FTA Public Clarification TAXP010: Free Zones and Designated Zones for Corporate Tax, VAT and Excise Tax (October 2026)

On 2 October 2026 the Federal Tax Authority published Public Clarification TAXP010, Free Zones and Designated Zones for Tax Purposes. It changes no law. What it does is confirm, in one document, something many free zone businesses have been getting wrong: "free zone" and "designated zone" mean different things under the Corporate Tax Law, the VAT Law and the Excise Tax Law, and a zone that qualifies under one does not automatically qualify under the others.

The sharpest consequence lands on free zone distributors. If you claim the 0% Corporate Tax rate on income from distributing goods, that activity only counts as a Qualifying Activity when it is carried out in or from a Corporate Tax Designated Zone, and TAXP010 spells out that a VAT Designated Zone is not automatically one of those.

What changed at a glance

Instrument

Public Clarification TAXP010, issued by the Federal Tax Authority on 2 October 2026

Legal effect

None on its own. It states the FTA's position and applies from the date the underlying laws took effect

Who is affected

Every business registered in a UAE free zone, and in particular (1) Qualifying Free Zone Persons relying on the distribution Qualifying Activity, (2) excise registrants holding goods in free zone warehouses, and (3) traders applying VAT designated zone treatment to goods

What to do

Confirm your zone's status separately under each of the three tax laws, in writing, and keep the evidence with your tax records

What TAXP010 actually says

Four terms, four legal tests.

The relationship between the two Corporate Tax terms is the one to commit to memory. Under Public Clarification TAXP010, a VAT Designated Zone is not automatically a Designated Zone for Corporate Tax purposes. To be a Corporate Tax Designated Zone, the area must be recognised as both a VAT Designated Zone and a Free Zone for Corporate Tax purposes. Every Corporate Tax Designated Zone is therefore a VAT Designated Zone. The reverse does not hold.

A second point matters more than it looks: there is no published list of Corporate Tax Free Zones. The FTA's Free Zone Persons guide (CTGFZP1) notes that no Cabinet Decision listing them has been issued, and TAXP010 tells every taxpayer to confirm their status with their free zone authority. Your trade licence won't tell you. Your lease won't tell you. The authority will.

Who is affected

Free zone distributors claiming the 0% rate

A Qualifying Free Zone Person pays 0% Corporate Tax on its Qualifying Income under Article 3(2)(a) of Federal Decree-Law No. 47 of 2022, provided it meets the conditions in Article 18 of that law, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025.

One Qualifying Activity, listed in Article 2(1)(l) of Ministerial Decision No. 229 of 2025, is the distribution of goods or materials in or from a Designated Zone. Three conditions sit inside it: the activity is conducted in or from a Designated Zone, goods entering the UAE are imported through that Designated Zone, and the goods go to a customer who resells, processes or alters them, or to a public benefit entity. (Ministerial Decision No. 229 of 2025 replaced Ministerial Decision No. 265 of 2023 with effect from 1 June 2023; several articles still cite the old decision.)

TAXP010's point: operating from a Free Zone is not enough for a distributor. The distribution itself must happen in or from a Corporate Tax Designated Zone, and a VAT Designated Zone only counts if it is also a Free Zone for Corporate Tax purposes.

Excise registrants using free zone warehouses

For excise, a Designated Zone is a fenced free zone with controlled entry and exit, security measures over the movement of people and excise goods, customs supervision and an appointed Warehouse Keeper, or another area the FTA designates after the Warehouse Keeper applies to register it. The conditions are in Article 15(2) of Cabinet Decision No. 37 of 2017.

The practical test is FTA approval of the specific area. A warehouse is not an Excise Tax Designated Zone just because the free zone around it is on the VAT list. TAXP010 directs businesses to confirm with the Warehouse Keeper or the free zone authority that the FTA has approved that area. If it has not, excise goods you believe are held under suspension may already count as released for consumption.

Traders relying on VAT designated zone treatment

A VAT Designated Zone is treated as outside the UAE for certain transactions in goods under Article 51(1) of Cabinet Decision No. 52 of 2017, provided the area is listed under Cabinet Decision No. 59 of 2017 (as amended) and meets the fencing, customs, security and goods-handling conditions. TAXP010 asks for both checks: the FTA's published List of Designated Zones, and confirmation from the zone authority that the conditions are met by the specific area where your company sits. Two reminders from the VAT rules: the treatment applies to goods, never services, and transaction by transaction, not as a blanket exemption on your licence.

Everyone else in a free zone

If you are in an office-based zone such as DMCC, IFZA, Meydan or Shams, you are not in a VAT Designated Zone, so you cannot be in a Corporate Tax Designated Zone. You can still be a Qualifying Free Zone Person for other activities, but distribution to mainland customers can never be a Qualifying Activity from those zones. JAFZA and DAFZA, by contrast, appear on the FTA's List of Designated Zones, which is one of the two tests.

Worked example: two distributors, two outcomes

This is our professional reading of how the provisions interact, not FTA guidance.

Company A is registered in JAFZA. It imports electronic components through Jebel Ali, stores them in its JAFZA warehouse and sells AED 9 million a year to mainland wholesalers who resell them. JAFZA is on the FTA's List of Designated Zones; assume its authority has confirmed in writing that it is a Free Zone for Corporate Tax purposes. JAFZA is then a Corporate Tax Designated Zone, the distribution is a Qualifying Activity, and the AED 9 million is Qualifying Income at 0%, provided Company A meets the other conditions (substance, audited financial statements, transfer pricing, de minimis) and files its Agreed-Upon Procedures report.

Company B is registered in IFZA and runs the same model from a leased mainland warehouse. IFZA is not on the VAT list, so it cannot be a Corporate Tax Designated Zone, and the AED 9 million is non-qualifying revenue. Under Article 4 of Cabinet Decision No. 100 of 2023, with thresholds set in Ministerial Decision No. 229 of 2025, non-qualifying revenue must not exceed the lower of 5% of total revenue or AED 5 million. Company B is over both. Under Article 5(2) of Ministerial Decision No. 229 of 2025, it ceases to be a Qualifying Free Zone Person from the start of that tax period and for the four that follow, and pays 9% on taxable income above AED 375,000.

Illustrative. Same goods, same customers, same revenue; the difference is which list the zone is on.

Same goods, same customers, same revenue. The difference is which list the zone is on. One nuance in Company B's favour: sales to another Free Zone Person that is the Beneficial Recipient remain Qualifying Income under Article 3(1)(a) of Cabinet Decision No. 100 of 2023; the designated zone requirement bites on sales to non-free zone customers.

What you must do now

1. Get two confirmations from your free zone authority, in writing. That your zone is a Free Zone for Corporate Tax purposes, and whether the specific area you operate from is a Designated Zone for Corporate Tax purposes. An email from the authority is adequate; a leasing agent's word is not. Keep it with your Corporate Tax records.
2. Check the VAT list, then check your plot. The FTA publishes the List of Designated Zones under Cabinet Decision No. 59 of 2017 and its amendments. Being listed is necessary, not sufficient: confirm with the authority that the Article 51(1) conditions are met by your specific area.
3. Excise registrants: confirm the FTA approval. Ask your Warehouse Keeper for evidence that the FTA has approved the specific warehouse as an Excise Tax Designated Zone, and that the registration is current in EmaraTax.
4. Distributors: map the flow of goods. Imports through the Designated Zone, customers who are resellers, processors or public benefit entities, and documents that prove both. These are the points an independent auditor will test under FTA Decision No. 6 of 2026.
5. Re-run the de minimis test. If revenue you treated as Qualifying Income came from distribution outside a Corporate Tax Designated Zone, reclassify and recompute. If a filed return is affected, take advice on a voluntary disclosure before the FTA raises it.

Deadlines and dates that matter

TAXP010 sets no new deadline; it applies from the date the underlying laws took effect. The dates that do carry obligations:

For a calendar-year 2026 tax period, the Corporate Tax return is due by 30 September 2027 and, by our calculation, the AUP report by 30 October 2027. If the report is not submitted, FTA Decision No. 6 of 2026 treats the distribution conditions as not met.

How Stevva can help

TAXP010 touches tax, audit and setup, and Stevva covers all three.

• Stevva Tax builds a zone status matrix for each entity and location under all three tax laws, drafts the confirmation requests to your free zone authorities, reclassifies revenue where needed and models the de minimis test before you file.
• Stevva Auditors, through appropriate licensed partners, prepares the audited financial statements required under Ministerial Decision No. 84 of 2025 and gets your documentation ready for the Agreed-Upon Procedures report under FTA Decision No. 6 of 2026.
• Stevva Corp factors designated zone status into zone selection. For a goods business, JAFZA or DAFZA versus DMCC, IFZA, Meydan or Shams is now a Corporate Tax decision as much as a licensing one.

Key takeaway

TAXP010 confirms that "free zone" and "designated zone" have no single tax meaning. Confirm your status under the Corporate Tax Law, the VAT Law and the Excise Tax Law separately, get it in writing from your free zone authority, and keep the evidence. If you distribute goods and claim 0%, that evidence is now part of an auditor's test, not just a filing position.

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