WHAT GLOBAL INVESTORS SHOULD KNOW ABOUT THE UAE’S LATEST CORPORATE TAX DECISION

The UAE has progressively aligned its corporate tax framework with international best practices, enhancing transparency while reinforcing its appeal as an investment-friendly jurisdiction. In its latest move, the Ministry of Finance issued Cabinet Decision No. 35 of 2025, introducing clear criteria for determining when non-resident juridical investors in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs) are subject to UAE Corporate Tax.

This decision makes a significant step in refining the country's regime, not by expanding the tax net indiscriminately, but by precisely defining when taxability arises, thereby reducing compliance burdens and preserving the UAE’s competitiveness as a global investment destination.

What Is The New Tax Law About?

The newly issued Cabinet Decision No. 35 of 2025 replaces the earlier Cabinet Decision No. 56 of 2023. It builds on Cabinet Decision No. 34 of 2025, which defines the qualifying criteria for investment funds and partnerships.

The key objective? To determine the limited circumstances under which a non-resident juridical investor in a QIF or REIT is considered to have a “nexus” in the UAE, thereby triggering corporate tax liability.

This distinction matters because, outside the clearly defined conditions non-resident investors in such funds will not be considered as having a taxable presence in the UAE. That’s a powerful assurance for foreign investment entities seeking predictability and favorable tax conditions.

Understanding the New Rule: What Defines Tax Liability for Non-Residents

Under the new framework, a non-resident investor in a QIF or REIT is only deemed to have a nexus in the UAE in these specific scenarios:

1. For QIFs (Qualifying Investment Funds):

• If the QIF distributes at least 80% of its income within nine months of the end of its financial year, a nexus is created on the date of dividend distribution.

• If the QIF fails to meet the 80% distribution requirement, the nexus arises on the date the ownership interest is acquired.

• A failure to meet the diversity of ownership conditions in the relevant tax period also triggers a taxable nexus.

2. For REITs (Real Estate Investment Trusts):

• If the REIT distributes 80% or more of its income within the nine-month timeframe, a nexus arises on the dividend distribution date.

• If it fails to meet this threshold, the nexus arises on the date of acquisition of the ownership interest.

Outside of these scenarios, non-resident juridical investors are not considered to have a nexus, and therefore, remain outside the scope of UAE Corporate Tax.

What It Means For Non-Resident Investors

This Cabinet Decision is not a tax expansion but a clarification. It reassures global investors by precisely outlining when corporate tax obligations arise for foreign entities investing through QIFs and REITs.

The implications are significant:

• Compliance Simplicity: Investors now know when they are subjected to tax and when they are not.
• Tax Planning Efficiency: Structures can be optimized to align with the defined thresholds
• Reduced Regulatory Ambiguity: Foreign entities can operate with greater legal and financial confidence.

In essence, this is not a tax grab, it's a strategic refinement that makes the UAE more attractive to institutional investors and fund managers.

Benefits For The Non-Resident Investor Group

Contrary to common assumptions about new tax laws, this decision is pro-investor in spirit and execution. Here’s why it benefits foreign investors:

• Limited Tax Exposure: Taxability is strictly confined to defined instances.
• Strategic Flexibility: Funds that meet distribution thresholds can avoid triggering a taxable nexus.
• Encourages Compliance Through Clarity: Investors are provided clarity in the country's tax laws, making compliance much easier.

The ICB Perspective

From our vantage point as tax advisors in the UAE, this Cabinet Decision is a welcome clarification. It supports the government’s vision of offering a globally competitive, transparent, and low-friction tax regime.

We expect

• Investors will now be more inclined to use QIFs and REITs for UAE real estate exposure, knowing that their tax position is clearly defined.
• Fund managers will proactively design structures to comply with the 80% distribution rule and ownership diversity to avoid taxable presence.
• The demand for tax advisory and consultancy services will grow as international investors seek to optimize under these updated conditions.

This move reinforces the UAE’s reputation as a tax-efficient, well-regulated market with a pro-investor philosophy.

How The UAE Continues To Support Investment Opportunities

The UAE has always prioritized ease of business and economic competitiveness. The focus is on creating a low-tax, high-transparency environment that aligns with international expectations while serving domestic growth.

Here’s How:

• Preserving investor confidence by limiting arbitrary or blanket tax impositions
• Demonstrating global tax compliance without compromising local competitiveness.

What Global Investors Should Do Next?

If you’re a non-resident investor, here’s what we recommend:

• Review Fund Structures: Ensure compliance with income distribution timeliness and ownership diversity.
• Monitor Tax Trigger Events: Know when and what might trigger and create a nexus.
• Consult UAE Tax Experts: Tax experts like ICB who understands local nuances is essential to remain complaint and efficient.
• Stay Updated: Follow further guidance issued by the Ministry of Finance and Federal Tax Authority

Conclusion

Cabinet Decision No. 35 of 2025 brings welcome clarity to the tax obligations of non-resident juridical investors in QIFs and REITs. It’s not about broadening the tax base, it’s about setting well-defined boundaries for when taxation applies.

This thoughtful, investor-conscious move is yet another sign that the UAE is building a sustainable, transparent, and opportunity-rich investment environment. For global investors, this is not just a regulatory update but a green light for strategic engagement with confidence.