Major New Tax Rules Announced in the UAE

To enhance the UAE’s appeal to investors and stimulate economic growth, the Ministry of Finance announced major tax reforms through the issuance of Cabinet Decision No. 34 of 2025, which supersedes the previous Cabinet Decision No. 81 of 2023.

A key aspect of the new decision is the introduction of favorable tax treatments for Qualifying Investment Funds (QIFs). Investors earning income through a QIF will not be subject to UAE Corporate Tax on that income, provided certain conditions are met, such as maintaining the real estate asset threshold below 10% and adhering to diversity of ownership requirements.

To offer greater flexibility, the decision grants QIFs a grace period to address any breaches of ownership diversity requirements. This period allows for corrections within an aggregate of 90 days in a year or during the fund's liquidation or termination phases.

Additionally, the reforms stipulate that any breach of the real estate asset threshold will result in 80% of the real estate income derived through the fund being subject to UAE Corporate Tax. Similarly, investors in Real Estate Investment Trusts (REITs) will be taxed on 80% of the real estate income obtained through the REIT.

For foreign juridical investors in REITs and QIFs that distribute 80% or more of their income within nine months of the financial year-end, the requirement to register for Corporate Tax is deferred until the date of dividend distribution. This measure aims to streamline compliance procedures and reduce administrative burdens for foreign investors.

Furthermore, the decision introduces provisions allowing certain limited partnerships to attain effective tax-transparent status, provided they meet specified conditions.