The UAE Ministry of Finance has issued Cabinet Decision No. 35 of 2025, which replaces Cabinet Decision No. 56 of 2023. This update clarifies how non-resident juridical persons can be regarded as having a “nexus” in the UAE for corporate tax purposes. It aligns with Federal Decree-Law No. 47 of 2022 and complements Cabinet Decision No. 34 of 2025 related to Qualifying Investment Funds (QIFs) and Limited Partnerships.
The government aims to simplify compliance while ensuring fairness in tax enforcement. By providing clear conditions for establishing a nexus, the decision supports a more transparent and investor-friendly environment. It also minimizes the risk of tax obligations being triggered without significant local economic ties.
Triggers for QIF and REIT Nexus Status
Under the new rules, a non-resident juridical investor in a QIF may be considered to have a nexus if specific conditions apply. For instance, if the QIF distributes 80% or more of its income within nine months from the end of its financial year, the nexus begins on the dividend distribution date. However, if this threshold is not met, the nexus applies from the date of ownership acquisition.
Additionally, when a QIF fails to meet the diversity of ownership requirement during a tax period, a nexus arises for that period. This condition ensures broader investor participation and limits excessive control by a few entities.
REITs follow the same principles. A nexus is established on the dividend date if the 80% income distribution requirement is met. If the REIT does not meet this threshold, the nexus begins on the date the ownership interest is obtained.
Simplified Compliance for Passive Investors
If a non-resident juridical investor holds interests exclusively in a QIF or REIT and none of the nexus-triggering conditions are met, they will not be subject to UAE tax. This key provision reduces tax filing burdens and enhances the country’s appeal to foreign investors.
Overall, this decision demonstrates the UAE’s continued focus on maintaining a competitive and well-regulated tax system. With well-defined guidelines, international investors can navigate their responsibilities with greater confidence and clarity.
Major Update: UAE Revises Tax Rules for Funds and Limited Partnerships
