Manufacture of electronic components and boards

Under Ministerial Decision No. 229 of 2025, the manufacture of electronic components is classified as a Qualifying Activity. Forensic focus is on the 'Substantial Transformation' test. Auditors will verify depreciation of specialized machinery and utility consumption (power/water) to ensure physical production matches reported output, preventing the masking of 'Excluded' distribution income as 'Qualifying' manufacturing income.

Audit Red Flag

Contract manufacturing arrangements where the actual 'substantial transformation' of electronic components occurs in mainland UAE or offshore while the Free Zone entity only performs final assembly or packaging.

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