UAE announces new tax rules for non-resident investors
Tax liability linked to investment activities in qualifying funds and trusts
ABU DHABI: In a significant move for foreign investors, the Ministry of Finance has unveiled Cabinet Decision No. 35 of 2025, which establishes clear guidelines regarding the tax liabilities of non-resident juridical investors in the United Arab Emirates.
This new regulation, effective immediately, replaces the previous Cabinet Decision No. 56 of 2023 and is designed to delineate when these investors are deemed to have a nexus in the UAE under the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
Taxation nexus explained
Under the newly established rules, a nexus for non-resident juridical investors in Qualifying Investment Funds (QIFs) or Real Estate Investment Trusts (REITs) will be triggered under specific circumstances. If a QIF distributes 80 percent or more of its income within nine months from the end of its financial year, the nexus is established on the date of the dividend distribution. Conversely, if the QIF fails to meet this distribution threshold, the nexus arises on the date the ownership interest is acquired. A similar framework applies to REITs, ensuring consistency across investment vehicles.
The regulations also introduce conditions regarding ownership diversity. Should a QIF not satisfy these ownership requirements during the relevant tax period, a nexus will be established, thereby obligating the investor to comply with UAE tax laws. This decision marks a pivotal shift in the UAE's approach to taxation for foreign investors, aiming to enhance transparency and facilitate smoother compliance.
Enhancing investment clarity
Industry experts believe this resolution serves as a double-edged sword for foreign investors. While it offers certainty regarding tax obligations, it also highlights the UAE’s commitment to generating tax revenue without compromising its competitive edge in the global marketplace. The introduction of a corporate tax with a standard rate of 9 percent on profits exceeding Dh375,000 ($102,100) reflects the UAE’s efforts to align with international standards while attracting foreign capital.
Furthermore, the Ministry of Finance has clarified that businesses with annual turnover below Dh1 million will remain exempt from corporate taxation, a move designed to encourage entrepreneurship and investment in the region.
A competitive investment environment
The issuance of Cabinet Decision No. 35 of 2025 underscores the UAE government’s ongoing commitment to creating an attractive and competitive investment landscape. With these new tax guidelines, foreign investors can better understand their potential tax exposure, allowing for more informed decision-making when considering investments in the UAE.