What Are The Conditions To Be Met For The Investment Manager Exemption Under UAE CT?
The regulations to be complied with by the businesses have been increased from before in UAE. The businesses must be aware of the new corporate tax regime, whereby they can ensure that, they are on the same page with the FTA and file the returns on time. The investment managers must also be aware of the impact of CT on the investment fund and the investment managers, the exemptions available, the compliance requirements, the relief that can be applied for, etc. Professional assistance from the tax experts must be acquired in order to ensure proper compliance. In this blog, we have highlighted the conditions that are to be met for being eligible for the investment manager exemption under UAE corporate tax.
Need for Investment Manager Exemption
The main objective of the exemption being provided is to avoid the triggering of the UAE corporate tax liability for the foreign investors or foreign investment entity. This could also enable the investment managers to get into transactions with the foreign entities without triggering any permanent establishment. If such an exemption is not applicable, then it could result in triggering the permanent establishment in the UAE due to the activities of the manager for the non-resident. Hence, this investment manager exemption would be helpful for the foreign investors who are engaged with the transactions with any UAE-based investment manager or broker.
You can also read: What are Investment Funds and the Investment Manager as per UAE CT law?
Conditions To Be Met For Exemption
The list of the conditions that are to be met by the investment manager has been laid down by the FTA, which includes the following:
- The exemptions are available if the investment manager is engaged in the business related to investment management services or the brokerage services. The investment management services might include services like acting as a general partner, manager, investment manager, or adviser for an investment fund; management of any investment mandate of a single investor or group of investors; providing the investment opportunities to the investors; representing the investment fund during any contract negotiation; providing the strategy to investors; performing research related to investment; or any other related services for which the manager might hold the licence in the UAE.
- In order to be eligible for the investment manager exemption, the entities authorised by the competent authorities must meet the regulatory oversight condition; hence, they must be subject to the regulatory oversight condition for the exemption.
- Another requisite for the exemption is the ordinary course of business condition, where the transactions should be in the ordinary course of business of the manager. If such transactions or the activities are not related to the investment management or any brokerage business, then the exemption will not be available.
- Another mandatory requisite is the independent capacity condition, where the investment management must act in the independent capacity regarding the transactions.
- The next condition is the arms-length condition, according to which the investment manager are required to render the services to the non-resident person on an arm’s-length basis and must receive due compensation for the same in order to be capable of the exemption.
- The other condition to be met is the no other representation relation condition, according to which the investment manager must not represent the non-resident person regarding any other transactions or income that might be subjected to the corporate tax in order to be eligible for the exemption.
- Any further conditions that might be laid by the Cabinet must be met in order to be eligible for the investment manager exemption.
The above listed are the conditions that are to be met by the investment manager for the exemption.
Consequences Of Not Meeting The Conditions
If the investment manager exemption conditions are not met or if the exemptions are not available, then the activities of the respective investment manager must be evaluated to identify the creation of any permanent establishment for the non-resident person as per Article 14 of CT law.
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