UAE Issues Corporate Tax Rule on Non-Residents’ Nexus for Investment Funds and REITs

April 7, 2025 116

The UAE Ministry of Finance has issued Cabinet Decision No. 35 of 2025, which outlines specific conditions under which non-resident juridical investors in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs) are considered to have a taxable nexus in the country. The decision is part of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and replaces Cabinet Decision No. 56 of 2023.

Clarifying Corporate Tax Nexus for Non-Resident Investors

This decision provides much-needed clarity on when non-resident entities investing in QIFs or REITs become subject to corporate tax in the UAE:

  • A nexus is established if the QIF distributes 80% or more of its income within nine months of its financial year-end. The nexus is then considered active from the dividend distribution date.
  • If the QIF fails to meet this 80% income distribution threshold, the nexus arises on the ownership acquisition date.
  • A nexus will also be created if the QIF fails to meet the diversity of ownership condition during the tax period.
  • The same rules apply to REITs, ensuring consistent application across investment structures.

These rules aim to reduce compliance burdens for foreign investors while clearly defining when tax obligations arise in the UAE.

Maintaining an Attractive Investment Climate

Aside from the scenarios outlined above, non-resident juridical persons investing exclusively in QIFs or REITs will not be considered to have a taxable presence in the UAE. This maintains the country’s commitment to being a competitive, transparent, and investor-friendly jurisdiction.

The decision follows Cabinet Decision No. 34 of 2025, which clarified regulations on Qualifying Investment Funds and Limited Partnerships, further contributing to tax certainty and strategic economic development.

Conclusion

By defining when a taxable presence is established, Cabinet Decision No. 35 of 2025 enhances transparency for foreign investment funds, supports compliance with UAE corporate tax laws, and reinforces the country's position as a leading destination for global investment.