The UAE Ministry of Finance has introduced new tax laws granting corporate tax exemptions to Qualifying Investment Funds (QIFs) and certain limited partnerships.
Under the new rules, income earned by QIFs will be exempt from UAE Corporate Tax if key conditions are met, including a maximum 10 percent threshold for real estate assets and compliance with ownership diversity requirements.
The regulations allow QIFs a grace period to rectify ownership diversity breaches after the initial two-year qualification window. However, such breaches must not exceed 90 cumulative days annually and cannot occur during liquidation.
If ownership diversity conditions are violated, the exemption is lost only for the non-compliant investors, provided the fund meets all other criteria. Additionally, if a QIF exceeds the 10% real estate threshold, only 80% of its real estate income becomes taxable.
For foreign juridical investors in REITs and QIFs, those that meet defined conditions and distribute at least 80% of income within nine months after the financial year-end will only be required to register for Corporate Tax at the time of dividend distribution.
The update also allows certain limited partnerships to obtain tax-transparent status, aligning the UAE’s tax framework with international standards.
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