UAE Announces New Tax Rules For Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships (QLPs)
On April 6, 2025, the ministry of finance has issued the Cabinet Decision No.34 of 2025 on the Qualifying Investment Fund and Qualifying Limited Partnerships for corporate tax treatment under the Federal Decree Law No.47 of 2022, which amends the provisions of Cabinet Decision No. 81 of 2023. The new decision refines the old provisions and offers flexibility for investors and fund managers and aims to attract investments and boost economic growth.
Favourable Tax Treatment
A key highlight of the new decision is the beneficial tax treatment for investors in the Qualifying Investment Fund. The investors will be exempt from UAE corporate tax if the income earned through a qualifying investment fund, given that the real estate asset threshold (10%) and the conditions for ownership diversity are not breached.
Greater Operational Flexibility
The decision grants greater flexibility by offering a grace period for qualifying investment funds that extends beyond the initial two years of establishment. During this grace period, the investors can remedy any breaches of the ownership diversity, provided that the fund breaches do not exceed 90 cumulative days in a year or if they occur during the time of termination or liquidation of the fund.
Fair Accountability
To promote fair and transparent tax treatment, the new decision enforces that any breaches of the diversity of ownership requirements and failure to comply with standards will only affect the specific investors involved and does not compromise the overall qualifying investment fund exempt status as long as the exemption conditions are satisfied. Moreover, investors in Real Estate Investment Trust (REIT) will only be subject to corporate tax on 80% of the real estate income if the 10% real estate asset threshold exceeds. This same rule applies to investors in Real Estate Investment trust, aligning tax requirements with the existing UAE regulatory requirements.
Reduced Administrative Burdens for Foreign Investors
Foreign Investors in REITs and QIFs that distribute at least 80% of their income within nine months from the end of the fiscal year are required to register for corporate tax at the time of payment of dividends. This measure reduces administrative burdens and facilitates streamlined tax compliance for foreign investors.
Alignment With Global Standards
The new decision also introduces provisions for certain limited partnerships to qualify for tax-transparent status, provided that they satisfy the required conditions. This initiative helps to align UAE tax practices with the international standards of taxation of such specific partnership structures.
Old Decision Vs New Decision
| Key Area | 2023 Rules (Decision No.81) | 2025 Rules (Decision No.34) |
| Real Estate Threshold | No specific limit defined | 10% threshold |
| Diversity Breach | Entire fund risked disqualification | Only investor causing breach could be impacted |
| Grace Period | Limited to first 2 years of formation | Extended beyond 2 years of establishment |
| REIT Income | Tax implications were unclear | 80% income subject to corporate tax |
| Partnership Tax Status | No tax transparency provisions | Tax transparency granted for QLPs |
| Foreign Registration | Registration should be done immediately | Deferred until dividend distribution (if 80% income is distributed within 9 months) |
Conclusion
This cabinet decision reinforces the UAE’s commitment to provide a tax framework that is investor-friendly, flexible and transparent, further strengthening the country’s position as a premier global investment destination.
