What’s the main difference between qualifying and excluded activities?

Qualifying activities get special tax benefits, while excluded activities do not.

What is an ancillary activity?

An ancillary activity is a small job that supports a main qualifying activity and can’t stand alone.

What happens if I cross the de minimis limit?

If your non-qualifying income goes over 5% of revenue or AED 5,000,000, you lose the special tax benefit.

Can I get tax benefits if I own property in a Free Zone?

Only if the property is commercial, is in a Free Zone, and the deal is with another Free Zone company.

Who can help me understand UAE corporate tax better?

Mubarak Al Ketbi (MAK) Auditing helps companies with tax advice, audits, and law updates.

Qualifying vs. Excluded Activities in UAE CT Law

Understanding Qualifying and Excluded Activities in UAE CT Law

Main Differences in Qualifying and Excluded Activities

The UAE started corporate tax law in June 2023. This new rule made many companies and people look at their business closely. Mubarak Al Ketbi (MAK) Auditing always helps companies in the UAE understand what’s new and what to do next. Many businesses still try to learn what the new tax law means for them.

The UAE government and the FTA keep making guides and updates to help everyone. You must know the main differences between qualifying activities and excluded activities. If you know these points, you can avoid mistakes and follow the law.

What Are Qualifying Activities in UAE Corporate Tax Law?

A qualifying activity is a job or business type that the UAE government approves for special tax rules. If you do these jobs, you may pay less tax or get special benefits. The law gives a clear list of these activities.

Here are main examples of qualifying activities:

Making goods or materials
Processing goods or materials
Holding shares or other securities
Owning, managing, or running ships
Giving reinsurance services (approved by the authority)
Managing funds (approved by the authority)
Offering wealth and investment management (approved by the authority)
Providing headquarters services for related parties
Treasury or financing for related parties
Leasing or financing aircraft and engines
Distributing goods or materials from a designated zone to resellers
Doing logistics for goods and materials
Any small job (ancillary) needed for the main activity

An ancillary activity is a task that must support the main job and can’t work by itself.

What Are Excluded Activities in UAE Corporate Tax Law?

Some business activities never get the tax break. These jobs are called excluded activities. If a business makes money from these, the money can’t count as qualifying income. These activities come from a list made by the government.

Main excluded activities include:

Any business with a natural person (except for qualifying activities)
Any banking, insurance, finance, or leasing (unless an exception applies)
Owning or using immovable property (unless it’s a commercial property in a Free Zone and the deal is with another Free Zone company)
Owning or using intellectual property (like patents, trademarks, or copyrights)
Any job that supports these excluded activities

If you earn money from these activities, you can’t claim the qualifying income benefit.

How De Minimis Rules Work in Corporate Tax

The de minimis rule helps a business stay as a qualifying Free Zone person, even if it earns a little money from excluded activities. The law sets strict limits.

A company meets de minimis if non-qualifying income is:

Less than 5% of total revenue or
Less than AED 5,000,000

If your company’s non-qualifying income is below both limits, you can keep your status as a qualifying Free Zone person. But if you pass these limits, you lose the special tax treatment.