General Conditions for Zero-Rated Corporate Tax

Know Your Customer: The customer of the Free Zone entity must purchase the good either for resale or for re-processing and re-sale AND
Business Location: The distribution of goods or materials must be undertaken in or from Designated Free Zone. This requirement is excepted for trading of Qualifying Commodities.

Qualifying Commodities and Non-Designated Free Zones: For businesses dealing with Qualifying Commodities, there is an additional flexibility:

1. Qualifying Commodities: These include metals, minerals, energy, and agricultural products in their raw form. These are generally unprocessed commodities, close to their natural state when harvested or extracted.
2. Traded on Recognized Commodities Exchange Market: This term refers to any commodities exchange market established in the UAE or internationally recognized markets of equivalent standing.
3. Non-Designated Free Zones: If a business dealing in Qualifying Commodities operates from a Non-Designated Free Zone, it may still benefit from zero-rated corporate tax. This allows for some flexibility in the location of the trading activities.
4. The trade itself does not need to be performed through an exchange

Note:
Qualifying Commodities in Raw Form typically refers to commodities that are in their natural and unprocessed state, and no value has been added to the commodity once it was grown, extracted, or mined. They are basically products that are close to the form they were in when they were harvested or extracted and are traded on Recognized Commodities Exchange Market before being processed or transformed. For instance, agricultural commodities like wheat, corn, or soybeans, are generally traded in their raw harvested, unprocessed form. They have not been processed into food items or any other type of product. However, while many commodities are traded in their raw form, it is important to note that some degree of processing may sometimes be involved to meet the trading standards or specifications required to even be traded on a Recognised Commodities Exchange Market. This processing typically aims to ensure uniformity and quality control, which makes large-scale trading possible

Additional Conditions for Compliance
To fully comply with the regulations and secure tax benefits, the company must meet the following additional conditions:
Adequate Number of Employees: The company must employ a sufficient number of staff within the Free Zone to demonstrate genuine economic activity.
Assets and Expenditure: There must be a significant presence of assets and operational expenditure within the Free Zone.
Audited Books of Accounts: Maintaining audited financial records is essential for compliance and verification purposes.
Adherence to Transfer Pricing Regulations: The company must follow transfer pricing rules to ensure transactions between related parties are conducted at arm’s length.
Meeting De-Minimis Requirements: This refers to satisfying minimum thresholds of economic activity or presence required to benefit from tax exemptions.

For more details on tax implications or to ensure compliance with all regulations, it is advisable to consult with local tax experts or authorities.