The UAE continues to refine its Corporate Tax (CT) framework to maintain its status as a leading investment and asset-management hub. One of the most significant recent developments is the introduction of Cabinet Decision No. 34 of 2025, which updates and expands the rules for funds seeking exemption under the Corporate Tax Law.

This update affects Qualifying Investment Funds (QIFs), Real Estate Investment Trusts (REITs), and — for the first time — Qualifying Limited Partnerships (QLPs). The changes apply to tax periods beginning on or after 1 January 2025 and are designed to provide more clarity, flexibility and investor-friendly treatment.

1. Introduction of Qualifying Limited Partnerships (QLPs)

Earlier regulations focused solely on investment funds and REITs. The 2025 update now formally recognizes QLPs as eligible for CT exemption, provided they meet specific criteria.
This creates new opportunities for fund sponsors and investors looking to structure private equity, venture capital, and similar partnership-based funds in the UAE.

2. Streamlined Conditions for QIFs

The revised framework simplifies several compliance requirements, making it easier for funds to qualify:

✓ No rigid requirement on the number of investment professionals

Previous rules imposed specific staffing expectations. These have now been removed, giving fund managers more operational flexibility.

✓ More flexible ownership-diversity rules

Under prior rules, failing the ownership-diversity test could disqualify the fund entirely.
Under the new framework, such a breach generally does not disqualify the fund. Instead, the tax implications may shift to particular investors who triggered the breach — a more balanced and investor-friendly approach.

✓ Enhanced transparency requirements

Funds must now provide investors with complete and accurate information necessary for determining their own tax positions.
This is a notable compliance addition and requires better data management and reporting processes.

3. Updated Tax Treatment for Investors

For QIFs and QLPs

• The fund itself is exempt from Corporate Tax once all conditions are met.
• Distributions made by the fund are typically excluded from the investor’s taxable income.
• However, large investors (holding significant ownership or control) may be required to include a proportionate share of the fund’s net income in their tax calculations. This prevents abuse of the exemption for closely held structures.

For REITs

REITs also continue to benefit from exemption, but with specific rules:

• Income from UAE immovable property is taxable to investors at 80% of the income, on a proportional basis.
• Distribution timing matters — REITs that distribute income within nine months of the financial year-end may offer more favourable outcomes for certain exiting investors.

4. What These Updates Mean for Fund Managers and Investors

The 2025 update brings substantial advantages:

• More accessible fund-exemption regime

The inclusion of QLPs and relaxed operational criteria encourage more fund setups in the UAE.

• Better investor certainty

Clear rules on distribution treatment and inclusion thresholds give investors greater predictability.

• Need for stronger compliance systems

With increased transparency obligations, funds must strengthen internal reporting and data-sharing processes.

• Greater flexibility in structuring

Family funds, private funds, PE/VC partnerships and real-estate vehicles can now explore more efficient structures under the updated exemption regime.

5. Key Takeaways

• Cabinet Decision No. 34 of 2025 updates exemption rules for QIFs, REITs and QLPs.
• QLPs are now formally recognised and can benefit from CT exemption.
• QIF qualification requirements have been simplified, particularly around ownership diversity and operational criteria.
• Special rules apply to REITs, especially concerning UAE immovable-property income.
• Investors — especially those with significant ownership — must monitor whether they may be required to include a share of fund income in their taxable base.
• Funds must maintain strong transparency and documentation practices to remain compliant.

Before concluding…

The UAE’s updated exemption framework marks a major step forward in creating a world-class environment for investment funds and partnership-based investment vehicles. With clearer rules, reduced administrative burdens, and broader eligibility, fund managers and investors are better positioned to structure efficiently and operate confidently within the UAE’s evolving tax landscape.