Ministry of Finance Announces the issuance of a Cabinet Decision on Qualifying Investment Funds and Qualifying Limited Partnerships for the Purposes of Corporate Tax Law
05 April 2025
As part of its continuous efforts to enhance the investment environment in the United Arab Emirates, the Ministry of Finance has announced the issuance of Cabinet Decision No. 34 of 2025 on Qualifying Investment Funds and Qualifying Limited Partnerships for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which replaces the provisions of Cabinet Decision No. 81 of 2023. The new decision aims to attract more investments and promote the growth of the national economy.
Preferential Tax Treatment
Among the most significant provisions of the new decision is the introduction of a favourable tax treatment, ensuring that investors deriving income from a Qualifying Investment Fund will not be subject to UAE Corporate Tax on the income derived through the fund, provided that the real estate asset threshold (10%) or the diversity of ownership conditions are not breached.
Flexibility
Additionally, the new decision offers greater flexibility, granting QIFs a grace period even after the first two years of establishment. This grace period allows them to remedy any breaches of the diversity of ownership requirements, provided such breaches do not exceed an aggregate of ninety days in a year or if they occur during the liquidation or termination of the fund.
Fairness
Further enhancing the tax framework, the new decision stipulates that any breaches of the diversity of ownership requirements will only impact the investors responsible for the breach and will not disqualify the overall fund as a QIF, provided that the relevant exemption conditions are met. Furthermore, any breach of the real estate asset threshold for a QIF will result in only 80% of the real estate income derived through the fund being subject to UAE Corporate Tax. Similarly, investors in a Real Estate Investment Trust (REIT) will only be subject to tax on 80% of the real estate income derived through the REIT. This aligns with the regulatory distribution requirements applicable to REITs in the UAE, ensuring consistency across tax and regulatory frameworks.
Ease of Administration
Foreign juridical investors in REITs and QIFs (that meet the relevant conditions) that distribute 80% or more of their income within nine months of the financial year-end are only required to register for Corporate Tax on the date of the dividend distribution. This streamlines compliance procedures and reduces administrative burdens for foreign investors.
International Best Practice
Lastly, the new decision introduces a new provision allowing certain limited partnerships to qualify for effective tax-transparent status, provided that they meet the necessary conditions. This ensures that the UAE promotes global best practice for the taxation of such specific partnership structures.
The decision reflects the UAE government's commitment to providing an attractive investment environment that is flexible and simplifies compliance requirements for investors, thereby maintaining the UAE's status as a leading investment hub.
