(Cabinet Decision No. 34 of 2025)
Published: May 2025 | By Singiri Auditing
On 27 March 2025, the UAE Cabinet issued Cabinet Decision No. 34 of 2025, which introduces key updates to the tax treatment of Qualifying Investment Funds (QIFs), Real Estate Investment Trusts (REITs), and Qualifying Limited Partnerships (QLPs) under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022).
This new decision replaces Cabinet Decision No. 81 of 2023 and applies to tax periods starting on or after 1 January 2025. It establishes clear rules around eligibility for tax exemption, investor obligations, and reporting standards.
A. Qualifying Investment Funds (QIFs)
To qualify for corporate tax exemption:
- Primary Business: The fund must primarily engage in Investment Business.
- Investor Role: Investors should not participate in day-to-day management.
- Transparency: The fund must provide investors with all documents and data required to calculate their adjusted taxable income.
Investment Manager Attribution:
If a UAE-based Investment Manager’s activity is attributed to a fund, that income must be included in the manager’s taxable income.
These activities are considered Investment Business if:
- They are subject to UAE Corporate Tax, or
- The manager meets conditions similar to those in Article 15(1) (adapted for resident persons).
Ancillary Activity Threshold:
The fund can conduct non-core activities, provided these generate no more than 5% of its total revenue in any financial year.
Investor Taxation Rules:
- Distributions from a QIF are not taxed.
- Exceptions apply when:
- The QIF has <10 investors and one investor owns 30% or more
- Grace Period: These thresholds do not apply for the first two years of the fund’s existence.
- Temporary breaches (e.g., for ≤90 days or during liquidation) are allowed without tax consequence.
Real Estate Income Rules:
- If UAE real estate makes up over 10% of fund assets, then 80% of the income must be included in the investor’s taxable income unless distributed within 9 months.
- Depreciation must be added back when the property is sold or the investor exits.
B. Real Estate Investment Trusts (REITs)
To be tax-exempt under the new decision, a REIT must meet the following:
- Property Value: Own/manage UAE real estate (excluding land) worth over AED 100 million.
- Ownership:
- List at least 20% of shares on a recognized stock exchange, or
- Be wholly owned by 2 or more unrelated institutional investors.
- Income Requirement: At least 70% of total assets must be rental income-generating.
- Investor Reporting: The REIT must provide all data necessary for investors to compute taxable income.
Tax Treatment for Investors:
- 80% of Immovable Property Income must be included in a juridical investor’s taxable income unless distributed within 9 months.
- If a distribution is made, no adjustment is required for exited investors.
- Depreciation adjustments apply upon sale of property or investor’s exit.
C. Qualifying Limited Partnerships (QLPs)
To be exempt from corporate tax:
- Core Activity: The QLP must primarily conduct Investment Business.
- No UAE Real Estate Income: It must not derive income from UAE immovable property.
- Genuine Business Intent: The QLP must not be formed for the main purpose of tax avoidance.
Subsidiaries of QLPs:
A wholly owned and controlled entity of a tax-exempt QLP can also apply for exemption if:
- It conducts activities on behalf of the QLP or
- Holds/invests funds solely for the QLP, and
- Does not earn UAE real estate income.
Investor Tax Rules:
- Investors do not pay tax on distributions.
- Juridical investors must include their pro-rated share of the QLP’s income (excluding the Investment Manager’s share) in taxable income.
Loss of Exemption:
A QLP loses its tax-exempt status for the current and following four tax periods if:
- It does not apply for exemption in its first eligible tax period, or
- It fails to meet exemption conditions.
Opening Balance Sheet Rules:
- Pre-exemption assets: Use closing balances from the last year before exemption.
Assets acquired during exemption: Use acquisition cost + capitalized costs.
Quick Reference Table
Criteria | Qualifying Investment Fund (QIF) | Real Estate Investment Trust (REIT) | Qualifying Limited Partnership (QLP) |
Main Activity | Investment Business | Real estate investment & rental income | Investment Business |
| Control by Investors | No day-to-day control | Same as QIF | Investor control not specified; however, the partnership must not be set up primarily for tax avoidance |
| Property Income Allowed | Yes (with limits and adjustments) | Yes (≥70% rental property income) | No UAE immovable property income allowed |
| Ownership Requirements | <30%/50% by one investor (based on number) | 20% listed or 2+ institutions owners | Must not be primarily for tax avoidance |
| Depreciation Adjustments | Allowed | Allowed | Allowed |
| Exemption Period Loss Consequence | Not specified | Not specified | 4-year ineligibility if criteria not met |
| Investor Tax Adjustment | Yes, based on thresholds & distributions | Yes, 80% of prorated income unless distributed | Yes, net income attributed to investors |
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