Which activities are qualifying activities for free zone companies?

Article 1 – Definitions Definitions in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses shall apply to this Decision, otherwise the following words and expressions shall have the meaning assigned against each, unless the context requires otherwise: Domestic Permanent : A place of Business or other form of presence of a Establishment Qualifying Free Zone Person outside the Free Zone in the State. Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 1 Qualifying Activities : Any activities determined by a decision issued by the Minister and conducted by a Qualifying Free Zone Person from which Qualifying Income is derived. Excluded Activities : Any activities determined by a decision issued by the Minister and conducted by a Qualifying Free Zone Person from which non-Qualifying Income is derived. Non-Free Zone Person : Any Person who is not a Free Zone Person. Qualifying Intellectual : Patents, Copyrighted Software and any right functionally Property equivalent to a Patent that is both legally protected and subject to a similar approval and registration process to a Patent, such as utility models, intellectual property assets that grant protection to plants and genetic material, orphan drug designations, and extensions of Patent protection, but not including any marketing related intellectual property assets, such as trademarks. Patents : Any patent granted under the law regulating patents in the State or granted under the relevant law of a foreign jurisdiction. Copyrighted Software : Any copyright subsisting in software granted under the law regulating copyrights in the State or granted under the relevant law of a foreign jurisdiction. Commercial Property : Immovable property or part thereof used exclusively for a Business or Business Activity and not used as a place of residence or accommodation including hotels, motels, bed and breakfast establishments, serviced apartments and the like. Designated Zone : A designated zone according to what is stated in Federal Decree-Law No. 8 of 2017 on Value Added Tax, and which has been included as a Free Zone in accordance with the Corporate Tax Law. Corporate Tax Law : Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 2

Article 4 – De minimis Requirements 1. The de minimis requirements shall be considered satisfied where the nonqualifying Revenue derived by the Qualifying Free Zone Person in a Tax Period does not exceed a percentage of the total Revenue of the Qualifying Free Zone Person in that Tax Period as specified by the Minister, or an amount specified by the Minister, whichever is lower. 2. Subject to Clause 3 of this Article, the following provisions shall apply: a. Non-qualifying Revenue is Revenue derived in a Tax Period from any of the following: 1) Excluded Activities. 2) Activities that are not Qualifying Activities where the other party to the transaction is a Non-Free Zone Person. 3) Transactions with a Free Zone Person where such Free Zone Person is not the Beneficial Recipient of the relevant services or Goods. b. Total Revenue is all Revenue derived by a Qualifying Free Zone Person in a Tax Period. 3. The following Revenue shall not be included in the calculation of non-qualifying Revenue and total Revenue: a. Revenue derived from the following transactions in relation to immovable property located in a Free Zone: 1) Transactions with a Non-Free Zone Person in respect of Commercial Property. 2) Transactions with any Person in respect of immovable property that is not Commercial Property. b. Revenue attributable to a Domestic Permanent Establishment or a Foreign Permanent Establishment of the Qualifying Free Zone Person. c. Revenue derived from the ownership or exploitation of intellectual property, Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 4 except for the Revenue related to the Qualifying Income referred to in Clause 1 of Article 7 of this Decision. 4. For the purposes of this Article, a Qualifying Free Zone Person and its Domestic Permanent Establishment or Foreign Permanent Establishment shall be treated as if the establishment was a separate and independent Person that is a Related Party of the Qualifying Free Zone Person.

Q Are company formation consultancy services provided by a Free Zone Person considered Qualifying Income of a Qualifying Free Zone Person30 if they are provided to the individual shareholders of a new company being formed in a Free Zone? A This depends on the services provided and who the Beneficial Recipient31 of the services is. If the Beneficial Recipient is a natural person, then the services are Excluded Activities32, and the income from the services is not Qualifying Income. If the Beneficial Recipient is a Free Zone Person and the services are not Excluded Activities, then the income from the services will be Qualifying Income. Free Zones – Qualifying Income - Income from Qualifying Intellectual Property Q For income to be considered Qualifying Income under the category of income derived from the ownership or exploitation of Qualifying Intellectual Property33, is it necessary to secure patent or copyright registration with the relevant UAE regulatory authority? A No, the Corporate Tax Law does not require Qualifying Intellectual Property to be registered if the Intellectual Property is automatically legally protected by the relevant legislation in the UAE upon creation. Free Zones – Qualifying Activities – processing of goods or materials Q Can a packaging or re-packaging business be a Qualifying Activity of processing of goods or materials34? A Processing of goods or materials is a wider concept than manufacturing and may occur where an item undergoes a process but essentially remains the same thing, and no new product is created. For example, packaging for sale or re-packaging of finished products could be a Qualifying Activity of processing. Free Zones – Qualifying Activities – trading of Qualifying Commodities Q Is trading of derivatives for speculative purposes a Qualifying Activity of trading of Qualifying Commodities35? A No. Trading of Qualifying Commodities means the physical trading of Qualifying Commodities and associated financial derivatives trading used to hedge against risks involved in such activities, and associated structured commodity financing.36 Derivative transactions which are not directly linked to hedging risk in physical commodity trading, conducted on a speculative basis, do not fall within the Qualifying Activities of Trading of Qualifying Commodities. The Free Zone Person must be able to demonstrate a clear link between the financial derivatives entered into and the risks arising from its physical trading of Qualifying Commodities. Q A Qualifying Activity of trading in Qualifying Commodities requires a Quoted Price to exist for the commodities37. Can the price of cash-settled derivatives of a commodity, specified by a Recognised Commodity Exchange Market, be referenced as a valid source of the Quoted Price? 30 Article 3(1)(a) of Cabinet Decision No. 100 of 2023 31 Article 3(3) of Cabinet Decision No. 100 of 2023 32 Article 2(2)(a) of Ministerial Decision No. 229 of 2025 33 Article 3(1)(c) of Cabinet Decision No. 100 of 2023 34 Article 2(1)(b) of Ministerial Decision No. 229 of 2025 35 Article 2(1)(c) of Ministerial Decision No. 229 of 2025 36 Article 2(3)(c) of Ministerial Decision No. 229 of 2025 7

Article 8 – Maintaining Adequate Substance and Outsourcing in a Free Zone 1. A Qualifying Free Zone Person shall undertake its core income-generating activities in a Free Zone or a Designated Zone, depending on where such activities are required to be conducted, and having regard to the level of the activities carried out, have adequate assets, an adequate number of qualified full-time employees in a Free Zone or a Designated Zone depending on where such activities are required to be conducted, and incur an adequate amount of operating expenditures, in relation to each activity. 2. Core income-generating activities can be outsourced to another Person in a Free Zone or a Designated Zone depending on where such activities are required to be conducted, provided the Qualifying Free Zone Person has adequate supervision of the outsourced activity. 3. Notwithstanding Clause 2 of this Article, core income-generating activities in respect of Qualifying Intellectual Property can be outsourced to any other Person in the State and to any other Person who is not a Related Party outside the State, provided the Qualifying Free Zone Person has adequate supervision of the outsourced activity. 4. For the purposes of this Article, core income-generating activities may vary according to the specific activity but mainly consist of those significant functions that drive the business value for each activity carried out by a Qualifying Free Zone Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 6 Person and are not exclusively or mostly support activities.