The United Arab Emirates has issued a new decision revising the tax treatment of investment funds and limited partnerships as part of its ongoing efforts to enhance the country’s investment climate and align with global best practices, the Ministry of Finance said.
Cabinet Decision No. 34 of 2025 replaces the earlier Cabinet Decision No. 81 of 2023 and sets out updated provisions for Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
The move aims to attract more domestic and foreign investment and promote sustained economic growth in the UAE.
One of the key changes is the introduction of favourable tax treatment for QIFs. Under the new rules, investors will not be subject to UAE Corporate Tax on income derived through a QIF, provided that the fund does not breach the 10% real estate asset threshold or fails to meet diversity of ownership conditions.
The decision also allows for a grace period to remedy any diversity-related breaches, as long as they do not exceed 90 days in a calendar year or occur during the fund’s liquidation or termination.
To further enhance fairness in the tax system, the Ministry said any breach of ownership diversity requirements will only impact the investors responsible and will not disqualify the entire fund, provided the exemption conditions are satisfied.
Additionally, if a QIF exceeds the 10% threshold for real estate assets, only 80% of the income from those assets will be taxed under the UAE Corporate Tax regime. A similar 80% tax treatment applies to Real Estate Investment Trusts (REITs), aligning tax and regulatory standards.
The decision also eases administrative requirements. Foreign juridical investors in QIFs and REITs that distribute 80% or more of their income within nine months of their financial year-end will only be required to register for corporate tax at the time of dividend distribution.
This change is intended to streamline compliance and reduce administrative burden.
A new provision in the decision allows certain limited partnerships to be treated as tax-transparent entities, provided they meet specific conditions, reflecting international tax best practices.
The Ministry of Finance said the decision reinforces the UAE’s position as a leading global investment hub by creating a transparent, flexible, and investor-friendly tax environment.
