UAE issues rule on non-residents’ nexus for corporate tax purposes
The new regulation clarifies when non-resident investors in QIFs and REITs are subject to corporate tax under the country’s tax law
The Ministry of Finance has issued Cabinet Decision No 35 of 2025, establishing guidelines for determining a non-resident person’s nexus in the UAE for the purposes of the country’s corporate tax law.
The new decision, which replaces Cabinet Decision No 56 of 2023, clarifies when a non-resident juridical investor in a qualifying investment fund (QIF) or real estate investment trust (REIT) is deemed to have a nexus in the UAE, thus becoming subject to taxation under Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses.
This follows the earlier issuance of Cabinet Decision No 34 of 2025, which focused on Qualifying Investment Funds and Qualifying Limited Partnerships.
Clarity for non-resident juridical investors involving corporate tax
Under the new decision, a nexus for a non-resident juridical investor in a QIF will arise under two circumstances. If the QIF distributes 80 per cent or more of its income within nine months from its financial year-end, the nexus is established on the date of the dividend distribution.
Alternatively, the nexus arises on the date the ownership interest is acquired if the QIF fails to distribute at least 80 per cent of its income within the same period.
Additionally, a nexus will also be created if the QIF fails to meet the diversity of ownership conditions during the tax period in which the failure occurs.
For REITs, a similar rule applies: a nexus is established either on the date of the dividend distribution, if 80 per cent or more of income is distributed within nine months from the financial year-end, or on the date of ownership acquisition if the REIT does not distribute at least 80 per cent of its income within the specified timeframe.
The decision provides clarity on when non-resident juridical investors in QIFs or REITs will be considered to have a taxable presence in the UAE, reducing compliance burdens for foreign investors.
Other than the above cases, non-resident juridical investors exclusively investing in QIFs and/or REITs will not be deemed to have a taxable presence in the country.
The issuance of this decision underscores the UAE government’s ongoing commitment to maintaining an attractive and competitive investment environment, while ensuring compliance with its tax regulations.
