UAE Cabinet Approves New Investment Fund Regulations Under Corporate Tax Law
The resolution introduces preferential tax treatments for qualified investment funds and partnerships to enhance the UAE's investment landscape.
The Ministry of Finance of the United Arab Emirates announced the issuance of Cabinet Decision No. (34) for the year 2025 regarding qualified investment funds and limited partnerships, applicable under Federal Decree-Law No. (47) of 2022 concerning corporate tax.
This new regulation replaces Cabinet Decision No. (81) of 2023.
The primary objective of the new decision is to bolster the UAE's position as an investment hub and attract more investments that contribute to the growth of the national economy.
A significant provision of the new regulation is the introduction of a preferential tax treatment that exempts investors earning income from a qualified investment fund from corporate tax in the UAE, provided their ownership in real estate does not exceed 10% and the conditions for ownership diversification are met.
The new decision offers additional flexibility by allowing qualified investment funds a grace period of up to two years from their establishment date to address any violations of ownership diversification requirements, as long as such violations do not exceed 90 days in any given year or occur due to the liquidation or dissolution of the fund.
Furthermore, the resolution stipulates that any breach of ownership diversification requirements will only affect the responsible investor, without compromising the fund's status as a qualified investment fund, provided the fund meets related exemption conditions.
In cases where the ownership of real estate exceeds the allowed percentage, only 80% of the income generated from real estate through the qualified investment fund will be subject to corporate tax in the UAE.
Likewise, investors in real estate investment funds will also be taxed on only 80% of the income derived from real estate through the fund.
This tax treatment aligns with the regulations governing real estate investment funds in the UAE, thereby ensuring coherence between regulatory and tax frameworks.
Foreign legal entities investing in real estate investment funds and qualified investment funds that meet the relevant conditions and distribute 80% or more of their income within nine months of the end of the fiscal year are required to register for corporate tax on the date of profit distribution.
This provision aims to simplify compliance procedures and reduce administrative burdens for foreign investors.
Additionally, the new decision includes a provision allowing certain limited partnerships to obtain effective tax transparency treatment, provided they satisfy the necessary conditions.
This initiative reflects the UAE government's commitment to adopting best global practices in regulating the tax treatment of such partnerships and underscores its dedication to creating a supportive and flexible investment environment that facilitates compliance for investors, enhancing the country's status as a leading investment destination.
This new regulation replaces Cabinet Decision No. (81) of 2023.
The primary objective of the new decision is to bolster the UAE's position as an investment hub and attract more investments that contribute to the growth of the national economy.
A significant provision of the new regulation is the introduction of a preferential tax treatment that exempts investors earning income from a qualified investment fund from corporate tax in the UAE, provided their ownership in real estate does not exceed 10% and the conditions for ownership diversification are met.
The new decision offers additional flexibility by allowing qualified investment funds a grace period of up to two years from their establishment date to address any violations of ownership diversification requirements, as long as such violations do not exceed 90 days in any given year or occur due to the liquidation or dissolution of the fund.
Furthermore, the resolution stipulates that any breach of ownership diversification requirements will only affect the responsible investor, without compromising the fund's status as a qualified investment fund, provided the fund meets related exemption conditions.
In cases where the ownership of real estate exceeds the allowed percentage, only 80% of the income generated from real estate through the qualified investment fund will be subject to corporate tax in the UAE.
Likewise, investors in real estate investment funds will also be taxed on only 80% of the income derived from real estate through the fund.
This tax treatment aligns with the regulations governing real estate investment funds in the UAE, thereby ensuring coherence between regulatory and tax frameworks.
Foreign legal entities investing in real estate investment funds and qualified investment funds that meet the relevant conditions and distribute 80% or more of their income within nine months of the end of the fiscal year are required to register for corporate tax on the date of profit distribution.
This provision aims to simplify compliance procedures and reduce administrative burdens for foreign investors.
Additionally, the new decision includes a provision allowing certain limited partnerships to obtain effective tax transparency treatment, provided they satisfy the necessary conditions.
This initiative reflects the UAE government's commitment to adopting best global practices in regulating the tax treatment of such partnerships and underscores its dedication to creating a supportive and flexible investment environment that facilitates compliance for investors, enhancing the country's status as a leading investment destination.
Translation:
Translated by AI
