UAE Announces New Tax Rules 2025 | Corporate Tax Updates
The United Arab Emirates (UAE) has unveiled a series of new tax regulations in 2025 aimed at strengthening its position as a leading investment hub in the Middle East and globally.
The changes are part of a broader effort to modernize the tax system, enhance regulatory clarity, and attract more foreign direct investment into the country. Issued by the Ministry of Finance, Cabinet Decision No. 34 of 2025 introduces significant updates to the corporate tax framework, specifically targeting Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships (QLPs) under the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This decision replaces the earlier Cabinet Decision No. 81 of 2023 and introduces more flexible, transparent, and investor-friendly provisions.
In this article, we will explore the key provisions of the new tax rules in the UAE, their implications for investors and businesses, and how these changes align with the UAE’s long-term economic strategy.
Overview of the New Tax Rules in the UAE (2025)
The updated tax framework is centered around the following goals:
Attracting foreign and local investment
Providing legal clarity for investment structures
Encouraging the growth of real estate and fund management sectors
Supporting economic diversification beyond oil and gas
The UAE’s approach to taxation remains competitive, offering low tax rates and numerous exemptions while adhering to international best practices in transparency and compliance.
What Is Cabinet Decision No. 34 of 2025?
Cabinet Decision No. 34 of 2025 is a legal framework that provides clarification on how Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships (QLPs) are treated under the UAE’s corporate tax regime. It refines earlier provisions and introduces more flexibility for fund managers and investors by offering tax benefits, streamlined compliance processes, and clearer exemptions.
This decision is particularly relevant for asset management firms, real estate investment trusts (REITs), private equity firms, venture capitalists, and international investors seeking to establish or expand operations in the UAE.
Tax Exemptions for Qualifying Investment Funds (QIFs)
Under the new rules, QIFs can enjoy exemptions from UAE Corporate Tax provided they meet certain criteria:
The fund must not breach the 10 percent real estate asset threshold.
The fund must maintain a diverse ownership structure, with no undue concentration of ownership among a limited number of investors.
These conditions aim to ensure that QIFs are structured and operated in a way that encourages wide investor participation and minimizes tax avoidance strategies.
If a QIF maintains compliance with these thresholds, income earned through the fund will not be subject to UAE Corporate Tax, offering substantial savings and improving net returns for investors.
Real Estate Asset Threshold Explained
The updated rules introduce a clear threshold for real estate exposure:
A fund that derives more than 10 percent of its income from real estate assets will be partially subject to Corporate Tax.
Specifically, 80 percent of the real estate income will be subject to corporate tax if the threshold is breached.
This is particularly important for funds and REITs heavily invested in UAE real estate. By defining a clear line for exemption, the UAE ensures that funds retain tax advantages while remaining aligned with broader regulatory goals.
More Flexibility for Ownership Diversity Breaches
A major improvement under the new rules is the allowance for greater flexibility when it comes to ownership diversity requirements.
Previously, if a QIF temporarily breached ownership rules (for example, if one investor took on an oversized stake), it could lose its tax-exempt status entirely. Under the new framework:
QIFs are given a grace period beyond the first two years of establishment to resolve breaches.
These breaches must not exceed an aggregate of 90 days per year, or they must occur during fund liquidation or termination.
This policy supports long-term stability of funds by recognizing that temporary changes in investor composition are often unavoidable in real-world scenarios.
Breach Impact Limited to Responsible Investors :
Another investor-friendly change introduced in 2025 is the principle of individual accountability. If a breach of ownership diversity occurs:
Only the investor responsible for the breach will lose the tax exemption on their share of income.
The fund itself will retain its QIF status, assuming all other conditions are met.
This ensures that the actions of one investor do not affect the entire fund, promoting fairness and safeguarding compliant stakeholders.
Tax Rules for Real Estate Investment Trusts (REITs) :
Real Estate Investment Trusts, or REITs, also benefit from revised tax treatment:
Investors will be subject to corporate tax on only 80 percent of real estate income derived through a REIT.
This aligns with regulatory distribution requirements in the UAE, which mandate that REITs distribute a large portion of their earnings to investors annually.
The changes offer consistency between the tax regime and the financial regulations governing REITs, creating a more predictable environment for real estate investors.
Corporate Tax Registration for Foreign Investors
To further ease international investment, the new tax decision provides a streamlined approach to corporate tax registration for foreign juridical investors:
Foreign investors in QIFs or REITs who distribute 80 percent or more of their income within nine months of financial year-end are required to register for corporate tax only at the point of dividend distribution.
This provision is particularly appealing to global asset managers and institutional investors, as it reduces administrative burden and delays mandatory registration until income is actually realized and distributed.
Tax Transparency for Limited Partnerships
A key addition to the UAE’s tax landscape is the treatment of limited partnerships. Cabinet Decision No. 34 of 2025 allows certain partnerships to be treated as tax-transparent entities if they meet the following conditions:
The partners agree on transparent treatment.
The partnership does not have legal personality.
The income is directly allocated to partners and not taxed at the partnership level.
This approach brings the UAE in line with international standards, especially in jurisdictions like the United States, the United Kingdom, and Singapore, where similar structures are commonly used in fund management and private equity.
How These Changes Support the UAE Economy
The implementation of these tax reforms serves several strategic goals:
Encouraging investment into non-oil sectors such as real estate, financial services, technology, and infrastructure.
Offering predictability and clarity for global investors.
Boosting the UAE’s rankings in ease of doing business, tax competitiveness, and foreign investment attractiveness.
Supporting the UAE Economic Vision 2031, which focuses on creating a diverse, knowledge-based economy.
By simplifying compliance, offering conditional exemptions, and maintaining low effective tax rates, the UAE strengthens its appeal in an increasingly competitive global market.
Strategic Implications for Business and Investment Funds
Businesses and investors should consider the following steps to align with the new tax regime:
Reassess Fund Structures: Evaluate current QIF or REIT qualification status and ownership diversity.
Review Real Estate Exposure: Keep real estate asset allocations within the 10 percent threshold where tax exemption is crucial.
Update Partnership Agreements: Ensure that limited partnerships meet criteria for transparent tax treatment.
Plan Distributions Strategically: Foreign investors can time dividend payments to delay corporate tax registration and reduce compliance obligations.
Consult with UAE Tax Advisors: Engage experts familiar with the UAE tax framework to implement the new provisions efficiently.
Who Benefits the Most from the 2025 Tax Rules?
The following groups stand to gain significantly from the updated UAE tax legislation:
Global fund managers establishing QIFs in the UAE
Private equity firms using limited partnerships
REIT sponsors managing large property portfolios
International investors seeking regional exposure
Wealth management firms offering diversified portfolios
By offering a level playing field and regulatory clarity, the UAE ensures that both institutional and retail investors can operate in a secure, tax-efficient environment.
UAE Reinforces Its Role as a Global Investment Hub
The introduction of Cabinet Decision No. 34 of 2025 confirms the UAE’s strategic intent to maintain a balanced corporate tax regime—one that respects global standards while preserving the country’s reputation as a pro-business environment.
These reforms not only improve legal certainty and fairness but also reinforce the UAE’s ability to attract long-term capital, sustain economic diversification, and compete globally in sectors ranging from real estate to financial services and beyond.
Businesses and investors should act promptly to align with the new rules, leverage the available exemptions, and ensure their operations are optimized for both growth and compliance.
1. What is Cabinet Decision No. 34 of 2025 and why was it introduced?
Cabinet Decision No. 34 of 2025 was issued by the UAE Ministry of Finance to update the tax treatment of Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships (QLPs) under the corporate tax law (Federal Decree-Law No. 47 of 2022). It replaces Cabinet Decision No. 81 of 2023. The purpose is to:
Make the UAE’s investment environment more attractive
Offer flexibility in compliance
Align with global tax transparency standards
Encourage capital inflow, especially in the real estate and fund sectors
2. Who qualifies for exemption under the new tax rules?
Entities that qualify for exemption include:
Qualifying Investment Funds (QIFs) that meet the ownership diversity and asset threshold conditions
Real Estate Investment Trusts (REITs) meeting distribution requirements
Limited Partnerships (QLPs) that meet transparency requirements
Foreign investors can also benefit from registration relief if they meet specific dividend distribution conditions.
3. What are the key conditions a QIF must meet to be tax-exempt in the UAE?
To qualify for tax exemption as a QIF under the new rules, a fund must:
Maintain diverse ownership (not concentrated in a few hands)
Ensure that real estate assets do not exceed 10% of total assets
Not breach these rules for more than 90 days in a financial year
In case of a breach, rectify it within the grace period allowed
Even if a breach occurs, the penalty applies only to the investor responsible, not the entire fund.
4. What happens if a QIF exceeds the 10% real estate asset threshold?
If a QIF breaches the real estate asset threshold:
It will not lose its QIF status entirely
However, 80% of the real estate income derived through the fund will be subject to UAE Corporate Tax
The remaining 20% remains tax-exempt
Fund managers must monitor real estate allocations closely to avoid unexpected tax liabilities
5. What is the grace period for ownership breaches, and how does it work?
The 2025 rules introduce more flexibility with ownership requirements:
QIFs now get a grace period even after their first two years
Breaches of ownership diversity are acceptable if:
They are corrected within 90 days in a calendar year, or
They occur during liquidation or termination of the fund
This allows fund managers to respond to investor changes without losing tax benefits.
6. How are REITs taxed under the new decision?
Under Cabinet Decision No. 34 of 2025:
Investors in REITs will be taxed on only 80% of the real estate income they earn through the REIT
This is in line with UAE REIT regulatory requirements, which mandate that REITs distribute 80% or more of their income annually
If the REIT follows the distribution rule, it continues to benefit from favorable tax treatment
This alignment ensures that REITs remain attractive for institutional and retail investors
7. When does a foreign investor in a QIF or REIT need to register for UAE Corporate Tax?
A foreign juridical investor (such as a foreign company or legal entity) in a QIF or REIT must register for Corporate Tax:
Only at the time of dividend distribution, provided the fund distributes at least 80% of its income
The registration must be done within nine months of the financial year-end
This means there is no need for preemptive registration, making the process smoother for foreign investors.
8. What are the requirements for a Limited Partnership to qualify for tax-transparent status?
A Limited Partnership can be treated as tax-transparent (not taxed at the entity level) if:
It does not have separate legal personality under UAE law
Partners agree that income will be taxed at the individual partner level, not the partnership
The partnership meets all conditions outlined in Cabinet Decision No. 34 of 2025
This structure is ideal for private equity firms, VC funds, and family offices looking for efficient tax planning.
9. How should businesses or fund managers prepare for these new tax rules in 2025?
Here’s a practical checklist for compliance:
Review fund structures to ensure QIF or REIT qualification
Monitor ownership diversity regularly to prevent breaches
Check real estate exposure to stay below the 10% threshold
For partnerships, assess whether transparency treatment is viable
For foreign investors, plan distributions strategically to delay registration
Engage with a local UAE tax advisor for updates and documentation support
10. Are the new tax rules already in effect, and what’s the timeline for compliance?
Yes, the new rules under Cabinet Decision No. 34 of 2025 are already in effect as of Q2 2025. There is no grace period for implementation, so businesses and investors must:
Align their structures and reporting immediately
Ensure that any breaches of ownership or asset thresholds are addressed proactively
Start maintaining proper documentation for corporate tax purposes
Make timely registrations where required
Failing to comply may result in loss of exemptions, penalties, and increased tax liability.
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