A major update for international investors, the UAE Ministry of Finance has issued Cabinet Decision No. 35 of 2025 on the Determination of a Non-Resident Person's Nexus in the UAE for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This new Decision replaces the earlier Cabinet Decision No. 56 of 2023 and brings clarity to a critical area of the UAE's corporate tax framework.
The updated legislation is particularly relevant to non-resident juridical persons investing in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs). Cabinet Decision No. 35 of 2025 sets out the specific circumstances under which such investors will be considered to have a "nexus" in the UAE—meaning they may be subject to UAE Corporate Tax on income attributable to that nexus.
The determination of a non-resident person's nexus in the UAE is crucial for understanding corporate tax obligations. This article will explore the conditions under which a non-resident person establishes a nexus in the UAE, as outlined in the relevant legal documents, including Federal Decree-Law No. 47 of 2022 and Cabinet Decision No. 35 of 2025.
Key Conditions for Establishing Nexus
One of the primary conditions under which a non-resident person creates a nexus in the UAE is through deriving income from immovable property located in the state. According to Article 2 of Cabinet Decision No. 35 of 2025, a non-resident person has a nexus in the UAE if it derives income from any immovable property in the state. This includes income from the right in rem, sale, disposal, assignment of rights, direct use, letting (including subletting), and any other form of exploitation of immovable property.
Another condition for establishing a nexus is related to income adjustments as specified in Cabinet Decision No. 34 of 2025. Article 2 of Cabinet Decision No. 35 of 2025 states that a non-resident person will have a nexus in the UAE if its income is adjusted pursuant to Clause (2) of Article (3) or Clause (5) of Article (3) or Clause (3) of Article (4) of Cabinet Decision No. 34 of 2025. This includes scenarios where dividends are distributed by an investment fund that distributes 80% or more of its immovable property income within nine months from the end of the fund's financial year or the date of acquiring an ownership interest in an investment fund that does not distribute such a percentage within the specified timeline.
Artificial Transfer of Rights in Immovable Property
The UAE tax authorities are vigilant about artificial arrangements designed to obtain a corporate tax advantage. Article 3 of Cabinet Decision No. 35 of 2025 addresses the artificial transfer of rights in immovable property. If a non-resident person artificially transfers or disposes of its right in rem in any immovable property in the UAE to another person without a valid commercial or other non-fiscal reason reflecting economic reality, this will be considered an arrangement to obtain a corporate tax advantage under Clause (1) of Article (50) of the Corporate Tax Law.
Requirement to Register for Corporate Tax
A Non-resident person who establish a nexus in the UAE is required to register for corporate tax. Article 4 of Cabinet Decision No. 35 of 2025 mandates that a non-resident person with a nexus in the state must register for corporate tax with the Federal Tax Authority in accordance with Article (51) of the Corporate Tax Law.
Conclusion
For international investors, understanding when a non-resident person establishes a nexus in the UAE is important to remain compliant under the evolving corporate tax regime. Key triggers include deriving income from UAE immovable property, income adjustments under Cabinet Decision No. 34 of 2025, and transactions that may be viewed as artificial transfers of property rights. Where these conditions are met, non-resident entities are required to register and comply with UAE Corporate Tax obligations.
This latest Cabinet Decision indicates a clear and forward-looking approach by the Ministry of Finance—one that promotes clarity, consistency, and alignment with global best practices. It strengthens the UAE's position as a premier destination for cross-border investment by offering a transparent and stable tax framework.
The Decision is likely to have wide-reaching implications for fund managers, real estate investors, and foreign institutional investors with exposure to UAE-based assets. As the UAE continues to refine its corporate tax landscape, this is an ideal time for fund managers, real estate investors, and multinational groups to assess their exposure and ensure they are structured for both compliance and opportunity. With the right guidance, non-resident investors can confidently navigate the UAE's regulatory environment and unlock the full potential of doing business in one of the region's most dynamic markets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
