Last week, the United Arab Emirates (UAE) released Cabinet Decision 35 of 2025 on Qualifying Investment Funds (QIF) and Qualifying Limited Partnerships (QLP) relating to the UAE Corporate Tax Law (Federal Decree Law 47 of 2022).

This release presents a significant change to the previous rules focusing on two key areas;

• An update on the conditions to be eligible for the tax exemptions, and
• Details on the calculation of Taxable Income for investors into these Qualifying vehicles.

We have provided below a few of the key highlights of the Decision.

Tax Periods 

The new Decision repeals the previous Decision (Cabinet Decision 81 of 2023) for Tax Periods beginning on or after 1 January 2025. This means the contents of the previous Decision, namely the conditions to be eligible for QIF status still apply to Tax Periods that began between 1 June 2023 and 31 December 2024.

The new Decision therefore only applies to Tax Periods beginning on or after 1 January 2025. This means potential applicants will need to assess themselves against two different criteria to determine if they can benefit from the exemption for the FY24 and FY25 periods.

QIFs 

Changes to the Conditions 

The key changes the new Decision introduces are that it removes the following conditions;

• “A single investor and its Related Parties do not own the following:

  a. More than 30% (thirty percent) of the ownership interests in the investment fund, where the investment fund has less than ten investors.

  b. More than 50% (fifty percent) of the ownership interests in the investment fund, where the investment fund has ten or more investors.”

• “The investment fund is managed or advised by an Investment Manager that has a minimum of three investment professionals.”

And introduces the following condition;

• “To provide its investors with all information, documents and data necessary for the purposes of calculating their Taxable Income adjusted pursuant to this Decision.”

The Decision also provides further details on the condition that prescribes that the principal Business / Business Activities conducted by the fund are Investment Business, and any other activities are ancillary or incidental. The following details are provided in this respect;

• Where the Business / Business Activities of a resident Investment Manager can be attributed to a resident investment fund, the Taxable Income of the Investment Manager must be adjusted to include the net income of the fund,
   

• The Business / Business Activities of the Investment Manager that are attributed to the fund will be considered to be Investment Business where;

  a. The activities are subject to CT in the UAE through the Investment Manager, and / or,

  b. The activities are undertaken by an Investment Manager who meets the conditions provided in the Investment Manager Exemption under Article 15 of the CT Law.

• Any other activities conducted by the fund will be considered as ancillary or incidental where they do not exceed 5% of the total revenue of the fund in that given financial year.

Real Estate Investment Trusts (REIT) 

Changes to the Conditions 

The key changes to the conditions to be eligible to be a REIT under the new Decision are as follows;

• A tweaking of the previous 70% Real Estate Asset percentage rule to be only related to rental income-generating immovable property, excluding immovable property held purely for capital appreciation purposes.
   
• “To provide its investors with all information, documents and data necessary for the purposes of calculating their Taxable Income adjusted pursuant to this Decision.”

QLPs 

Changes to the Conditions 

In order to be a QLP, the following conditions must be met;

• The principal Business / Business Activities conducted are Investment Business and any other activities are ancillary or incidental.
   
• The QLP does not derive any income from the exploitation of immovable property in the UAE.
   
• The main purpose of the QLP is not to avoid CT.

The Decision also explained that juridical persons who are wholly owned by a QLP and undertake only the same activities as the QLP can also apply to be exempt from UAE CT.

The Calculation of Taxable Income under the New Decision for QIFs 

The new Decision provides details on the calculation of Taxable Income for investors into QIFs (including REITs and QLPs), both in terms of the required reporting, and relevant adjustments. Some of the key takeaways are included below;

• The Taxable Income of an investor in a QIF who is a Taxable Person must be adjusted to exclude any profit distributions received from the fund,

• The Taxable Income of an investor in a QIF who is a juridical person must include the prorated Net Profit of the fund in the following cases;

  a. Where the QIF has less than 10 investors, and an investor and its’ Related Parties own 30% or more of the ownership interests in the fund, and

  b. Where the QIF has 10 investors or more, and an investor and its’ Related Parties own 50% or more of the ownership interests in the fund.

• A grace period / exemption from this reporting requirement is provided where;

  a. It is the first 2 financial years of the fund and fund intends not to exceed the stated threshold from the 3rd financial year onwards,

  b. The thresholds are exceeded for reasons outside of the QIF’s control for a period of less than 90 days in any given financial year, and

  c. The thresholds are exceeded due to liquidation or termination of the fund.

• Where a QIF who is not an REIT invests in immovable property (and the value of the immovable property comprises over 10% of the total assets value of the fund), a juridical person who is an investor must adjust its Taxable Income in the period to include 80% of the prorated immovable property income.
   
• Specific rules regarding the calculation of Taxable Income in instances of disposal of immovable property by the QIF, or disposals of ownership interests by investors.

The new Decision therefore presents a welcome update both in the ability for more investment vehicles to have the opportunity to meet the conditions and benefit from the regime, and in providing further details on the reporting requirements for investors which are fast approaching.

If you have any questions or would like to discuss how this could impact you, please reach out to a one of our experts within the A&M Tax Team!