The UAE Ministry of Finance has rolled out a set of forward-looking tax regulations aimed at enhancing the country’s appeal to investors through Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships. The initiative is designed to fuel economic growth by offering more attractive conditions for both domestic and international investors.
Key Highlights of the New Framework:
1. Preferential Tax Treatment for Investors
Investors in QIFs will benefit from corporate tax exemptions, provided the fund:
- Maintains real estate assets below 10% of total investments.
- Meets ownership diversity requirements.
This structure incentivizes fund formation while maintaining oversight over concentrated ownership and asset classes.
2. Enhanced Flexibility for QIFs
QIFs now have greater leeway to rectify ownership breaches:
- A grace period is allowed beyond the initial two years.
- Breaches must not exceed 90 cumulative days per year.
- Exceptions also apply during fund liquidation phases.
3. Fairer Tax Enforcement
In cases of ownership diversity violations:
- Only non-compliant investors will be penalized.
- The fund itself remains tax-exempt if other criteria are met.
- If the real estate asset threshold is breached, only 80% of real estate income will be taxed—mirroring Real Estate Investment Trust (REIT) treatment.
4. Simplified Corporate Tax Compliance for Foreign Investors
Foreign juridical investors in compliant REITs or QIFs will enjoy simplified administration:
- No need to register for UAE Corporate Tax until the date of dividend distribution.
- Applies only if at least 80% of income is distributed within nine months of the fiscal year-end.
5. Tax Transparency for Limited Partnerships
Limited partnerships that meet specific criteria can now elect for tax-transparent status, aligning the UAE with global tax transparency standards and increasing investor confidence.
