Qualifying Activities for the QFZP Regime

The Closed-List Principle

The QFZP regime is conditional upon the exercise of qualifying activities enumerated on an exhaustive basis by Ministerial Decision No. 229 of 2025 (which repealed and replaced MD No. 265 of 2023 with retroactive effect from 1 June 2023), issued under Cabinet Decision No. 100 of 2023. An activity outside this list is not necessarily taxed at 9%: income from transactions with another Free Zone Person that is the beneficial owner of the goods or services remains qualifying as long as the activity is not an excluded activity (Cabinet Decision No. 100 of 2023, art. 3); the list of qualifying activities essentially governs dealings with non-Free Zone Persons. Non-qualifying income, for its part, is taxed at 9% from the first dirham, and the entity loses QFZP status if the de minimis rule is breached.

The Thirteen Categories of Qualifying Activities

1. Manufacturing

Production or transformation of goods, provided that the core operations are carried out within the free zone. Partial subcontracting is permitted as long as the primary value-add remains within the zone.

2. Processing of Goods

Transformation, packaging, labeling, and assembly of products. Distinguished from manufacturing by the absence of fabrication from scratch.

3. Trading of Qualifying Commodities

Trading of raw materials exhaustively listed (metals, minerals, energy, agricultural products and — since MD No. 229 of 2025 — industrial chemicals, associated by-products and environmental commodities such as carbon credits), quoted on a recognised exchange or priced by a recognised price reporting agency (Ministerial Decision No. 230 of 2025). Includes physical trading and certain related hedging derivatives.

4. Holding of Shares and Other Securities

Holding shares and securities for investment purposes qualifies where the holding period (actual or intended) reaches twelve months (MD 229/2025, art. 2(3)(d)) — no minimum participation percentage is required. Includes dividend income and capital gains on disposal.

5. Ownership, Management and Operation of Ships

International maritime activities: shipowning, technical management, crew management, and international transportation.

6. Reinsurance

Reinsurance activities carried out by entities licensed by the competent authorities (the Central Bank of the UAE or the free zone financial regulators — DFSA in the DIFC, FSRA in ADGM).

7. Fund Management Services

Management of UCITS and alternative funds. The texts do not require the funds or their investors to be located outside the UAE: the condition set by MD 229/2025 is that the activity be carried out under the supervision of the competent authority.

8. Wealth and Investment Management Services

Wealth and investment management services, carried out under the supervision of the competent authority (MD 229/2025) — the texts do not require clients to be located outside the UAE. A particularly developed activity at ADGM and DIFC.

9. Headquarter Services to Related Parties

Headquarter services (strategy, coordination, shared services) provided to group companies. Includes management services, centralized R&D, and global marketing.

10. Treasury and Financing Services to Related Parties

Cash pooling, intra-group lending, and management of foreign exchange or interest rate risk for group companies. MD No. 229 of 2025 extends this category to treasury and financing activities conducted for the entity's own account.

11. Financing and Leasing of Aircraft

Financing and leasing of aircraft, including engines and rotable components — a flagship sector of the UAE's aviation leasing platforms.

12. Distribution of Goods in or from a Designated Zone

Distribution in or from a Designated Zone, subject to MD 229/2025: in particular, goods entering the UAE must be imported through the Designated Zone and supplied to a customer reselling, processing or altering them for sale/resale, or to an eligible public benefit entity. Merely invoicing from a Free Zone is insufficient.

13. Logistics Services

International logistics services: transportation, warehousing, distribution, and regional hubs. A flagship activity of the airport and port free zones (DAFZA, JAFZA).

Ancillary Activities

Ancillary activities necessary to the conduct of a qualifying activity (internal administration, accounting, legal, HR) are treated as part of the principal activity and retain qualifying status. This tolerance is essential in practice: a QFZP trading desk does not lose its status because it has an in-house HR or accounting team.

Frequent Practical Cases

• Pure family holding — qualifying if limited to holding equity interests and receiving dividends / capital gains.
• Trading of precious stones from DMCC — qualifying provided the stones appear on the list of qualifying commodities.
• Corporate consulting firm — activity not on the list: fees are taxable at 9% from the first dirham where clients are outside the free zones; services rendered to another Free Zone Person that is the beneficial owner remain qualifying, however (Cabinet Decision No. 100 of 2023, art. 3).
• E-commerce company delivering to UAE consumers — non-qualifying (neither a qualifying activity nor non-UAE customers).
• Family office structuring an executive's wealth in Dubai — qualifying as wealth management provided the activity is carried out under the supervision of the competent authority (MD 229/2025), with no condition as to where the beneficiaries are located.

Distribution: obligations from 2026. For QFZPs undertaking the relevant distribution activity, FTA Decision 6/2026 requires additional procedures and an agreed-upon procedures report under ISRS 4400. Evidence must support, in particular, customer status, resale or processing and import conditions. The report must be obtained within thirty days after the CT return deadline for periods beginning on or after 1 January 2026. This requirement concerns distributors within the decision’s scope, rather than all QFZPs.