UAE Introduces New Conditions for Corporate Tax Exemptions

The Ministry of Finance (MoF) of the UAE has made a significant announcement regarding a new Cabinet decision that outlines additional conditions for investment funds seeking exemptions from corporate tax

Read also: UAE's Tabreed Reports 61% Rise in First-Half Profit Amid Expansion

New Cabinet Decision Introduces Exemption Conditions for UAE Investment Funds

The decision, revealed on Saturday, aims to provide clarity and guidance to ensure a smooth application of the exemption criteria. The exemption conditions vary based on the type of investment funds, excluding Real Estate Investment Trusts (REITs), and are designed to foster a favorable environment for investment in the country.

Conditions for Investment Funds (excluding REITs)

According to the newly introduced Cabinet decision, investment funds, other than REITs, must meet specific criteria to be eligible for corporate tax exemptions. Firstly, the investment fund must be primarily engaged in investment business activities, with ancillary or incidental activities not exceeding 5 percent of their total annual revenue. Additionally, the share of ownership interests in the investment fund held by a single investor and its related parties should not exceed 30 percent or 50 percent, depending on the number of investors in the fund. Furthermore, the investment fund must be overseen by an investment manager employing a minimum of three investment professionals, and day-to-day management of the fund should not be controlled by investors. To enhance flexibility, the diversity of ownership criteria for investment funds (excluding REITs) will be non-binding during the fund's first two financial years, provided there is a well-substantiated intent to diversify ownership after this initial period.

Exemption Conditions for Real Estate Investment Trusts (REITs)

For Real Estate Investment Trusts (REITs), the exemption conditions are equally stringent and well-defined. To qualify for corporate tax exemptions, a REIT must have real estate assets, excluding land, exceeding Dh100 million in value. Additionally, a minimum of 20 percent of the REIT's share capital must be publicly listed or wholly owned by two or more institutional investors. Moreover, the REIT is required to maintain an average real estate asset percentage of at least 70 percent annually, ensuring that the majority of its portfolio remains invested in real estate assets.

Strengthening the UAE's Investment Hub Status

Younis Haji Al Khoori, undersecretary of the MoF, expressed confidence in the clarity and simplicity of the additional conditions set forth by the new Cabinet decision. These conditions are instrumental in maintaining the UAE's position as a leading investment hub, attracting both domestic and international investors seeking tax exemptions for their investment funds and REITs. The MoF remains committed to fostering an investor-friendly environment, and individuals interested in the Corporate Tax Law and related decisions can access all relevant information on the ministry's official website (https://mof.gov.ae/tax-legislation/).

Follow Us on Follow Elmethaq at Google News