The UAE Ministry of Finance has introduced a series of transformative tax reforms aimed at spurring economic growth and attracting more investments into the region.
These reforms focus on offering favorable tax conditions and regulatory changes for Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships, marking a significant shift in the UAE’s approach to investment and taxation.
Under the new regulations, investors in QIFs will enjoy a preferential tax regime. Income generated from these funds will be exempt from UAE Corporate Tax, provided that they meet certain conditions. Notably, the funds must adhere to a 10% real estate asset threshold and maintain diversified ownership structures. These measures are designed to encourage the growth of QIFs while maintaining a healthy balance of investments across sectors.
To further enhance flexibility, the UAE’s Ministry of Finance has introduced a grace period for QIFs to correct ownership diversity breaches that may arise after the initial two-year period. However, these breaches must not exceed 90 cumulative days per year, nor can they occur during liquidation periods. This adjustment allows funds greater leeway in managing their ownership structures without incurring penalties.
In addition, the Ministry clarified that ownership diversity violations will only impact the breaching investors, as long as the other exemption criteria remain intact. For QIFs exceeding the real estate asset threshold, only 80% of the real estate income will be subject to tax, aligning with the treatment of Real Estate Investment Trusts (REITs).
One of the major highlights of the new tax reforms is the simplification of compliance procedures for foreign investors. Juridical foreign investors in REITs and QIFs who meet specific conditions—such as distributing 80% or more of their income within nine months of the financial year-end—will only need to register for Corporate Tax when they distribute dividends, streamlining tax obligations.
The reform package also includes provisions to grant certain limited partnerships tax-transparent status, ensuring that the UAE remains aligned with international best practices in taxation.
This update reflects the UAE’s continued commitment to creating a business-friendly environment and reinforcing its position as a global investment hub with competitive tax advantages. The changes aim to attract more foreign capital by providing a clear, efficient regulatory and tax framework that benefits both local and international investors.