The United Arab Emirates Ministry of Finance has issued Cabinet Decision No. of 2023, introducing additional conditions that investment funds must meet to qualify for corporate tax exemptions under Federal Decree-Law No. of 2022. This move aims to uphold the integrity of the corporate tax system while enhancing the UAE's appeal as an investment hub.
Under the new decision, investment funds, excluding Real Estate Investment Trusts , must primarily engage in investment business activities, with ancillary activities not exceeding 5% of their total annual revenue. Furthermore, the ownership interests held by a single investor and its related parties are capped at 30% for funds with fewer than ten investors, and 50% for those with ten or more investors. Additionally, qualifying funds must be managed by an investment manager employing at least three investment professionals, and investors must not control the fund's day-to-day operations. To provide flexibility, the diversity of ownership criteria will be non-binding for the first two financial years of a fund's establishment, provided there is a substantiated intent to diversify ownership subsequently.
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