The FTA’s Free Zone Persons Guide. Ancillary and Main Activity: how to distinguish between them and why?

The FTA’s Free Zone Persons Guide provides substantial input in obtaining clarity. However, some clarifications requires further details. Specifically, the Guide addresses how to distinguish between a main Qualifying Activity from ancillary one. And that is where the Guide brings in more confusion than clarity, in my view.

But firstly, why does the distinction matter? Both main activity and ancillary one are qualifying for 0% Corporate Tax rate. So why bother? In our recent webinar, we explained the rationale using the third slide (lower left corner):

  • Support functions that are part of a main activity may be performed anywhere.
  • If a support function is considered an ancillary activity, its core function must be confined within a free zone. Conversely, no localization is needed if the support function is part of a main activity

The confusion may ensue from the FTA’s description of features of main and ancillary activities:

  • Both bear natural and integral attributes (see 2nd slide). The only difference is that to be main activity an operation must be natural and integral ‘part’ of the main activity and to be ancillary activity an operation shall be natural and integral ‘compliment’ of the main activity.
  • The Cabinet has included support functions for core operations in the main activity description, but they are also embedded in the description of ancillary activities (see 3rd slide).

Obvious disclaimer: These interpretations are my personal opinions and are not official or endorsed by any competent authority.



Subscribe to our news and case studies:

Follow us on LinkedIn

Last News


VAT for indirect export

This case study addresses several major issues related to the application of a 0% VAT rate to indirect exports in the UAE. First, it considers the resale of goods that

Read more

The FTA’s Free Zone Persons Guide. Substance for HQ services

Here is another slide from the webinar we held last week. It demonstrates insights from one example in the Guide. There are 92 examples therein. Example 24 deals with adequate

Read more

The FTA’s Free Zone Persons Guide. Ancillary of incidental: effect for the UAE Corporate Tax

This Monday, we published the slides related to the definition of Ancillary Activities. In the attached slide, we delve into differentiating between Ancillary and Incidental Activities. I watched a webinar

Read more

We'd love to hear from you!

Whether you have a question, need advice, or are ready to explore tax solutions for your business, don't hesitate to reach out