Cabinet Decision No. (81) of the year 2023 has been issued.
The Ministry of Finance in the United Arab Emirates (UAE) has announced the issuance of Cabinet Resolution No. (81) of 2023, which relates to determining additional conditions for qualified investment funds according to the provisions of Federal Decree No. (47) of 2022, regarding corporate and business taxation in Dubai, UAE.
Objectives of the decision
This decision aims to set the conditions that investment funds must meet to be eligible for the benefits of corporate tax exemption. This decision contributes to enhancing the sustainability of the corporate tax system and strengthening the UAE’s position as a competitive investment center.
Additional conditions for exempting investment funds from corporate tax.
Under this decision, the additional requirements for exempting investment funds from corporate tax – except for income-generating real estate investment trusts (REITs) – include a set of points.
- The fund’s main investment activities should represent the majority of its activities, where supportive or incidental activities must not exceed 5% of its total annual revenue.
- Ownership shares of a single entity or related parties should not exceed 30% or 50%, depending on the number of investors in the fund.
- The fund must be supervised by an investment manager who appoints no fewer than three investment experts.
- Investors cannot control the daily management of the fund.
To enhance flexibility in the corporate tax system, diversification of ownership is not required for investment funds – with the exception of income-generating real estate investment trusts (REITs) – during the first two fiscal years of fund establishment, unless evidence of an intention to achieve ownership diversification after this period is available.
Conditions for exemption for Real Estate Investment Trusts (REITs)
- For Real Estate Investment Trusts (REITs), the exemption conditions require that the real estate assets – excluding land – exceed AED 100 million.
- Additionally, at least 20% of the capital must be traded, or it must be fully owned by two or more institutional investors.
- The REITs must also maintain an average of at least 70% real estate assets annually.”
"The additional conditions stated in the new decision by the Cabinet are clear and easy to apply, and they contribute to maintaining the UAE's position as a leading investment center, striking a balance between competitiveness and sustainability and the integrity of the corporate tax system."
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