In recent months, some modifications have been made to the corporate tax laws of the UAE in order to clarify and channel the activities of commodity trading, especially for Free Zone companies. Such amendments clarify which commodities qualify, set standards for pricing, and define regulations for structured financing and related activities. The changes foster transparency, discourage the misuse of tax benefits, and realign trading activities with international standards. Companies dealing with metals, energy, agriculture, industrial and environmental commodities will have to comply with basic requirements to maintain eligibility for 0% tax. This blog will reflect on the new rules, their decay, and how to ensure that some companies are not found on the wrong side.
What Are the New Tax Rules for Trading Commodities in the UAE?
The tax authority of the United Arab Emirates has issued new rules related to the Federal Decree-Law No. 47 of 2022 regarding Corporate taxation, pertaining to how commodity trading for companies in Free Zones is to be treated. Much of this will be administered by the Ministerial Decision No. 229 of 2025 (but also accompanying Ministerial Decision No. 230 of 2025) and shall be effective retrospectively from 1 June 2023.
To begin with, the term ‘Qualifying Commodities’ has now been broadened from being confined hitherto to raw-form metals, minerals, energy, and agricultural products. The new list now also includes industrial chemicals, by-products of commodity production, and environmental commodities such as carbon credits and renewable energy certificates.
Secondly, the requirement that commodities be in a ‘raw form’ has been removed; all that is now required is that the commodity (or a related commodity) must have a ‘Quoted Price’ – that is, a price by a recognised commodity exchange or by a recognised price-reporting agency.
The rules now include structured commodity-financing activities in the definition of dealing in commodities for Free Zone eligibility. Pre-payment, forfaiting, countertrade, warehouse- receipt finance, export receivable finance, project finance, Islamic trade finance, and streaming finance are some examples of structured commodity-financing activities now clearly included under the trading of commodities for Free Zone eligibility.
Fourth, there is a new “51% distribution guardrail” test. If any Free Zone company derives 51% or more of its revenue from logistics, warehousing, distribution, and inventory-management functions, then that portion of income will not be treated as ”Trading of Qualifying Commodities” for tax-free purposes.
Finally, the companion decision (MD 230) identifies specific recognised price-reporting agencies which can be relied upon for the “Quoted Price” reference. This ensures clarity for companies concerning which pricing sources will qualify within the ambit of the rules.
Why Were These Commodity-Tax Rules Introduced?
Tax laws for commodities were introduced by the UAE with a view to enabling companies to have clear guidance on which activities may qualify under the 0% corporate tax regime offered in the Free Zone. This is to prevent any misuse of the tax benefits by offering a common and transparent pricing standard for trading and financing in commodities. The rules create a fair generative framework that is aligned with genuine business processes while complying with the general structure of the corporate tax law by addressing qualifying commodities, acceptable financing activities, and recognised sources of pricing.
What Commodities Now Qualify Under the Updated Framework?
Under the United Arab Emirates’ new corporate tax regime, the definition for the term “Qualifying Commodities” has been broadened to include the following:
- Other Metals and Minerals: Silver mined within the U.A.E., or gold, copper and iron ore.
- Energy Products: Crude oil, natural gas, and other refined fuels.
- Agricultural Commodities: Such as wheat, corn, and coffee.
- Industrial Chemicals: Sulfuric acid and ammonia.
- Environmental Commodities: Carbon credits and renewable energy certificates.
The scope also shall cover the by-products made directly from the production or extraction of the primary commodity. For example, petroleum coke resulting from the refining of crude oil fits into the new definition of a qualifying commodity. The decisive yardstick for qualification is the existence of a “Quoted Price”, which is defined as the price provided specifically by a Recognised Commodities Exchange Market or a Recognised Price Reporting Agency thus supporting international best practices whilst providing more transparency to the business being run out of the UAE’s Free Zones.
How Does the “Quoted Price” Requirement Work?
According to the new rules of the UAE, for a commodity to qualify for the Free Zone 0% taxation regime, it has to possess a “Quoted Price,” which means that its price must be set by a recognized commodity exchange or a recognized price-reporting agency. This quoted price ensures transparency and consistency when valuing commodities for tax purposes. The companies should use these approved sources for the purchase, sales, or financing of commodities, thus preventing manipulation and ensuring that trading practices meet international standards.
What Are the Compliance and Pricing Benchmarks You Must Meet?
As for trading in commodities, companies established in the Free Zones will have to adhere to strict pricing and compliance standards whereby prices must be established through quoting prices by recognized commodity exchanges or price-reporting agencies. In addition, those companies must ensure that structured commodity financing activities, such as pre-payments or export receivable finance, fit within such parameters. Furthermore, revenues from logistics, warehousing, and distribution must not exceed 51% of total revenue for a company to continue to be eligible for Free Zone status. These parameters act as safeguards to prevent abuse and ensure transparency.
What Are the Implications for Free Zone Companies?
The revisions further expand on the eligible trading and financing activities eligible for the 0% corporate tax rate. Accordingly, Free Zone companies are advised to assess their commodities, financing arrangements, and sources of income. Any company failing to comply with the criteria could thereafter be subjected to withdrawal of the benefit of tax exemptions. This will, in turn, safeguard the tax regime to be only available to genuine commodity trade and structured financing exposed to a low risk of penalties or disputes with the UAE tax authorities.
How Will Your Business Operations and Contracts Be Affected?
New rules dictate some changes in most trading contracts, pricing arrangements, and financing structures. Contracts must name a recognized quoted price as a reference point, and financing agreements need to follow the qualifying activities list. Companies would also want to revisit their revenue-sharing models to ensure that income from logistics or distribution does not exceed 51%. These changes may also involve updating supplier and client agreements to ensure compliance with the corporate tax framework.
What Documentation and Audit Requirements Apply to Commodity Traders?
All financial transactions need a proper record. On-thrust prices are based upon prices charged in an open market. Documentation includes contracts of trading, structured financing, or any other supporting agreements. Free Zone authorities should take into consideration various proofs of evidence during audits such as proof of source price, proof of allocation of revenues, etc. Adherence to proper records will indeed give room for transparency and will also be in compliance with the 0% commercial taxation regime, thus reducing disputes or adjustments by the UAE Ministry of Finance.
How Do These Rules Align with the UAE’s Corporate Tax Regime?
With modernization, the commercial transactions and funding transactions are covered under Federal Decree-Law No. 47 of 2022 within the framework for corporate tax for UAE establishments. The rules define the qualifying commodities, price sources, and eligible activities to ascertain that operations indeed satisfy the intent behind the free zone companies benefiting from a 0% tax rate. Furthermore, these rules will also offer a counterbalance against the potential abuse of this tax incentive in line with the broader corporate tax objectives of transparency, consistency, and compliance.
Conclusion: Next Steps for Your Commodity Trading Business
The new UAE commodity tax regulations will clarify and organize the manner in which Free Zone companies will conduct and finance their trading activities. Therefore, businesses must carry out a thorough examination of their commodity portfolios, contracts, pricing methods, and revenue sources to comply with new benchmarks. This includes maintaining proper documentation, using recognised quoted prices, and aligning financing arrangements with defined qualifying activities. By doing this, companies can continue operating under the 0% corporate tax regime without pretending or litigating. Thorough planning and adapting operations right now will secure and enhance future tax efficiency and compliance. Partnering with experts like SetupMate can simplify this process, helping your business keep abreast of the provisions while confidently navigating entry.
