Foreign investors in UAE-based qualifying investment funds (QIFs) and real estate investment trusts (REITs) now have greater clarity on their tax exposure, thanks to recent Cabinet Decisions.
Under the UAE Corporate Tax Law, non-resident juridical investors are taxed only if they have a “nexus” in the UAE — such as earning income from local real estate. However, the latest updates (Cabinet Decisions 34 & 35 of 2025) ensure that passive investments in compliant QIFs or REITs do not trigger tax liability.
Key Highlights:
No Tax Nexus: Foreign investors in compliant QIFs/REITs are not considered to have a taxable presence in the UAE.
Conditions to Maintain QIF/REIT Status:
Max 10% in real estate (for QIFs)
80% of income distributed within 9 months
Ownership diversity maintained
Triggers for Tax Nexus:
Distribution date (if 80% rule is met)
Acquisition date (if conditions are not met)
Ownership diversity breaches (with 90-day grace period)
Protective Measures:
Even if a fund breaches certain conditions:
Only 80% of real estate income is taxed (if 10% threshold exceeded).
Other investors retain benefits if breach is due to one investor.
Market Outlook:
The UAE’s fund ecosystem is growing fast — with 33 licensed fund managers and 58 local funds expected soon. Active REITs like Emirates REIT and ENBD REIT show strong investor interest.
Conclusion:
The latest reforms offer a clear roadmap for foreign investors, helping reduce compliance risks and making the UAE a more attractive, low-tax destination for fund-based investments.
