UAE Corporate Tax was initiated under Federal Decree-Law No. 47 of 2022 and Cabinet Decision 34 of 2023, and it brings with it a new horizon for investment managers in the region. The law balances competitiveness with global transparency while assuring clarity to local and foreign investors alike.
Under the Corporate Tax UAE regime, businesses in the mainland are subject to a 9% Corporate Tax rate on taxable income exceeding AED 375,000. Profits below this threshold are taxed at 0%. Entities operating within free zones, such as DIFC or ADGM, may still qualify for the 0% Corporate Tax QFZP status if they meet specific conditions.
The Federal Tax Authority (FTA) ensures compliance by making sure that organizations adhere to UAE corporate tax rules 2025 and report their correct taxable income. This in return ensures taxable presence avoidance UAE and tax avoidance while providing tax certainty to foreign investors.
Example:
Accordingly, a fund management company based in DIFC managing international portfolios could experience, depending on structure and activities, 0% tax on qualifying free zone income but 9% tax on non-qualifying mainland income.
The Investment Manager Exemption UAE can be availed by a Qualifying Free Zone Person (QFZP), subject to requisite substance and regulatory requirements. Such exemption enables licensed fund managers and advisers in free zones like DIFC and ADGM to continue to be subject to 0% Corporate Tax on qualifying income.
To claim this advantage, the Free Zone investment manager must:
Investment Manager Exemption UAE protects foreign investor protection UAE from avoidable double taxation when the manager acts independently, and it also supports tax-free distributions for QIF investors in line with UAE practice with the global investment fund regimes.
Example:
An asset manager licensed in ADGM and providing discretionary portfolio management to offshore funds may claim Corporate Tax exemption UAE provided it acts independently and meets all the requirements under the substance regime.
According to the Investment Funds and Investment Managers (IFIM) Guide published by the FTA, the UAE recognizes Qualifying Investment Funds (QIFs) in order to further encourage a competitive asset-management industry.
A QIF benefits from advantageous tax treatment if the fund qualifies as a widely held collective investment vehicle and is subject to appropriate regulatory oversight. The fund must be managed by an approved or licensed investment manager providing investment management services on an arm’s-length basis.
Key conditions for Qualifying Investment Funds:
The fund is widely held and not restricted to related parties.
Investors are institutional or individual investors who want returns from pooled investments.
All brokerage services UAE or investment management activities are conducted under licensed supervision.
The manager of the fund has to get arm’s length remuneration for the services provided, so the issues related to tax avoidance UAE could be avoided.
Activities are in line with a well-articulated investment strategy (passive/active).
Example:
A DIFC-registered real estate investment fund with an independent management firm under DFSA rules may qualify as a QIF if 30 or more investors participate, none of them having controlling interest.
These conditions ensure that income derived from Qualifying Income UAE remains outside the corporate-tax base, provided the fund’s investment management services are genuinely independent and commercially driven.
The financial ecosystem in the UAE is highly regulated through three main authorities:
Securities and Commodities Authority UAE (for mainland entities)
DIFC Financial Services Authority (DFSA)
ADGM Financial Services Regulatory Authority (FSRA)
These bodies govern regulated investment managers UAE and ensure observance of ethical accounting practices, along with compliance with the laws and regulations. of UAE.
Investment managers dealings in commodities, real estate, debt obligations, warrants, foreign currency, futures, options, swaps, derivatives, and securities UAE, or even crypto-assets investment UAE, should show transparency and sufficient internal controls.
To maintain the exemption status, the firms must not create a permanent establishment (PE) UAE for their overseas clients. They should act as an independent agent UAE and not as a dependent representative.
Example:
A Dubai-based brokerage executing derivative trades for an offshore hedge fund will not create a PE UAE if it acts independently and is compensated on an arm’s length basis. This keeps the foreign investor outside the UAE tax net while maintaining full compliance.
Note:
Investment managers also have to adhere to the regulations concerning carbon emission credits transactions and similar asset-class reporting, when applicable, under UAE environmental and financial laws.
Even though the Investment Manager Exemption UAE comes with 0% taxation, the firm has to hold good documentation in place. The FTA may check:
Where such requirements are not satisfied, the business will either not be given QFZP status or will be charged the normal 9% Corporate Tax.
Example of Investment Manager Exemption in Practice
Example:
The DIFC-licensed fund manager operates USD 300 million worth of regional equity portfolios for offshore clients and is a DFSA-regulated company with full-time analysts based in Dubai, charging an annual management fee on an arm’s-length basis.
Because it acts independently, has adequate substance, and provides investment management services in the course of its ordinary business, it qualifies for the Investment Manager Exemption UAE. In such a case, foreign clients stay out of any UAE tax burden, while the manager has 0% Corporate Tax on the qualifying income.
Investment Manager Exemption UAE sits within the context of an overall strategy for attracting international capital into the country, coupled with sound corporate tax compliance in the UAE. Essentially, with specific UAE corporate tax rules 2025, oversight by the FTA, and clear definitions for QFZP and QIF, there is real tax certainty for foreign investors in the UAE.
Accordingly, investment managers compliant with the Corporate Tax Law UAE can practise with confidence in Dubai, DIFC, ADGM, and further afield, retaining their independence while meeting the regulatory requirements with 0% corporate tax to enhance further the UAE’s reputation as a world-class investment platform.
According to the UAE Tax Law, Investment Manager’s Exemption mainly provides that a regulated fund manager and advisor, even if operating from a free zone such as the DIFC or ADGM, shall be entitled to 0% Corporate Tax on respective qualify income, provided it acts independently and is able to show substance and regulatory requirements.
QFZP is a licensed entity in the UAE free zone deriving Qualifying Income UAE, meeting the substance requirements, and in compliance with Corporate Tax Law UAE. Qualified QFZPs can claim Corporate Tax exemption UAE on eligible activities.
To qualify, the Free Zone investment manager must:
Operate in the ordinary course of business under regulatory oversight UAE.
Work independently from investors.
Meet the UAE’s ownership diversity threshold requirements while maintaining adequate substance.
Qualifying Investment Funds (QIFs) are those regulated funds that are widely held and professionally managed on an arm’s-length basis. They also qualify for Corporate Tax exemption UAE in case they are managed by a Free Zone investment manager in accordance with the Investment Funds and Investment Managers (IFIM) Guide.
It gives tax certainty for foreign investors, prevents taxable presence avoidance, and provides foreign investor protection UAE, therefore allowing UAE to be a trusted global hub in asset management and investment funds.