The UAE Ministry of Finance has announced new tax regulations designed to stimulate economic growth by attracting more investments. These changes specifically target Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships, offering favorable tax conditions to encourage investor participation.

Under the new framework, investors involved in QIFs will enjoy a preferential tax regime. Income generated from these funds will be exempt from the UAE Corporate Tax, provided investors meet specific conditions, including maintaining a real estate asset threshold of at least 10% and adhering to ownership diversity requirements.

To enhance flexibility for investors, the new rules grant QIFs a grace period to rectify any breaches in ownership diversity beyond the initial two-year limit. However, these breaches must not exceed 90 cumulative days in any given year or occur during periods of liquidation. The Ministry clarified that ownership diversity violations will affect only the breaching investors, provided that other exemption criteria are met.

Furthermore, if a QIF surpasses the real estate asset threshold, only 80% of its real estate income will be subject to taxation, which aligns with the treatment applied to Real Estate Investment Trusts (REITs). The new regulations also simplify administrative processes for foreign investors. Juridical foreign investors in REITs and QIFs that meet particular conditions, including distributing 80% or more of their income within nine months of their financial year-end, will only need to register for Corporate Tax on the dividend distribution date.

In line with international best practices, the new provisions also allow certain limited partnerships to achieve tax-transparent status, reinforcing the UAE’s commitment to upholding global tax standards. This regulatory update is viewed as a significant step in solidifying the UAE’s status as a leading global investment hub, providing competitive tax advantages and a streamlined regulatory environment to attract foreign capital.