On 27 March 2025, the UAE Cabinet issued Decision No. 34 of 2025, updating and replacing the earlier Decision No. 81 of 2023 under Federal Decree‑Law No. 47 of 2022 on Corporate Tax. This latest directive clarifies which collective investment vehicles—namely Qualifying Investment Funds, Qualifying Limited Partnerships and Real Estate Investment Trusts—may claim tax exemption, and sets out the specific activity requirements, income‑sharing rules and compliance timelines they must follow.
By tightening definitions and detailing the conditions for exemption, the Decision promotes regulatory certainty and supports the UAE’s goal of a transparent, business‑friendly tax environment.
Exemption Conditions for Qualifying Investment Funds
General Requirements
To qualify for corporate tax exemption (in addition to Corporate Tax Law Article 10(1)), an investment fund (excluding REITs) must:
- Conduct Investment Business as its principal activity, with any other activities being incidental.
- Restrict investor involvement in day‑to‑day management.
- Provide investors with information necessary for accurate taxable income calculations.
Income Attribution
- Resident Investment Managers’ income tied to a QIF must be adjusted to include the net income attributed to the fund (Corporate Tax Law Art. 20).
- Only nonancillary activities generating ≤5% of total revenue qualify as incidental
Treatment of Investor Income
Profit Distributions
Investors in an exempt QIF exclude received profit distributions from their taxable income.
Net Profit Inclusion
A juridical investor must include prorated Net Profit where:
- The fund has <10 investors and any investor or related parties hold ≥30% ownership or influence; or
- The fund has ≥10 investors and the threshold rises to 50%.
Exceptions
- First two financial years of the fund’s operation.
- Temporary threshold breaches (<90 days/year) due to uncontrollable events or fund liquidation.
Immovable Property Income
Immovable Property Income
If a QIF holds >10% of assets in State immovable property, an investor must include 80% of prorated Immovable Property Income. However, if ≥80% of such income is distributed within nine months post‑year end, appropriate relief applies.
Exemption Conditions for Real Estate Investment Trusts
To be exempt as a QIF, a REIT must, beyond Corporate Tax Law Article 10(1):
- Hold ≥AED 100 million in State immovable property (excluding land).
- Either float ≥20% of its shares on a Recognised Stock Exchange (without related‑party subscription) or be wholly owned by ≥2 institutional investors (at least two of those are not Related Parties).
- Must hold rental-income generating properties (excluding immovable properties held solely for capital appreciation) averaging at least 70 % of total value of its assets during the Financial Year.
- Provide requisite investor information.
The REIT investor income rules largely mirror those for other QIFs, with a mandatory inclusion of 80% prorated Immovable Property Income (subject to the same distribution exceptions)
Qualifying Limited Partnerships
Exemption Criteria
A QLP may be exempt where it:
- Primarily conducts Investment Business; ancillary activities ≤5% of revenue.
- Derives no income from State immovable property.
- Operates with no primary purpose of tax avoidance.
Attributed Income and Investor Treatment
- Income of resident Investment Managers tied to a QLP is adjusted akin to QIFs.
- Investors exclude profit distributions but include prorated net income (after deducting Investment Manager’s share) where applicable.
Compliance and Cessation
Failure to apply in the first Tax Period or meet conditions results in loss of exempt status for the current and subsequent four periods. On cessation, opening values for assets and liabilities are prescribed under arm’s length principles for tax purposes.
Unincorporated Partnerships
An unincorporated partnership treated as a Taxable Person under Corporate Tax Law Article 16(8) may apply to be a QIF if meeting all relevant conditions.
Applicability and Repeals
Implementation: The Minister of Finance may issue detailed implementing decisions.
- Applicability: The Decision applies to Tax Periods beginning on or after 1 January 2025 and took effect upon issuance on 27 March 2025.
- Repeals: Cabinet Decision No. 81 of 2023 is repealed for periods commencing on or after 1 January 2025; conflicting provisions are also rescinded.
The Minister of Finance may issue detailed implementing decisions to facilitate practical compliance.
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