UAE FREE ZONE REGULATIONS

Key regulatory changes, corporate tax implications, and compliance updates for businesses operating in UAE free zones in 2025.

Last Update: October 7, 2025

1. The Free Zone as a Strategic Incentive: Regulatory Context

Free zones remain vital to the UAE economy, offering 100% foreign ownership, repatriation of profits, and simplified licensing. Under corporate tax rules, Free Zone Persons (FZPs) that meet qualifying conditions benefit from 0% corporate tax on qualifying income. However, rules around qualifying vs excluded activities and substance requirements have been tightened.

2. Ministerial Decisions 229 & 230 of 2025 — What’s New

MD 229 of 2025 replaces MD 265/2023, updating Qualifying and Excluded Activities lists.
Removes 'raw form' requirement for commodities and expands scope to industrial chemicals, by-products, energy, and environmental commodities.
Introduces 'Quoted Price' criterion via recognized price reporting/exchanges.
MD 230 (2025) specifies Recognised Price Reporting Agencies (RPRAs) for validation.
Changes are retroactive to 1 June 2023, so companies must reassess prior treatment.

3. Dubai Resolution No. 11 of 2025 — Mainland Access

Dubai’s Executive Council Resolution No. 11 allows free zone firms to operate outside their free zone within the Emirate.

Licensing options: establish a branch in Dubai, a branch outside the free zone, or obtain permits for specific activities (up to six months).

Requirements: maintain separate financial records for free zone vs mainland operations and comply with both federal and local laws.

Licensing is renewable annually, but branches are not independent legal persons — parent entity remains liable.

4. Compliance & Substance Requirements

Free zone benefits require substance, audited accounts, and compliant reporting.

To maintain free zone benefits, businesses must:

Maintain economic substance (operations, staff, assets, decision-making).
Meet reporting, transfer pricing, and documentation duties.
Prepare audited financial statements (Article 5, MD 229).
Monitor revenue mix: non-qualifying income above 51% may disqualify 0% tax status.

5. Market Access & Expansion Flexibility

Free zone entities can now expand by opening branches in mainland or other emirates (subject to jurisdiction rules).

Some emirates allow expansion without physical office for the first year.

This improves market access but requires clear financial and compliance segregation.

Key Considerations & Action Steps

Reassess revenue under MD 229 & 230 for compliance.
Update transfer pricing and commodity trading documentation per 'Quoted Price' rules.
If under Dubai Resolution 11, set up branch licensing, financial separation, dual compliance.
Strengthen substance (HR, assets, decision-making) to preserve 0% rate.
Ensure audited accounts meet free zone requirements.
Monitor FTA guidance, DET updates, and free zone authority rules.

How We Can Help

With new 2025 Free Zone regulations and corporate tax reforms, maintaining 0% eligibility and compliance has become more complex. At MP Elites Consulting, our advisors help Free Zone businesses reassess qualifying income, strengthen substance requirements, and manage dual compliance for mainland operations — ensuring you retain every available benefit.