Replaces Cabinet Decision No. 81 of 2023 for tax periods starting on or after 1 January 2025, setting the conditions for investment funds, REITs and qualifying limited partnerships to be exempt from corporate tax and how investors adjust their taxable income for distributions and property income.
Cabinet Decision No. 34 of 2025 is the current rulebook for the corporate tax exemption of investment funds, real estate investment trusts and, for the first time, qualifying limited partnerships. It took effect on 27 March 2025 and applies to tax periods starting on or after 1 January 2025; Article 8 repeals Cabinet Decision No. 81 of 2023 but keeps it alive for earlier periods. The main shift from the 2023 decision is that investor concentration and real estate exposure no longer disqualify the fund itself; instead they trigger adjustments to the taxable income of the fund's corporate investors.
Article 2 sets three conditions for a fund other than a REIT: its principal business must be Investment Business (issuing interests to raise or pool investor funds to share in the gains from acquiring, holding, managing or disposing of investments), investors must not control day-to-day management, and the fund must give investors the information they need to adjust their own taxable income. Other activities are ancillary if their combined revenue is no more than 5% of total revenue. Article 3 then taxes investors: distributions from an exempt fund are excluded from an investor's taxable income, but a juridical investor that, with its related parties, holds or can exercise 30% or more of the interests, votes, board seats, profits or influence in a fund with fewer than ten investors (50% where there are ten or more) must include its prorated share of the fund's net profit. That rule is suspended for the fund's first two financial years where there is evidence of an intention to stay below the thresholds, and for breaches outside the parties' control lasting no more than 90 days in aggregate. Where a fund's UAE Immovable Property Percentage exceeds 10%, juridical investors include 80% of their prorated Immovable Property Income, unless the fund distributes at least 80% of that income within nine months of year end.
Article 4 keeps the REIT tests: UAE immovable property excluding land worth more than AED 100,000,000, at least 20% of shares floated on a Recognised Stock Exchange without the REIT or its related parties buying them, or direct whole ownership by two or more unrelated institutional investors, and rental-generating property of at least 70% of total assets on average. REIT investors include 80% of prorated Immovable Property Income unless the nine-month distribution test is met.
Article 5 lets a Qualifying Limited Partnership, a juridical limited partnership formed solely for collective investment under a framework that existed on or before 1 June 2023, apply for exemption if its principal business is Investment Business, it derives no income from UAE immovable property and its main purpose is not tax avoidance; its wholly owned holding and ancillary subsidiaries may also apply. A partnership that fails to apply in its first period or breaks a condition loses the exemption for that period and the following four.
Investment funds, real estate investment trusts and qualifying limited partnerships seeking or holding exemption from UAE corporate tax, the juridical persons they wholly own, their investment managers, and taxable persons, resident or non-resident, that invest in them, for tax periods beginning on or after 1 January 2025.
| Article 2 | A fund other than a REIT qualifies if its principal business is Investment Business with other activities limited to 5% of revenue, investors do not control day-to-day management, and it provides investors the information needed to adjust their taxable income; a resident investment manager's attributed activities count as Investment Business where taxed through the manager or meeting Article 15 conditions. |
| Article 3(1) | Profit distributions received from an exempt Qualifying Investment Fund are excluded from the investor's taxable income. |
| Article 3(2)–(4) | A juridical investor that with its related parties holds or can exercise 30% or more of a fund's interests, votes, board, profits or influence (50% where the fund has ten or more investors) includes its prorated net profit, except in the fund's first two financial years with evidence of intention, for breaches outside its control up to 90 days a year, or on liquidation. |
| Article 3(5)–(6) | Where a fund's UAE Immovable Property Percentage exceeds 10%, juridical investors include 80% of their prorated Immovable Property Income, unless the fund distributes 80% or more of that income within nine months of year end. |
| Article 3(7)–(9) | On disposal of a fund interest outside Article 23, previously included undistributed profit is excluded up to the taxable gain; a fair-value depreciation election is deemed made by the fund and investors may claim it, with recapture on disposal of the property or the interest. |
| Article 3(10) | A non-resident investor may appoint a tax agent, directly or through the fund or its investment manager, to handle its obligations under the Tax Procedures Law. |
| Article 4 | A REIT qualifies if its immovable property excluding land exceeds AED 100,000,000, at least 20% of its shares are floated without related-party subscription or it is wholly owned by two or more unrelated institutional investors, and rental-generating property averages at least 70% of total assets; investors include 80% of prorated Immovable Property Income subject to the nine-month distribution exception. |
| Article 4(8) | Institutional investors are government entities and government controlled entities and their wholly owned subsidiaries, foreign governments and their entities, international organisations, banks, insurers, pension and social security funds, regulated investment funds and any juridical person the FTA determines. |
| Article 5(1)–(2) | A Qualifying Limited Partnership may be exempt if its principal business is Investment Business, it derives no income from UAE immovable property and its main purpose is not corporate tax avoidance; a juridical person it wholly owns may be exempt if it only carries out, holds assets for or supports the partnership's activity and has no UAE property income. |
| Article 5(5)–(6) | Distributions from an exempt Qualifying Limited Partnership are excluded from investors' income, but a juridical investor includes its prorated share of the partnership's net income as shown in the financial statements, net of the investment manager's attributed income. |
| Article 5(8)–(9) | A partnership that does not apply in its first tax period or fails a condition during a period loses exempt status from the start of that period and for the following four periods, with opening asset values taken from the last pre-exemption balance sheet or cost. |
| Articles 8–9 | Repeals Cabinet Decision No. 81 of 2023, which continues to apply to tax periods that commenced before 1 January 2025; this decision applies to tax periods commencing on or after that date. |
The decision sets no fines. Its sanctions are loss of status: a Qualifying Limited Partnership that fails to apply in time or breaches a condition ceases to be exempt from the start of that tax period and for the following four periods (Article 5(8)), and investors who omit the required income adjustments face the ordinary corporate tax penalties under Cabinet Decision No. 75 of 2023.
This decision changed how we structure fund and family investment vehicles from the 2025 tax year. Because concentration no longer disqualifies the fund, a single-family fund or a two-investor vehicle can still be exempt at fund level, but its corporate investors pick up the fund's net profit in their own return, so we now model the tax at investor level before recommending the structure. For holding structures that use DIFC or ADGM limited partnerships, formed through the registered providers we coordinate there, Article 5 is the first route to exemption for the partnership itself, and the five-period lockout for a missed first-period application means we calendar that application at formation. For real estate funds we track the 10% immovable property threshold and the nine-month 80% distribution window with the client's accountants, and we arrange the tax agent appointment that Article 3(10) allows for non-resident investors.
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