Investment Funds and Investment Managers

Frequently Asked Questions

An investment fund is an entity whose primary function is the issuance of investment interests to raise money, pool investor funds, or create a joint investment fund to permit the holder of such an investment interest to reap the benefits from the profits or gains from the entity’s acquisition, holding, management, or disposal of investments, in line with the applicable laws.

  • Investment funds are often organized as limited partnerships to preserve tax neutrality for their investors. This tax neutrality follows from the reality that the majority of nations recognize limited partnerships as transparent for domestic and foreign tax purposes, putting investors in the fund in the same tax status as if they had invested directly in the fund’s underlying assets.
  • Investment funds set up as partnerships, unit trusts, or other unincorporated entities are as fiscally transparent as “Unincorporated Partnerships” for UAE CT.
  • Investment funds structured as corporate entities, such as Real Estate Investment Trusts that apply as a “Taxable Person” for UAE CT purposes have the right to apply to the Federal Tax Authority to be exempt from UAE CT if the requirements are met

A recognized stock exchange covers:

  • UAE: Any stock exchange formed in the UAE and approved and regulated by the pertinent competent authorities (for example, Nasdaq Dubai, Abu Dhabi Securities Exchange, or Dubai Financial Market);
  • Foreign: Any stock exchange formed outside the UAE that is of equal standing to the UAE stock exchange in the UAE.

Yes, Investment fund managers are liable to UAE CT on their income if they are UAE residents or if conducting business there through a permanent establishment.

For the investment fund exemptions, the fund or the manager must be subject to regulatory oversight, but not both.

When specified requirements are met, regulated UAE investment managers are permitted to offer discretionary investment and asset management services to foreign funds and clients without establishing a local permanent establishment for international investors in the UAE. It gets to be known as the “Investment Manager Exemption”.

A UAE-based investment manager should not create possible UAE residency for CT purposes for the foreign investment fund/investment vehicle it manages where the conditions of the Investment Manager Exemption are met.

The Federal Tax Authority will consider requests from investment funds that employ wholly-owned UAE investment holding companies and other Special Purposes Vehicles to deploy money and hold investments to get the advantage of the UAE CT exemption granted to the investment fund.

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