On 27 March 2025, the UAE Cabinet issued Decision No. 34 of 2025, updating and changing the earlier Decision No. 81 of 2023 under Federal Decree‑Law No. 47 of 2022 on Corporate Tax. This cutting-edge directive clarifies which collective funding automobiles—specifically Qualifying Investment Funds, Qualifying Limited Partnerships, and Real Estate Investment Trusts—might also additionally declare tax exemption and spells out the unique pastime requirements , profit-sharing regulations, and compliance timelines they must follow. By understanding definitions and detailing the situations for exemption, the decision promotes regulatory reality and helps the UAE’s aim of a transparent, business‑friendly tax environment.
Exemption Conditions for Qualifying Investment Funds
General Requirements
To qualify for company tax exemption (further to Corporate Tax Law Article 10(1)), a funding fund (aside from 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 data essential for accurate taxable income calculations.
Income Attribution
- Resident Investment Managers’ profits tied to a QIF must be adjusted to consist of the net profits attributed to the fund (Corporate Tax Law Art. 20).
- Only nonancillary sports producing ≤5% of general sales qualify as incidental.
Treatment of Investor Income
Profit Distributions
Investors in an exempt QIF exclude acquired income distributions from their taxable profits.
Net Profit Inclusion
A juridical investor must consist of prorated net profit wherein:
- 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
The fund has 10% of property in state immovable property; an investor must consist of 80% of prorated immovable property income. However, if ≥80% of such profits is sent inside 9 months post‑12 months, a suitable relief applies.
Exemption Conditions for Real Estate Investment Trusts
To be exempt as a QIF, a REIT must, past Corporate Tax Law Article 10(1):
- Hold ≥AED 100 million in state immovable property (aside from land).
- Either float ≥20% of its stocks on a recognized stock exchange (without a related‑party subscription) or be fully owned by ≥2 institutional traders (at least one of these isn’t a related party).
- Must maintain rental-profit-producing houses (aside from immovable houses held entirely for capital appreciation) averaging at least 70 % of the general cost of its property in the course of the financial year.
- Provide considered necessary investor data.
The REIT investor profits regulations in large part replicate the ones for different QIFs, with an obligatory inclusion of 80% prorated Immovable Property Income (difficulty due to the identical distribution exceptions).
Qualifying Limited Partnerships
Exemption Criteria
A QLP can be exempt wherein it:
- Primarily conducts investment business; ancillary sports are ≤5% of sales.
- Derives no profits from state immovable property.
- Operates without a number one reason for tax avoidance.
Attributed Income and Investor Treatment
- The income of resident investment managers tied to a QLP is adjusted comparably to QIFs.
- Investors exclude income distributions, which consist of prorated internet profits (after deducting the investment manager’s share), where applicable.
Compliance and Cessation
Failure to use it within the first tax period or meet situations consequences in lack of exempt popularity for the contemporary and next 4 durations. On cessation, commencing values for property and liabilities are prescribed under arm’s period ideas for tax purposes.
Unincorporated Partnerships
An unincorporated partnership dealt with as a taxable person under Corporate Tax Law Article 16(8) might also additionally be observed to be a QIF if all applicable situations are assembled.
Applicability and Repeals
- Applicability: The decision applies to tax periods starting 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 durations setting out on or after 1 January 2025; conflicting provisions also are rescinded.
- Implementation: The Minister of Finance might also additionally trouble special enforcing selections.
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FAQs
What is Cabinet Decision No. 34 of 2025?
It is a UAE directive outlining tax exemption criteria and compliance requirements for QIFs, QLPs, and REITs under the Corporate Tax Law.
Who qualifies as a QIF under Cabinet Decision No. 34 of 2025?
A fund primarily conducting investment business, with limited investor control and meeting data-sharing and profit distribution rules.
What are the exemption conditions for a QLP?
A QLP must engage mainly in investment activities, earn no income from UAE immovable property, and not be set up for tax avoidance.