The UAE Ministry of Finance has issued Cabinet Decision No. 35 of 2025, introducing a new mechanism to determine when a non-resident juridical person gains a taxable presence (nexus) in the UAE through investments in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs).
This decision replaces the earlier Cabinet Decision No. 56 of 2023, offering clearer guidance under Federal Decree-Law No. 47 of 2022 concerning corporate tax on businesses and entities. The move is intended to streamline foreign investor obligations and strengthen the UAE’s appeal as a tax-efficient investment hub.
🔗 Source: UAE Ministry of Finance – Official Announcement
When Does a Non-Resident Investor Trigger UAE Taxation?
According to the new Cabinet Decision, a non-resident juridical person investing in a QIF or REIT may be considered to have a “nexus” in the UAE, meaning they could be liable for corporate tax, under specific circumstances:
- If the fund distributes at least 80% of its income within nine months after its financial year-end, a nexus is established on the dividend payout date.
- If the fund fails to meet the 80% distribution requirement, the nexus applies from the date the investment stake is acquired.
- A nexus is also recognized if the QIF does not satisfy the diversity of ownership criteria during a given tax period.
- The same principles apply: nexus occurs either on the dividend distribution date (if 80% income is distributed timely), or on the date of acquiring ownership, should the REIT fall short of that threshold.
Notably, non-resident entities that invest solely in QIFs or REITs — and do not breach the specified conditions — will not be treated as having a taxable presence in the UAE. This exemption lowers the compliance load for global investors and reinforces the nation’s strategy to attract institutional capital through regulatory clarity.
Strategic Benefits and Broader Policy Context
The updated rules align with global tax transparency standards while maintaining investor-friendly policies. By explicitly stating when tax obligations apply, the UAE continues to position itself as a destination for capital flows, especially within its booming real estate and investment fund sectors.
This update also follows the recently issued Cabinet Decision No. 34 of 2025, which defines the characteristics of Qualifying Investment Funds and Limited Partnerships under the corporate tax framework.
A Ministry spokesperson commented,
“This decision builds investor confidence by offering greater predictability in tax treatment.”
With this regulatory clarification now in effect, international investors can better assess their tax exposure while engaging with UAE-based investment vehicles. The UAE government’s broader goal remains clear: encourage foreign investment while aligning with international best practices in tax governance.
