On 29 July 2023, the United Arab Emirates (UAE) Ministry of Finance (MoF) announced Cabinet Decision No. (81) of 2023, outlining additional conditions for Qualifying Investment Funds under the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. The Cabinet Decision stipulates additional conditions that investment funds must meet to be treated as a Qualifying Investment Fund and be exempt from Corporate Tax. The decision upholds the integrity of the Corporate Tax system, while bolstering the UAE’s competitiveness as an investment hub.

According to the Cabinet Decision, the additional conditions for investment funds, other than Real Estate Investment Trusts (REITs), to be exempt from Corporate Tax, include being primarily engaged in investment business activities, with ancillary or incidental activities not exceeding 5% of their total annual revenue; the share of ownership interests in the investment fund held by a single investor and its related parties not exceeding 30% or 50%, depending on the number of investors in the investment fund; being overseen by an investment manager employing a minimum of three investment professionals; and the day-to-day management of the fund not being controlled by investors.

To ensure the flexibility of the Corporate Tax system, the diversity of ownership criteria for investment funds other than REITs will be non-binding for the first two financial years of the fund’s establishment, provided that the intent to diversify its ownership after the first two financial years is substantiated.

Regarding REITs, the exemption conditions include the necessity for real estate assets, excluding land held by the REIT, to exceed AED100 million in value, a minimum of 20% of its share capital being publicly listed or wholly owned by two or more institutional investors, and an average real estate asset percentage of at least 70% maintained annually.

His Excellency Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said: “The additional conditions set forth through this new Cabinet Decision are clear and simple to apply, and serves the UAE to retain its position as a leading investment hub. This Cabinet Decision balances the UAE remaining competitive as an investment hub, while maintaining the integrity of the Corporate Tax system.