New tax measures introduced in UAE

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The UAE Ministry of Finance has unveiled new regulations aimed at boosting economic growth by attracting more investments through the introduction of favourable tax and regulatory changes for Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships.

Under the new rules, investors in QIFs will benefit from a preferential tax regime. Income derived from such funds will be exempt from UAE Corporate Tax, provided they meet certain conditions, including a real estate asset threshold of 10% and ownership diversity requirements.

In a move to increase flexibility, the new regulations allow QIFs a grace period to correct breaches in ownership diversity beyond the initial two-year period. However, these breaches must not exceed 90 cumulative days per year or occur during liquidation.

The Ministry further clarified that violations related to ownership diversity will impact only the breaching investors, provided other exemption criteria are satisfied. Additionally, if a QIF exceeds the real estate asset threshold, only 80% of its real estate income will be subject to taxation, aligning it with the treatment of Real Estate Investment Trusts (REITs).

The new rules also simplify administrative procedures for foreign investors. Juridical foreign investors in REITs and QIFs who meet specific conditions and distribute 80% or more of their income within nine months of the financial year-end will only need to register for Corporate Tax on the date of dividend distribution, streamlining compliance.

In a bid to align with international best practices, the decision introduces provisions for certain limited partnerships to obtain tax-transparent status, ensuring the UAE’s commitment to global tax standards.

This regulatory update is seen as a key step in cementing the UAE’s position as a leading global investment hub, offering competitive tax advantages and an efficient regulatory environment to attract foreign capital.