Cabinet Decision No. 34, released this weekend, introduces a comprehensive new framework for Qualifying Limited Partnerships (QLPs). It applies exclusively to partnerships with legal personality, as partnerships without legal personality are already treated as fiscally transparent by default under Article 16 of the Corporate Tax Law.
One of the key questions that arises in practice is whether a Limited Partnership (LP) that holds an investment fund license can still benefit from tax exemption as a Qualifying Limited Partnership (QLP), even if it fails to qualify as a Qualifying Investment Fund (QIF). The answer is nuanced but affirmative in many cases.
Understanding the Difference: QIF vs. QLP
In 2025, two distinct exemptions apply to fund structures:
- Qualifying Investment Fund under Article 10(1)(d) of Federal Decree-Law No. 47 of 2022 and Article 2 of the Cabinet Decision No. 34 of 2025.
- Qualifying Limited Partnership under Article 5 of Cabinet Decision No. 34 of 2025.
While Qualifying Investment Fund are regulated funds that must meet specific requirements on investor concentration, business activity, and income types (especially relating to immovable property), Qualifying Limited Partnership are a narrower category. They are limited partnerships established for the sole purpose of collective investment and are subject to different conditions.
QIF vs QLP Exemption Eligibility
|
Criteria |
Qualifying Investment Fund (QIF) |
Qualifying Limited Partnership (QLP) |
|
Legal Basis |
Article 10(1)(d) of Corporate Tax Law + Cabinet Decision No. 34 of 2025 |
Articles 1 and 5 of Cabinet Decision No. 34 of 27 March 2025 |
|
Entity Type |
Any legal form (funds, REITs, LLPs, LPs) |
Limited Partnership with legal personality |
|
Purpose |
Investment activity with fund regulation |
Sole purpose of collective investment |
|
Legal Framework |
Any recognized fund regime |
Must be established under framework in force before 1 June 2023 (e.g. ADGM LP regime) |
|
Regulatory Status |
Must be a licensed investment fund |
May or may not be licensed — no licensing requirement |
|
Ownership Conditions |
<30% held by a single investor (if <10 investors), or <50% (if ≥10 investors) |
No specific ownership thresholds |
|
Principal Activity |
Investment Business only; other activities ≤5% of revenue |
Same |
|
UAE Real Estate Income |
Permitted, with specific rules for REITs and investor tax adjustments |
Not permitted at all — strict exclusion |
|
Tax Avoidance Purpose |
Not a stated condition, but implied |
Explicitly required to prove non-avoidance |
QIF Ineligibility: Common Reason
An LP with an investment fund license may fail to qualify as a Qualifying Investment Fund if it exceeds the 30% (or 50%) investor concentration threshold.
However, in cases where such LP was:
- ‘established … under a legal framework that explicitly allowed for the establishment of such partnerships on or before 1 June 2023’, and
- compliant with investment business activity thresholds,
it may still qualify for exemption as a Qualifying Limited Partnership.
Conditions for QLP Exemption
Article 1 and Article 5 of the Decision No. 34 allows a limited partnership with legal personality to apply for QLP exemption if all the following are met:
- Sole Purpose – it must have been established solely for collective investment (Art. 1).
- Legal Framework – it must have been established under a legal framework in force before 1 June 2023, e.g., ADGM LP regime (Art. 1)
- Principal Activity – It must conduct only Investment Business; any ancillary activity must not exceed 5% of total revenue (Article 5, Clause 1(a) and Clause 4)
- No UAE Immovable Property Income - it must not earn income from any form of exploitation of immovable property located in the UAE (Art. 5(1)(c)).
- Genuine Business Purpose – the partnership must not be formed for the principal purpose of avoiding tax (Art. 5(1)(c)).
When these conditions are satisfied, the LP can apply for exemption. Once granted, the entity is not subject to Corporate Tax at the LLP level. Instead, the tax obligation shifts to the investors, who must include their prorated share of the LP’s net income in their own tax returns, subject to applicable exemptions.
Consequences of Failing QIF Conditions
Holding an investment fund license does not automatically make a limited partnership a Qualifying Investment Fund. Regulatory status and tax status are independent concepts. However, the fact that the LP holds an investment fund license supports rather than contradicts the requirement that the partnership be established for the sole purpose of collective investment, which is essential for qualification as a Qualifying Limited Partnership.
For example, an ADGM LP is licensed as an investment fund but fails the QIF exemption due to ownership concentration (e.g., one investor holds 40% and there are fewer than 10 investors).
However:
- It only does Investment Business.
- It does not own UAE property.
- It was established under the framework existed before June 2023 solely for collective investment.
- It has not elected to be treated as a fiscally transparent entity.
It can apply for exemption as a QLP under Article 5.
Summary
In our view, an LP with legal personality and an investment fund license that fails to meet the QIF exemption can still qualify for exemption as a QLP, provided it strictly adheres to the conditions outlined in Cabinet Decision No. 34. This provides a valuable fallback for investment-focused LPs that are not structured or diversified enough to meet the broader QIF criteria but still operate within a tightly controlled investment business framework.
For fund managers, legal advisors, and compliance teams, understanding this distinction is critical when structuring LPs for tax efficiency under the UAE Corporate Tax regime.
The disclaimer
Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.
The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here.
You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.
