New Tax Rules for Investment Funds and Partnerships
- 10.04.2025
- Posted by: Malavika Kolera
- Categories: Dubai, Tax
The UAE has introduced important updates to its corporate income tax framework with Cabinet Decision No. 34 of 2025, which clarifies the taxation of qualifying investment funds and qualifying limited partnerships. This decision, issued on 27.03.2025, applies to tax periods starting from 01.01.2025 and provides important guidelines for investors and fund managers operating in the UAE.
Who Needs to Register?
The decision introduces clear definitions for several key terms:
Investment Business: Activities related to issuing investment interests to raise or pool funds with the aim of enabling investors to benefit from resulting profits or gains.
Immovable Property: Land, buildings, structures, and permanent fixtures located in the UAE.
Qualifying Limited Partnership: A juridical person established under UAE legislation specifically for collective investment purposes.
Real Estate Investment Trust: As defined in relevant UAE legislation.
Conditions for Tax Exemption
For an investment fund to qualify for corporate income tax exemption, it must meet these conditions:
- Its principal business activities must be investment-related
- Investors must not control the day-to-day management of the fund
- The fund must provide investors with the necessary information for calculating their taxable income
For Real Estate Investment Trusts seeking exemption, additional requirements include:
- The value of immovable property under management must exceed AED 100 million
- At least 20% of shares must be floated on a recognized stock exchange, or qualifying institutional investors must own the trust
- At least 70% of assets must be rental income-generating immovable property
Investor Taxation Rules
The decision establishes clear rules for how investors in these funds are taxed:
- Profit distributions received from qualifying investment funds are excluded from taxable income
- In specific cases, investors may need to include a prorated portion of the fund’s net profit in their taxable income
- Special provisions apply to immovable property income where a fund has an Immovable Property Percentage above 10%
Special Provisions for Limited Partnerships
Qualifying Limited Partnerships can apply for tax exemption if:
- Their principal business is investment-related
- They don’t derive income from immovable property in the UAE
- Their main purpose is not tax avoidance
Impact on UAE Businesses and Investors
This new cabinet decision provides greater clarity for investment funds operating in the UAE. It creates a more structured approach to taxation while maintaining the UAE’s attractiveness for investment by offering potential exemptions.
For investors, the rules define when distributions are tax-exempt and when a portion of a fund’s profits might need to be included in their taxable income. This creates more predictability in tax planning for UAE investment activities.
Compliance Requirements
Funds seeking exemption must apply to the Federal Tax Authority and meet all specified conditions. They must also provide investors with the necessary documentation to calculate their taxable income accurately.
Non-resident investors can appoint tax agents to handle their obligations, either directly or through the qualifying investment fund or its investment manager.
How TME Services Can Help
Cabinet Decision No. 34 of 2025 represents an important development in the UAE’s corporate income tax framework as it matures. The provisions aim to balance tax compliance with maintaining the UAE’s status as an attractive investment center.
As tax specialists in UAE, TME Services can help you manage these changes effectively. Our team can assess how these new regulations affect your current investments, help structure new investments to optimize tax efficiency, ensure compliance with all reporting requirements, and provide ongoing advisory support as the UAE tax landscape continues to evolve.
TME Services - Your Complete Business Partner
Our comprehensive services are designed to support you every step of your business journey:
- Company Formation: We guide you through all aspects of setting up your company, whether in a free zone or on the mainland, ensuring you choose the best option for your business.
- Visa and Emirates ID Services: We streamline the process of securing visas and Emirates IDs for you and your employees, allowing you to focus on your business operations.
- Accounting: Our team ensures your business stays compliant with local financial regulations, which is crucial for maintaining good standing in Dubai’s business community.
- Tax: We help manage Dubai’s tax environment, ensuring your business remains compliant while optimizing your tax position.
- Business Consulting: Leveraging our deep understanding of Dubai’s market, we provide valuable insights and help you develop effective strategies to succeed.
Visit our services page to learn more about everything we do.
