The UAE Ministry of Finance has announced a series of new regulations designed to stimulate economic growth and attract foreign investment. These measures focus on providing favorable tax treatment and regulatory clarity for Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships.
Under the updated framework, QIFs will enjoy a preferential corporate tax regime, with income generated by these funds exempt from UAE Corporate Tax, provided they meet specific criteria. This includes maintaining a real estate asset threshold below 10% and complying with ownership diversity requirements.
To enhance flexibility, the regulations allow QIFs a grace period to address any breaches in ownership diversity beyond the initial two-year qualification period. Such breaches are permitted only if they do not exceed 90 cumulative days per year and do not occur during liquidation.
Importantly, the Ministry clarified that only the non-compliant investors will lose tax exemption benefits in the event of ownership diversity breaches—provided all other qualifying conditions remain met. If a QIF surpasses the 10% real estate threshold, only 80% of its real estate income will be taxable, consistent with the treatment of Real Estate Investment Trusts (REITs).
The reforms also streamline procedures for foreign juridical investors in REITs and QIFs. Those meeting eligibility criteria and distributing at least 80% of their income within nine months of the financial year-end will only be required to register for Corporate Tax at the time of dividend distribution, thereby easing administrative burdens.
Additionally, the regulations introduce tax transparency options for certain limited partnerships, aligning the UAE’s corporate tax regime with international standards and reinforcing its commitment to best practices in global taxation.
These changes are a strategic move to strengthen the UAE’s position as a premier global investment destination—offering competitive tax advantages and an efficient regulatory landscape to attract long-term capital.
