Cabinet Decision No. 34 of 2025 ​ and Cabinet Decision No. 35 of 2025​

Key highlights​

CD 34 introduces certain positive changes for UAE QIFs that invest outside real estate, as well as for investment funds that are structured as incorporated partnerships. ​

QIFs will no longer be treated as tax-transparent entities, unless the diversity of ownership condition is not met or the QIF holds UAE immovable property exceeding 10% of its total assets. Instead, as provided in the UAE CT Law, QIFs will be exempted from UAE CT. This reduces administrative and investor reporting obligations for the fund itself and helps shield investors from UAE CT registration and compliance requirements. Additionally, the QLP regime (effective from 1 January 2025) provides juridical partnerships with an exemption from UAE CT, where the QLP's income is attributed to and taxed at the investors' level. As such, QLPs are effectively given a tax-transparent status.​

On the other hand, for investors in REITs or QIFs with UAE immovable property assets, CD 34 introduces certain additional considerations. In particular, the new rules provide for current taxation of both resident and non-resident juridical investors, with specific adjustments applicable upon exit. The approach to determining taxable income at the investor level remains to be clarified and would benefit from further guidance.​

The new rules also introduce investor reporting obligations for investment managers, which are a prerequisite for the QIF / REIT to obtain tax-exempt status. While these requirements aim to ensure compliance, they may present a notable administrative effort for both investment managers and investors, particularly in the case of publicly listed QIFs and REITs.​

Finally, a nexus for non-resident juridical investors may now arise where the QIF does not meet the diversity of ownership condition, potentially resulting in non-exempt income being subject to tax. This marks a shift from the previous regime, where nexus was limited to income derived from UAE immovable property (whether directly or through fund investments). The change may result in additional compliance considerations for non-resident investors and differs from approaches seen in some other jurisdictions, where non-resident investors (particularly in listed REITs and QIFs) are generally not subject to direct tax filing obligations.​

While CD 34 introduces a number of welcome changes, the UAE may wish to consider certain refinements to further enhance the competitiveness of its investment fund regime. These could include:​

• Aligning the tax treatment of REITs more closely with international practices; ​

• Simplifying the income proration rules applicable to investors; and​

• Streamlining filing and compliance obligations for non-resident investors.​

Exempt status of QIFs​

• QIFs are exempt from UAE CT (subject to meeting certain conditions) and are no longer required to categorise or attribute net income available for distribution to investors. In other words, QIFs are no longer treated as effectively tax-transparent but are instead regarded as an exempt entity for UAE CT purposes.​

• Where the 'diversity of ownership condition' is not met, or where UAE immovable property exceeds 10% of total assets, juridical investors (including non-resident investors) may become subject to tax on their pro-rated share of the QIF’s Net Profit, notwithstanding that the QIF itself remains exempt. This reflects a different approach from that followed in other leading investment fund jurisdictions, where taxation of investors typically arises only upon the receipt of distributions or gains on disposal.​

• Juridical investors should not be subject to UAE tax where the diversity of ownership condition is breached due to circumstances beyond the control of the QIF or its investors, provided that the breach is remedied within 90 days or arises in connection with the liquidation of the QIF.​

New tax regime for incorporated partnerships​

• The new QLP tax regime provides collective investment partnerships with separate legal personality (“incorporated” or “juridical” partnerships), which do not derive income from UAE immovable property, with an exemption from UAE CT. Under this regime, QLPs retain an effectively tax-transparent status, whereby investors are taxed on an accrued basis on their share of the QLP’s income.​

• This regime offers juridical partnerships an additional pathway to achieve tax transparency, alongside the existing options of qualifying as a Qualifying Free Zone Person (QFZP) or as a Qualifying Investment Fund (QIF), subject to meeting the relevant conditions. Existing juridical partnerships may apply for QLP status from 1 January 2025.​

• Unlike the QIF regime, the QLP regime does not impose a diversity of ownership condition. Accordingly, foreign investors in a QLP are not expected to create a nexus for UAE tax purposes, provided the QLP does not earn UAE immovable property income.​

Attribution of certain income by the QIF / QLP to the investment manager​

• The investment manager’s income may need to be adjusted to include net income attributed to the QIF/QLP arising from the activities of the investment manager. Further guidance is required on how this attribution should be determined, though the intended objective appears to be ensuring that investment managers are remunerated on an arm’s length basis.​

Emphasis on taxing UAE Immovable Property Income​

• Juridical investors (both resident and non-resident) in REITs and QIFs holding UAE immovable property exceeding 10% of total assets will generally be subject to tax on 80% of their pro-rated share of UAE immovable property income, calculated on an accrual basis and subject to various adjustments.​

• The apparent policy intent is to tax UAE immovable property income of a QIF in the hands of its resident and non-resident juridical investors. To this end, a new rule has been introduced whereby, if the value of UAE immovable property held by a QIF exceeds 10% of its total asset value, investors will be subject to tax on 80% of their pro-rated share of the QIF’s UAE immovable property income.​

• This introduces additional considerations for fund managers, who will need to monitor and track immovable property values, identify the related income, and report the pro-rated immovable property income to investors in the event the threshold is exceeded.​

Nexus in the UAE for non-resident investors​

• Based on CD 35, a nexus for non-resident juridical investors in a QIF or REIT is triggered at the earlier of:​

• the date of dividend distribution, provided the QIF/REIT distributes at least 80% of its UAE immovable property income within 9 months following its financial year-end; or​

• the date the interest in the QIF/REIT is acquired, if the 80% distribution condition is not met by the QIF/REIT.​

• In addition, a taxable nexus may arise where a QIF does not meet the diversity of ownership condition. This marks a change from the previous regime, under which non-resident juridical investors were only subject to UAE CT on their share of UAE immovable property income. Under CD 34, non-resident juridical investors may now be subject to UAE CT on their pro-rated share of the QIF’s income (excluding exempt income) in the event the diversity of ownership condition is not satisfied.​

• Juridical investors (resident and non-resident) that dispose of their interests in a QIF or REIT prior to receiving any distributions should not be subject to tax on the QIF/REIT’s UAE immovable property income, provided the QIF/REIT distributes at least 80% of its income within 9 months of its financial year-end. Accordingly, short-term investors (resident and non-resident) should not be subject to tax on income not received by the time of their exit.​

Compliance obligations for non-resident investors​

• Non-resident investors of a QIF that become subject to UAE CT are required to register for CT by appointing a tax agent and comply with the filing and payment obligations set out under the UAE CT Law. ​

Introduction of investor reporting requirements​

• QIFs and REITs are required to provide investors with the necessary information and documentation to enable them to calculate their adjusted taxable income. This introduces a potentially considerable investor reporting obligation for UAE investment funds, particularly in light of the adjustments required for investors in REITs and QIFs holding UAE immovable property. It is unclear at this stage if the Federal Tax Authority (FTA) will introduce forms and notifications through which this information should be provided. ​

• The investor reporting requirement may present practical challenges for listed QIFs, given the limited visibility over their investor base. As such, appropriate arrangements may need to be considered with authorised distributors or placement agents to support compliance with this obligation.​

• Meeting the investor reporting requirement is one of the conditions for a QIF or REIT to benefit from tax-exempt status under the UAE Corporate Tax regime.​

Proration of Immovable Property Income​

• The calculation of a juridical investor's share of Immovable Property income depends on whether the QIF / REIT distributes at least 80% of that income within 9 months after their financial year end. ​

• Where the QIF/REIT meets the distribution criteria, the investor should consider income accrued during their tax period and the period for which a profit distribution relates to. ​

• Where the QIF/REIT does not meet the distribution criteria, the investor should consider income accrued during the holding period of their interest in the QIF/REIT. ​

• It is not clear how this rule would be applied in practice and additional complexity may arise where the investor's tax period and that of the QIF/REIT do not match. We expect further details to be issued by the FTA to clarify how resident and non-resident investors should apply these calculation and reporting requirements to ensure compliance. ​

Depreciation adjustments for investment properties​

• A QIF is deemed to have elected to apply for depreciation deduction for investment properties recorded at FMV pursuant to a decision to be issued by the Minister of Finance (this decision is not issued yet). ​

• Investors in QIFs / REITs can claim depreciation adjustments in calculating their accrued taxable income. However, investors are required to reverse such deprecation adjustments when (i) the QIF / REIT disposes of Immovable Property or (ii) when the investor disposes of its interest in the QIF / REIT. ​

• This introduces additional compliance considerations for both investors and fund managers. Investment managers will be required to provide detailed reporting to investors upon the disposal of immovable property, while investors will need to maintain records of prior depreciation adjustments to ensure these can be reversed (added back) to their taxable income upon the disposal of immovable property assets by the QIF/REIT or at the time of exit.​

Sale of QIF / REIT units ​

• On exit from REITs (and QIFs with immovable property income) by juridical resident investors and non-resident investors that trigger nexus, CD 34 allows adjusting for, and excluding, undistributed income from the accrued taxable income realised by such investors during their holding period. ​

• However, the adjustment would depend on (i) whether the exiting investors benefit from participation exemption under Article 23 of the CT Law, and/or (ii) whether the REIT meets the 80% distribution requirement within 9 months of financial year end. ​

Key Takeaways​

What does this mean for you?​

At PwC, we have a team of specialists in the asset management and alternative investments industry that offer strategic advisory services to help navigate the complexities of the constantly changing UAE tax landscape.​​

Our goal is to help you build a robust investment strategy that not only meets regulatory requirements but also maximizes tax efficiency, enabling you to unlock the full potential of your investments in and from the UAE.​

Appendix – QIF and REIT conditions​