UAE Ministry Of Finance Unveils Cabinet Decision On Qualifying Investment Funds And Partnerships For Corporate Tax Law

The Ministry of Finance in the United Arab Emirates has issued Cabinet Decision No. 34 of 2025, replacing Cabinet Decision No. 81 of 2023. This decision focuses on Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships under Federal Decree-Law No. 47 of 2022 concerning corporate taxation. The aim is to boost investments and foster economic growth in the UAE.

One key feature of this new decision is the favourable tax treatment for investors in QIFs. Investors will not face UAE Corporate Tax on income from these funds, provided they adhere to specific conditions like maintaining a real estate asset threshold below 10% or meeting diversity of ownership criteria.

The decision also introduces flexibility by allowing QIFs a grace period beyond their initial two years. During this time, they can address any breaches in ownership diversity requirements, as long as these breaches do not exceed ninety days annually or occur during fund liquidation or termination.

Furthermore, breaches in ownership diversity will only affect the investors responsible, not disqualifying the entire fund as a QIF if exemption conditions are met. This ensures that only those at fault bear the tax consequences.

If a QIF exceeds the real estate asset threshold, only 80% of its real estate income will be taxed under UAE Corporate Tax. Similarly, Real Estate Investment Trust (REIT) investors will be taxed on just 80% of their real estate income, aligning with UAE regulatory distribution requirements for REITs.

Foreign juridical investors in REITs and QIFs that distribute at least 80% of their income within nine months after the financial year-end need to register for Corporate Tax only upon dividend distribution. This simplifies compliance and reduces administrative burdens for foreign investors.

Tax-Transparent Status for Partnerships

The decision also allows certain limited partnerships to achieve effective tax-transparent status if they meet specific conditions. This aligns with global best practices for taxing such partnership structures, enhancing the UAE's investment appeal.

This initiative underscores the UAE government's dedication to creating an attractive investment environment by simplifying compliance and offering flexibility to investors. It reinforces the UAE's position as a premier investment destination.

With inputs from WAM