How are qualifying investment funds treated for Corporate Tax?

However, if the natural person holds the ownership interest as a Personal Investment, the net income of the Qualifying Investment Fund will not be treated as Taxable Income of the natural person.26 Example 1: A natural person investing in a Qualifying Investment Fund A natural person based in the UAE invests (using personal savings) in a Qualifying Investment Fund where he earns income from his investment. He does not require a Licence to make such an investment. The income derived by the natural person is Personal Investment income and accordingly is not subject to Corporate Tax. Non-Resident Persons For a Non-Resident Person that holds an ownership interest in a Qualifying Investment Fund, any net income that is not Exempt Income will be taken into account for Corporate Tax purposes if it is attributable to a Permanent Establishment of the NonResident Person in the UAE. An investor that is a Non-Resident Person and a juridical person that holds an ownership interest in a Qualifying Investment Fund which earns income from Immovable Property in the UAE, is earning income from that Immovable Property and, therefore, has a nexus in the UAE, as specified in Cabinet Decision No. 56 of 2023.27 The proportional part of net income from Immovable Property in the UAE shall be treated as Taxable Income of that investor. A Non-Resident Person that holds an ownership interest in a Qualifying Investment Fund may derive State Sourced Income, however, the current Withholding Tax rate on State Sourced Income is 0%.28 Exempt Persons If an Exempt Person holds an ownership interest in a Qualifying Investment Fund, it will not be subject to Corporate Tax on the net income from the Qualifying Investment Fund. However, if an Exempt Person is treated as a Taxable Person in relation to certain Business or Business Activities under Article 4(2) of the Corporate Tax Law, such an Exempt Person shall treat any net income from a Qualifying Investment Fund (that is not Exempt Income) as Taxable Income only to the extent that it holds an 26 Article 2 of Cabinet Decision No. 49 of 2023. 27 Article 2 of Cabinet Decision No. 56 of 2023. 28 Article 12(3)(b) of the Corporate Tax Law. Corporate Tax Guide | Investment Funds and Investment Managers | CTGIFM1 22

A private pension fund may apply to the Authority to be exempt from Corporate Tax Law where all of the following conditions are met: 1. The fund comprises a pool of assets which have been assigned by law or contract as pension plan assets or the acquisition of these assets has been financed by or with the use of contributions to a pension plan for the exclusive purpose of financing the pension plan benefits. 2. The fund grants pension plan members or beneficiaries a right or other contractual claim or entitlement, against its assets or earnings. 3. The income of the fund solely comprises income as specified in the relevant decision. 4. The fund must have an Auditor.31 Example 9: A Pension Fund established in the UAE Company Y is a private pension fund established in Umm Al Quwain that meets the conditions to be exempt from Corporate Tax. The fund would like to make an application to the FTA to be treated as an Exempt Person. Company Y will be required to register for Corporate Tax as the fund will be considered a Taxable Person for Corporate Tax purposes until such time the application to be exempt for Corporate Tax is approved by the FTA. Once Company Y is registered for Corporate Tax, it can make an application to the FTA to be treated as an Exempt Person provided all the relevant conditions are met. Qualifying Investment Funds Whilst there are various structures that collective investment funds may take, the term investment fund refers to a contractual arrangement or juridical person whose primary purpose is to pool investor funds and invest such funds in accordance with a defined investment policy. Regardless of the type of investment fund, the Corporate Tax Law seeks to ensure the tax neutrality of investment funds so that investors, whether domestic or foreign, are in the same or a similar tax position as if they had invested directly in the underlying assets of the fund. In recognition of the neutrality principle, an investment fund can make an application to the FTA for exemption from Corporate Tax as a Qualifying Investment Fund where 31 Article 2 of Ministerial Decision No. 115 of 2023. Corporate Tax Guide I Registration of Resident Juridical Persons I CTGRJP1 22