Cabinet Decision No. 35 of 2025 on the Determination of a Non-Resident Person's Nexus in the State
Effective Date:
1 January 2025
Details: This Decision repeals and replaces Cabinet Decision No. 56 of 2023 and sets out the updated criteria under which a non-resident person is considered to have a nexus in the UAE, particularly in relation to income derived from immovable property. It reflects a broader interpretation and enhances enforcement measures.
Key Provisions:
- Expanded Nexus Criteria: Nexus is deemed established where a non-resident derives income from the sale, disposal, letting, sub-letting, use, or other forms of exploitation of immovable property in the UAE.
- Link to Income Adjustments: Nexus is also deemed established when income is adjusted under Articles 3(2), 3(5), or 4(3) of Cabinet Decision No. 34 of 2025, which relate to determining taxable income from UAE immovable property.
- Anti-Avoidance Rule: Transfers of rights in rem that are artificial or lack commercial justification will not prevent the establishment of a nexus and will be treated as abusive arrangements aimed at avoiding tax.
- Corporate Tax Registration Requirement: Where a nexus is established under this Decision, the non-resident person must register for Corporate Tax in accordance with Article 51 of the Corporate Tax Law.
- Transitional Provision: This Decision is effective from 1 January 2025. Cabinet Decision No. 56 of 2023 remains in force for prior tax periods.
Impact: The new Decision significantly widens the scope of what constitutes a nexus for non-residents, particularly with regard to income from UAE immovable property, and aligns it with recent amendments to the Corporate Tax regime. It strengthens the FTA's ability to tax cross-border real estate-related income.
Compliance Tips:
- Non-residents engaged in UAE real estate activities should reassess their potential tax exposure under the new nexus rules.
- Legal arrangements involving UAE property rights should be reviewed for commercial substance.
- Ensure corporate tax registration where required to avoid penalties.
Applicability: All non-resident persons deriving income from UAE immovable property or subject to adjustments under Cabinet Decision No. 34 of 2025.
Ministerial Decision No. 88 of 2025 on the Commentary and Agreed Administrative Guidance
Effective Date:
1 January 2025
Details: This Decision adopts the OECD Commentary and Agreed Administrative Guidance for the purpose of implementing Cabinet Decision No. 142 of 2024 regarding the Top-Up Tax on Multinational Enterprises (MNEs), in line with Pillar Two of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
Key Provisions:
Adoption of OECD Documents: The Decision formally adopts several key OECD documents, including:
- The Consolidated GloBE Commentary (2023–2024)
- Administrative Guidance (June 2024, Jan 2025)
- Guidance on Articles 8.1.4, 8.1.5, and 9.1
- GloBE Information Return specifications
Binding Interpretative Status: These commentaries and guidance documents are to be used for interpreting and applying the UAE's Top-Up Tax rules as imposed under Cabinet Decision No. 142 of 2024.
Impact: This Decision provides legal certainty for the application of Pillar Two rules in the UAE and aligns domestic tax administration with international norms. It reinforces the UAE's commitment to OECD BEPS compliance and ensures MNEs can rely on consistent international interpretations.
Compliance Tips:
- MNEs subject to the Top-Up Tax should review the adopted OECD guidance and ensure internal policies are aligned.
- Prepare for the GloBE Information Return obligations using OECD formats.
Applicability: All UAE-headquartered or UAE-based constituent entities of multinational enterprise groups within scope of the Top-Up Tax under Cabinet Decision No. 142 of 2024.
Federal Tax Authority Decision No. 7 of 2025 on Audited Aggregated Financial Statements for Tax Groups
Effective Date: Tax periods beginning on or after 1 January 2025
Details: This Decision supplements Ministerial Decision No. 301 of 2024 and mandates that Tax Groups must submit audited Aggregated Financial Statements, aligning financial reporting practices with international auditing and accounting standards.
Key Provisions:
Audit Requirement: Tax Groups must prepare and submit audited Aggregated Financial Statements compiled under IFRS or IFRS for SMEs and audited in accordance with International Standards on Auditing (ISA).
Definition of Aggregated Financials: Standalone financial statements of each group member are aggregated, excluding inter-group transactions and fair value adjustments unless permitted under limited circumstances.
Consistency and Currency: Aggregated Financial Statements must be:
- Presented in UAE Dirhams
- Based on uniform accounting policies
- Prepared before any intra-group eliminations
Disclosures: Full financial disclosures are required, including:
- Statement of profit or loss
- Statement of financial position
- Statement of changes in equity
- Statement of other comprehensive income
- Aggregation methodology and accounting policies used
Deadline: Aggregated financials must be submitted within 9 months of the end of the relevant tax period.
Exiting Members: Entities leaving a Tax Group must retain asset/liability values used for tax purposes unless prohibited by accounting standards.
Impact: This Decision imposes significant compliance obligations on Tax Groups, promoting greater transparency and auditability. It also prevents manipulation of consolidated figures by requiring granular, member-level reporting.
Compliance Tips:
- Tax Groups should immediately engage auditors to prepare Aggregated Financial Statements under the specified frameworks.
- Ensure accurate intra-group transaction tracking and clear documentation of aggregation processes.
Applicability: All entities registered as Tax Groups under the UAE Corporate Tax Law.
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.
