Defence activities

Excluded · 9% taxable

Forensic Analysis

DZ requiredSubstance: HIGHAI-derived

Defence activities are classified as sovereign-linked functions. Under Ministerial Decision No. 229 of 2025, income derived from these activities is explicitly categorized as Excluded Income for Free Zone Persons to prevent the erosion of the tax base on government-funded security mandates and to maintain parity with non-FZ contractors.

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Legal Reference

Ministerial Decision No. 229 of 2025, Article 3, Clause 1(f)

Audit Red Flag

Mischaracterization of military hardware supply or defense-related technical services as 'Qualifying Services' or 'Distribution of Goods' to exploit the 0% regime.

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