NaqoodFTA TAXP010: Free Zones and Designated Zones Are Not the Same for UAE Tax
On 2 October 2026 the Federal Tax Authority published Public Clarification TAXP010, Free Zones and Designated Zones for Tax Purposes. It does not change the Corporate Tax, VAT, or Excise Tax laws. It spells out something many free zone businesses still get wrong: the same physical address can qualify under one tax and fail under another.
The core message is simple. You must decide Free Zone or Designated Zone status separately for Corporate Tax, VAT, and Excise Tax. A VAT Designated Zone is not automatically a Corporate Tax Designated Zone.
What did TAXP010 clarify?
TAXP010 walks through four labels that look similar but are defined differently:
| Tax label | What it means (per TAXP010) | How to confirm |
|---|---|---|
| Corporate Tax Free Zone | Geographic area specified by Cabinet decision on the Minister鈥檚 suggestion | Ask your Free Zone authority |
| Corporate Tax Designated Zone | On the VAT List of Designated Zones and included as a Free Zone under Corporate Tax | Ask your Free Zone authority; do not assume VAT listing alone is enough |
| VAT Designated Zone | Free Zone on Cabinet Decision No. 59 of 2017 (as amended) that also meets Article 51(1) of the VAT Executive Regulation | Check the FTA List of Designated Zones, then confirm Article 51(1) conditions with the Free Zone authority |
Excise Tax Designated Zones follow a separate test (fenced free zone or FTA-approved area under Warehouse Keeper supervision). TAXP010 stresses that businesses should confirm Excise status with the Free Zone authority or the Warehouse Keeper, not by copying their VAT or Corporate Tax answer.
TAXP010 states the FTA鈥檚 position and neither amends nor seeks to amend the underlying legislation. It is effective from the implementation dates of those laws unless the text says otherwise.
Why does the Corporate Tax Designated Zone distinction matter?
Under the Qualifying Free Zone Person rules, juridical persons that are incorporated, established, or registered in a Corporate Tax Free Zone can benefit from a 0% Corporate Tax rate on Qualifying Income if they meet the conditions in the Corporate Tax Law, Cabinet Decision No. 100 of 2023, Ministerial Decision No. 229 of 2025, and any other conditions the Minister sets.
One Qualifying Activity under Ministerial Decision No. 229 of 2025 is the distribution of goods or materials in or from a Corporate Tax Designated Zone. Being registered in a Free Zone is not enough for that activity. The distribution itself must be carried out in or from a Corporate Tax Designated Zone, and any extra FTA procedures for that activity must also be met.
If a Qualifying Free Zone Person fails any of the Article 18(1) conditions (and related Cabinet and Ministerial decisions) at any time in a Tax Period, it ceases to be a Qualifying Free Zone Person from the beginning of that Tax Period and for the following four Tax Periods. That is why guessing zone status from a VAT list alone is risky. For the fuller QFZP picture, see qualifying free zones for Corporate Tax and Corporate Tax with SBR filing.
What should UAE free zone SMBs do now?
Ask your Free Zone authority, in writing if you can, for three answers: Corporate Tax Free Zone status, Corporate Tax Designated Zone status, and VAT Designated Zone status (plus Excise if you deal in Excise Goods). Keep the reply with your tax file.
For VAT, cross-check the FTA List of Designated Zones and confirm that the specific area where you operate meets Article 51(1) of the VAT Executive Regulation. Listing alone is not the whole test in TAXP010.
If you distribute goods and rely on the 0% rate for Qualifying Income, map where distribution physically happens against Corporate Tax Designated Zone status. Do not treat a VAT Designated Zone badge as a Corporate Tax shortcut.
Naqood is FTA-accredited accounting software for UAE businesses. Free zone companies can keep invoices, purchases, and Corporate Tax figures in one ledger while they confirm zone status with their authority.
Frequently asked questions about TAXP010
When was TAXP010 issued?
The FTA listed Public Clarification TAXP010 with an issue date of 2 October 2026 on its Corporate Tax and VAT guides and references pages.
Does TAXP010 change the tax rates or invent new AED thresholds?
No. It clarifies how Free Zone and Designated Zone definitions work across Corporate Tax, VAT, and Excise Tax. It does not set new AED amounts and does not amend the laws it explains.
Is a VAT Designated Zone the same as a Corporate Tax Designated Zone?
No. TAXP010 says a VAT Designated Zone is not automatically a Corporate Tax Designated Zone. For Corporate Tax, the zone must be on the VAT List of Designated Zones and included as a Free Zone under the Corporate Tax Law. Confirm both with your Free Zone authority.
Do mainland companies need to read TAXP010?
It matters most if you operate in, or trade with, Free Zones or Designated Zones. Mainland businesses that buy from Free Zone distributors, or that are assessing Qualifying Free Zone Person treatment for a Free Zone entity in their group, should still understand the separate definitions.
Where can I confirm my zone status?
TAXP010 points businesses to their Free Zone authority for Corporate Tax Free Zone and Designated Zone status, to the FTA List of Designated Zones plus Free Zone authority confirmation for VAT, and to the Free Zone authority or Warehouse Keeper for Excise Tax Designated Zones.
This guide is for general information and does not constitute tax or legal advice. For how the rules apply to your specific situation, consult a qualified UAE tax adviser. Naqood is an FTA-accredited accounting platform for UAE businesses.