zone company providing internal loans to its UAE subsidiaries for operational purposes may now qualify under MD 229, provided proper documentation and arm’s length interest rates are maintained.

Distribution Activities Clarified

Goods and materials distributed within or from Designated Zones are explicitly recognised, including transactions with public benefit entities—without affecting regulatory thresholds.

Distribution activities now cover resale, processing, and ancillary logistics, but if more than 51% of revenue comes from distribution, warehousing, or inventory management under commodity trading, the activity may not qualify.

Compliance Guardrails Introduced

– 4-Year Lockout Rule: If a company loses QFZP status for breaching conditions, it cannot re-apply for four years.

– De Minimis Rule: Non-qualifying income must not exceed 5% of total revenue or AED 5 million, whichever is lower.

– IP Income: Qualifying Intellectual Property income is tied to the nexus approach (only UAE-based R&D counts, although R&D outsourced to non-related parties outside the UAE may also qualify).

– Retroactive Application: These rules apply from 1 June 2023, meaning past filings may need review.

Companies must maintain clear documentation linking expenditures to qualifying IP and activities, including contracts, invoices, and accounting records, to demonstrate compliance in case of audits.

MD 230 of 2025 – Recognised Price Reporting Agencies

This decision outlines which pricing agencies businesses can rely on when determining quoted prices for intra-group transactions involving qualifying commodities. It ensures adherence to arm’s length pricing, mitigating disputes and improving audit resilience.

It also clarifies that both physical commodity trades and derivative contracts can qualify, but only when pricing is based on recognised agencies, closing loopholes where companies could self-price.

Recognised agencies include global benchmarks such as S&P Platts, Argus Media, ICIS, and similar internationally accepted pricing sources. This ensures pricing transparency and audit defensibility.

Why These Updates Matter

Encouraging Investment – Clearer rules make the UAE’s Free Zones more attractive to global investors and startups alike.

Reducing Ambiguity – Businesses now have defined guidelines, helping them confidently structure operations and manage tax obligations.

Aligning with Global Norms – The inclusion of recognised price benchmarks and expanded activities reflects international best practices.

Supporting Sustainable Growth – By including environmental commodities and diversified activities, the UAE is encouraging new sectors to flourish.

Raising Compliance Standards – With the new guardrails (lockout, de minimis test, IP rules), Free Zone companies need disciplined structures and stronger documentation.

Companies now need to demonstrate substance in the UAE, maintain audit-ready records, and ensure that revenue-generating activities are genuinely connected to the qualifying operations to retain the 0% tax benefit.

The Bigger Picture

The UAE’s Free Zones have long been a cornerstone of its economic diversification strategy. With these latest updates, the government is sending a clear signal: business innovation, cross-border investment, and compliance will be supported through smart, transparent tax policies.

In short, Free Zones remain competitive, but the government has closed loopholes—companies must now prove substance and compliance to retain the 0% tax rate.

For entrepreneurs, CFOs, tax advisors, and investors alike, understanding MD 229 and MD 230 is no longer optional—it’s essential. These reforms are poised to redefine how Free Zone businesses operate and compete on a global stage.

How German Fintax Consultancy Can Help?

At German Fintax Consultancy, we specialise in helping businesses navigate complex tax environments with confidence and precision. Our team of experts provides tailored advice on corporate tax compliance, structuring qualifying activities, and ensuring adherence to recognised pricing frameworks. Whether you’re expanding operations within UAE Free Zones or looking to align your business with the latest regulatory standards, we offer comprehensive solutions designed to optimise tax efficiency while minimising risks. Trust us to guide you through the nuances of MD 229 and MD 230, so you can focus on growth, innovation, and long-term success.

Frequently Asked Questions (FAQs)

What are MD 229 and MD 230 about?

MD 229 of 2025 clarifies the scope of qualifying and excluded activities for Free Zone companies in the UAE, while MD 230 of 2025 specifies recognised price reporting agencies for determining quoted prices in intra-group transactions.

How does the expanded definition of commodity trading impact businesses?

It allows businesses to trade industrial chemicals, by-products, and environmental commodities, broadening eligible activities and aligning the UAE’s tax rules with international standards.

Can treasury and financing services now benefit from tax incentives?

Yes, treasury and financing services provided to related parties or for the taxpayer’s own account are recognised as qualifying activities, enabling greater operational flexibility.

Why are recognised price reporting agencies important?

They ensure that intra-group commodity transactions follow the arm’s length principle, reducing tax disputes and ensuring compliance with global pricing norms.

How can German Fintax Consultancy assist Free Zone businesses?

German Fintax Consultancy provides expert guidance on tax compliance, qualifying activities, pricing frameworks, and regulatory alignment to help businesses optimise operations and manage risks effectively.