Abu Dhabi, UAE – April 2025 – In a strategic move to strengthen its position as a global investment hub, the United Arab Emirates (UAE) has announced significant changes to its corporate tax framework, aimed at attracting investment and promoting long-term economic growth.
The Ministry of Finance revealed the issuance of Cabinet Decision No. 34 of 2025 on Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This new decision supersedes Cabinet Decision No. 81 of 2023, introducing more favorable provisions for investors.
Key Highlights of the New Tax Rules
One of the most notable updates is the exemption from UAE Corporate Tax for income derived through a Qualifying Investment Fund—provided the fund complies with specific conditions such as maintaining a real estate asset threshold of 10% and meeting diversity of ownership requirements.
To further encourage investment, the new framework allows greater flexibility for QIFs by offering a grace period beyond the first two years of establishment. This period enables funds to address temporary breaches in ownership diversity, so long as the breach does not exceed 90 days within a year or occurs during the fund’s termination or liquidation.
In a move to protect compliant investors, breaches in ownership diversity rules will only affect the non-compliant investors, and not disqualify the fund itself—if exemption conditions continue to be met.
For funds surpassing the 10% real estate asset threshold, only 80% of the real estate income will be subject to corporate tax. This provision is also extended to Real Estate Investment Trusts (REITs), aligning the tax regime with existing regulatory distribution requirements.
Moreover, foreign juridical investors in QIFs and REITs that distribute at least 80% of their income within nine months of the financial year-end will only need to register for Corporate Tax upon dividend distribution. This aims to streamline compliance and reduce administrative obligations for international stakeholders.
In another significant update, certain limited partnerships can now qualify for tax-transparent status, provided they meet specific conditions. This reflects the UAE’s dedication to international best practices in the taxation of partnerships.
A Move Toward Investment Excellence
The newly issued Cabinet Decision underscores the UAE government’s proactive approach in enhancing the investment landscape, ensuring tax consistency, and simplifying compliance requirements for both local and foreign investors.
By aligning its tax framework with global standards while preserving investor benefits, the UAE continues to position itself as a premier destination for business and investment in the Middle East and beyond.
