The Ministry of Finance has issued Cabinet Decision No 35 of 2025, establishing clear guidelines for determining when a non-resident person has a nexus in the UAE for the purposes of the country’s corporate tax regime. This decision, which replaces Cabinet Decision No 56 of 2023, provides explicit criteria for non-resident juridical investors in qualifying investment funds (QIFs) or real estate investment trusts (REITs) to be considered to have a taxable presence in the UAE under Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses. It also aligns with the earlier release of Cabinet Decision No 34 of 2025, which focused on Qualifying Investment Funds and Qualifying Limited Partnerships. The new rule clarifies the conditions under which non-resident investors will be deemed subject to UAE corporate tax, thereby improving predictability for foreign capital and potentially reducing compliance ambiguities for international participants. The decision reflects the UAE government’s ongoing effort to balance an attractive, competition-friendly investment environment with the need to uphold robust tax regulations and ensure proper tax collection. In this context, the decision is positioned as a natural extension of the policy framework governing corporate taxation and the treatment of cross-border investment vehicles in the UAE. It underscores the government’s commitment to maintaining a clear, consistent approach to nexus determinations in the evolving UAE corporate tax landscape.
Key Provisions of Cabinet Decision No 35 of 2025
The new decision introduces specific, codified triggers that determine when a non-resident juridical investor in a qualifying investment fund (QIF) will be considered to have a nexus in the UAE, thereby making it subject to corporate tax under the country’s Federal Decree-Law No 47 of 2022. At the core of the document are two principal nexus pathways for QIF investments, each tied to the QIF’s income distribution behavior relative to its financial year-end. The first pathway is anchored in a distribution threshold: if the 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 that dividend distribution. This provision creates a direct, time-bound trigger linked to actual shareholder returns, making the tax status of non-resident investors contingent on the timing and scale of distributions rather than on other, potentially nebulous factors. The second pathway is activated if the QIF does not distribute at least 80 percent of its income within the same nine-month window; in that scenario, the nexus arises on the date ownership interest is acquired. This alternative ensures that ownership changes can themselves generate corporate tax exposure even in the absence of full distribution of income within the prescribed period. Together, these dual provisions provide a robust framework by which the UAE tax authorities can determine nexus in real-world investment scenarios, reducing ambiguity for both fund managers and non-resident investors. In addition to these primary triggers, the decision states that a nexus will also be created if the QIF fails to meet the diversity of ownership conditions during the tax period in which the failure occurs, introducing a third criterion focused on ownership structure and concentration of control. This added dimension is intended to deter structures that might attempt to circumvent tax obligations by exploiting unusual or overly concentrated ownership arrangements, reinforcing the UAE’s emphasis on transparent, diversified ownership as part of compliant investment activity. The decision thus provides a comprehensive set of criteria to capture a broad spectrum of practical arrangements that could give rise to a taxable presence, while simultaneously presenting clear benchmarks for compliance.
For real estate investment trusts (REITs), the decision adopts a parallel approach to nexus determination, applying the same two primary triggers with respect to distributions and ownership acquisitions. Specifically, a REIT’s nexus with the UAE tax system is established on the date of dividend distribution if 80 percent or more of the REIT’s income is distributed within nine months from the REIT’s financial year-end. Alternatively, if the REIT does not distribute at least 80 percent of its income within that nine-month period, the nexus accrues on the date of ownership acquisition. This symmetry between QIFs and REITs underscores a consistent policy design across different investment vehicles, ensuring that similar economic behaviors—income distribution patterns and ownership transfers—yield comparable tax outcomes for non-resident investors. The decision emphasizes that, outside of these specified cases, non-resident juridical investors who exclusively invest in QIFs and/or REITs will not be deemed to have a taxable presence in the UAE. In practical terms, this creates a defined boundary around the circumstances under which such investors will be taxed, while preserving the preferential treatment for investment structures that do not engage in the listed nexus triggers. The overall effect is a clearer, more predictable tax regime for foreign capital, with explicit rules that can guide fund structuring, distribution planning, and cross-border investment decisions.
The decision ultimately serves two broad objectives. First, it clarifies when non-resident juridical investors in QIFs or REITs will be considered to have a taxable presence in the UAE, thereby establishing a taxed nexus under the corporate tax regime. Second, it aims to reduce compliance burdens for foreign investors by providing an unambiguous set of criteria that can be applied in a consistent manner. In practical terms, these clarifications help investors, fund managers, and tax professionals to align their strategic planning with the UAE’s corporate tax framework, anticipating tax exposures based on concrete, rule-based triggers rather than relying on interpretation of more general guidance. The decision’s explicit thresholds and triggers also support more transparent reporting and easier benchmarking against international best practices for nexus determination. At the same time, the policy preserves meaningful distinctions and carve-outs: outside of the specified nexus scenarios, non-resident investors with exposure solely through QIFs and/or REITs will not be treated as having a taxable presence in the UAE, thereby maintaining a favorable environment for certain passive investment structures while still ensuring that genuine tax obligations are captured when distributions or ownership transfers signal taxable activity. The net effect is a more predictable, administrable system that reduces litigation risk and enhances clarity for market participants, encouraging continued foreign investment while reinforcing the integrity of the UAE’s tax regime.
In sum, Cabinet Decision No 35 of 2025 delineates precise nexus criteria for non-resident investors in QIFs and REITs, anchored to distribution behavior and ownership dynamics. By codifying these triggers and adding a diversity-of-ownership safeguard, the decision reduces ambiguity and helps ensure consistent application of Federal Decree-Law No 47 of 2022. The alignment with Cabinet Decision No 34 of 2025, which concentrates on Qualifying Investment Funds and Qualifying Limited Partnerships, further harmonizes the tax treatment of cross-border investment vehicles, strengthening the UAE’s framework for corporate taxation in a way that supports both investment attractiveness and tax compliance objectives.
Nexus triggers for QIFs: distribution and acquisition
The central nexus framework for QIFs rests on two primary, mutually exclusive pathways tied to income distributions and ownership changes. First, when a QIF distributes 80 percent or more of its income within nine months after the end of its financial year, the nexus is triggered on the date of that distribution. This approach ties the taxable presence to a concrete financial event—the distribution itself—signaling that the fund has sufficiently allocated its earnings to its beneficiaries and, by implication, that the non-resident investor stands in a position to be taxed under the UAE corporate regime as a beneficiary in the fund structure. The nine-month deadline serves as a reasonable period during which the fund should execute distributions, ensuring that the tax status is aligned with actual economic activity and shareholder returns rather than with discretionary timing or opaque accounting practices. The use of a strict percentage threshold (80%) ensures that partial distributions are not treated as a nexus-creating event unless they meet a material distribution criterion, reducing the risk of micro-level tax exposure for investors in funds with smaller or irregular payout patterns.
Second, if the QIF fails to distribute at least 80 percent of its income within the same nine-month window, the nexus arises on the date the ownership interest is acquired. This rule captures scenarios where the fund retains a significant portion of its income within the year and changes in ownership occur despite the lack of full distribution. The implication is that a non-resident investor acquiring a stake in such a QIF during a period of retention triggering non-distribution will be treated as having a UAE nexus from the moment of acquisition. This provision recognizes that aggressive retention of income might signal a different economic philosophy or corporate structure in which the investor’s economic exposure and potential tax obligations are not aligned with a regular distribution pattern. By linking the nexus to the acquisition event in this context, the decision ensures that new owners cannot bypass tax exposure simply by timing the transfer to coincide with a period of low or no distributions. The result is a more comprehensive framework that covers both distribution-based and ownership-change scenarios, reducing gaps in nexus determination and discouraging tax planning that seeks to operate outside the scope of established distribution rules. The two-pronged approach thus gives fund managers and investors clear, predictable guidance on when nexus arises, enabling proactive tax planning and compliance.
Moreover, the decision adds a third axis for nexus in QIFs related to ownership diversity. If the QIF fails to meet the diversity of ownership conditions during the tax period in which such a failure occurs, a nexus is created. The concept of diversity of ownership is designed to prevent the formation of investment vehicles with highly concentrated ownership structures that could be leveraged, either for tax planning or regulatory arbitrage, to minimize taxable activity in the UAE. By imposing a diversity-of-ownership criterion, the decision reinforces the importance of an open, multi-actor investor base as a criterion for tax eligibility under the UAE corporate tax regime. The practical effect is to incentivize fund managers to maintain a broad, diversified investor base, aligning fund governance with tax policy objectives and reducing the chance that a single or small number of investors could influence tax outcomes in ways that obscure taxable presence. This third trigger ensures that nexus is not merely a function of distribution timing or acquisition, but also of structural characteristics that could influence how income is allocated, distributed, or retained within the fund. For non-resident investors, this means that changes in ownership composition, as well as the overall governance and ownership profile of a QIF, can carry tax consequences, further emphasizing the need for careful, ongoing monitoring of ownership structures and compliance with diversity requirements.
Nexus triggers for REITs: mirrored logic with distribution and acquisition
REITs, as specialized real estate investment vehicles, are subject to a parallel nexus framework in Cabinet Decision No 35 of 2025. The logic mirrors that applied to QIFs, creating symmetry in how tax exposure is determined across different investment vehicles and ensuring consistent policy application. For REITs, the nexus arises on the date of dividend distribution if 80 percent or more of income is distributed within nine months from the REIT’s financial year-end. This parallel structure ensures that genuine, timely distribution of income to beneficiaries triggers tax presence in a predictable fashion, aligning with common corporate tax principles that tie taxable activity to actual distributions of earnings to investors. The nine-month distribution window remains the reference period for measuring compliance with the distribution threshold, reinforcing the objective of a timely, decision-based tax outcome. By contrast, if the REIT does not distribute at least 80 percent of its income within the nine-month window, nexus arises on the date of ownership acquisition. This provision acts as a catch-all for scenarios where the REIT retains a substantial portion of its income and experiences a change in ownership, ensuring that the tax rules do not permit ongoing retention without corresponding tax implications for new investors. The consistency of this approach across QIFs and REITs provides a coherent framework for cross-vehicle investment strategies and simplifies the tax planning process for non-resident investors who participate through multiple structures.
As with QIFs, another dimension applies to REITs if the REIT fails to meet the diversity of ownership conditions during the tax period in which such a failure occurs. The clause reinforces the overarching policy intent: avoid arrangements that limit ownership diversification in ways that could obscure taxable activity and hinder transparent taxation. If a REIT compromises the diversity of ownership during a tax period, a nexus is created, thereby ensuring that the UAE tax regime captures potential taxable presence arising from ownership configurations that might otherwise be exploited to avoid tax. The inclusion of this factor for REITs aligns with the broader objective of maintaining robust governance and ownership standards across investment vehicles, supporting a tax regime that penalizes structural arrangements that undermine the integrity of the nexus framework. In effect, REITs, like QIFs, are subject to a three-pronged nexus structure: (i) distributions meeting or exceeding the 80 percent threshold within nine months, (ii) ownership acquisitions when distributions fall short of the threshold, and (iii) ownership-diversity considerations during the tax period in which they occur. The combined approach ensures comprehensive coverage of possible tax exposures for non-resident investors and promotes a stable, predictable environment for real estate-focused investment flows in the UAE.
Other clarifications and scope of application
Beyond the core nexus triggers, Cabinet Decision No 35 of 2025 clarifies that, outside of the explicit nexus events described above, non-resident juridical investors who exclusively invest in QIFs and/or REITs will not be deemed to have a taxable presence in the UAE. This carve-out is important because it delineates a boundary for tax exposure and helps to preserve the favorable status of certain investment structures that do not engage in the defined triggers. By explicitly stating this, the decision reduces the risk of unintended tax status changes for passive investors operating solely through QIFs or REITs, promoting a more predictable and manageable tax environment for international capital. The decision’s language thus balances the need for taxation of genuine economic presence with a recognition that not all cross-border investment activity should automatically incur UAE corporate tax liabilities. It is this balance—between clear triggers and sensible exemptions—that positions Cabinet No 35 as a practical tool for market participants and tax practitioners. The broader message is one of transparency and predictability: investors can plan with greater confidence knowing the exact conditions under which nexus arises, while fund structures are encouraged to maintain openness and diversification to minimize unnecessary tax exposure. The policy emphasis on explicit, threshold-based criteria, combined with the explicit exemption for investors solely involved through QIFs or REITs, reflects a thoughtful approach to nexus that aims to foster investment while upholding tax integrity.
Transition, effective dates, and alignment with related decisions
cabinet No 35 of 2025 is designed to work in concert with existing and forthcoming Cabinet Decisions related to the UAE corporate tax regime. It supersedes Cabinet Decision No 56 of 2023, establishing updated and more precise criteria that reflect the current policy objectives and the practical realities of investment in QIFs and REITs. The decision also aligns with Cabinet Decision No 34 of 2025, which concentrates on Qualifying Investment Funds and Qualifying Limited Partnerships. This alignment ensures consistency across related instruments and supports cohesive governance of cross-border investment vehicles within the UAE’s tax framework. The expected effect is to streamline regulatory expectations for fund managers and international investors alike, reducing interpretive friction and enabling more straightforward tax planning and compliance. While the decision itself provides the explicit nexus criteria, it also implicitly suggests the types of documentation and governance standards that may be relevant for compliance. Fund managers may need to maintain robust records of distributions, ownership changes, and measures of ownership diversity to demonstrate compliance with the nexus rules if queried by tax authorities. In practice, this translates into operational considerations, such as enhanced reporting capabilities, governance reviews, and strict adherence to distribution timelines to avoid inadvertent nexus creation. The broader regulatory ecosystem, including the corporate tax regime under Federal Decree-Law No 47 of 2022, will continue to be the backbone of this framework, with Cabinet No 35 providing essential implementation detail for the nexus determination process.
Overall, the revised decision signals a mature, methodical approach to nexus determination in the UAE’s corporate tax regime. It aims to provide clarity and predictability for non-resident investors in QIFs and REITs while preserving the government’s ability to collect tax from truly taxable economic activity. The combination of distribution-based triggers, acquisition-based triggers, and diversity-of-ownership safeguards creates a structured and transparent framework that reduces ambiguity and supports efficient compliance. As the UAE continues to refine its corporate tax landscape, stakeholders should expect ongoing clarification and potential refinements to these rules, particularly as market practices evolve and new investment products emerge. For now, Cabinet Decision No 35 of 2025 offers a clear, actionable set of criteria that non-resident investors and fund operators can rely on when assessing nexus and tax obligations in the UAE.
Practical implications for non-resident investors and fund managers
For non-resident juridical investors considering or already holding interests in QIFs or REITs, the decision sets a concrete map of when UAE corporate tax exposure may arise. The two primary triggers—distribution-based nexus and acquisition-based nexus—tie tax liability to observable financial actions, enabling more predictable cash flows and tax planning. Fund managers need to monitor distribution schedules carefully to determine whether any given distribution crosses the 80 percent threshold within the nine-month window and to plan distributions accordingly where possible. In scenarios where distributions exceed the threshold, the timing of the nexus will be the distribution date, anchoring tax planning to a specific event rather than an abstract accounting moment. In situations where distributions fall short of the threshold, managers and investors must be acutely aware of the acquisition date when a new investor enters the position, as this is the moment that nexus may arise for that investor. This means that, from both a governance and a transactional perspective, tracking ownership changes with precision is essential to ensure accurate tax reporting and to avoid unintended nexus creation. The diversity-of-ownership rule adds another layer of attention, requiring ongoing monitoring of the ownership structure to ensure it remains sufficiently diversified and compliant with the conditions attached to no-nexus status. Fund managers should consider implementing governance measures that foster broad-based ownership, such as inviting a wider investor base or rebalancing holdings to reduce concentration risk, thereby supporting the aim of maintaining non-nexus status where possible. The practical implication is clear: robust record-keeping, timely distribution planning, transparent governance, and careful consideration of ownership diversification are all critical to managing nexus risk under the new regime. Investors should engage their tax advisers to model various distribution and acquisition scenarios that could impact nexus status, enabling proactive decision-making that aligns with both investment objectives and UAE tax obligations. In a market environment where cross-border investment structures are common and where funds routinely adjust distributions in response to market conditions, the decision’s rules are likely to shape fund policy choices and investor commitments. The clarity brought by these provisions can reduce compliance costs over time, as participants become more adept at anticipating whether particular actions will create a nexus, allowing for smoother operations and more predictable tax outcomes.
The broader tax and regulatory context
Cabinet Decision No 35 of 2025 sits within a broader macro framework that includes Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses, as well as related cabinet decisions that have progressively clarified the UAE’s corporate tax regime. The central aim of the governance architecture is to promote a competitive investment climate while ensuring that cross-border investment structures contribute to the UAE’s tax base in a transparent and predictable fashion. The nexus rules for QIFs and REITs are part of a larger policy emphasis on clarity, stability, and fairness in the taxation of resident and non-resident entities. The decision’s emphasis on explicit thresholds and time-bound triggers is consistent with a broader trend toward rule-based taxation, reducing discretionary interpretive risk and enabling more consistent tax administration. By aligning the nexus criteria with distribution practices and ownership dynamics, the UAE seeks to create a measurement approach that reflects real economic activity, rather than abstract financial arrangements that may obscure the true source of taxable activity. This alignment is particularly important for international investors who operate across multiple jurisdictions, seeking predictable, comparable tax outcomes. The clarified rules may also influence how international tax planning is conducted, with corporate tax exposure tied to defined, auditable events such as distributions and ownership transitions. For fund administrators, this context provides a framework within which to design governance and reporting protocols that support compliance with nexus determinations and facilitate transparent communications with investors regarding potential tax implications. The ongoing policy trajectory suggests that the UAE will continue to refine and extend its tax framework as investment products evolve, maintaining a balance between openness to foreign capital and rigorous tax governance.
Practical guidance for stakeholders
Given the clarified nexus framework, several practical steps are advisable for both non-resident investors and fund managers to ensure compliance and optimize tax outcomes. First, establish robust distribution monitoring processes that accurately track whether distributions reach or exceed the 80 percent threshold within the nine-month window. This requires precise record-keeping of the timing and amount of distributions and a clear understanding of what counts as “income” for the purpose of the distribution calculation. Second, implement rigorous ownership-tracking mechanisms to detect acquisition dates that could trigger nexus, particularly in scenarios involving secondary offerings, secondary market transactions, or strategic restructurings where new investors join the fund. A precise log of ownership changes will facilitate timely tax determinations and reduce the risk of inadvertent nexus creation. Third, maintain comprehensive records related to ownership diversity to demonstrate compliance with the diversity of ownership criteria. This may involve documenting the distribution of ownership stakes among a broad investor base and ensuring that no single investor or small coalition of investors dominates the fund in a way that triggers nexus concerns. Fourth, incorporate the nexus rules into fund governance documents, offering memoranda, and distribution policies. Clear contractual alignment helps ensure that investors understand the tax implications of distributions and ownership changes, reducing the potential for disputes or misunderstandings later on. Fifth, coordinate with tax advisers to model various scenarios, including changes in distribution patterns and investor composition, to forecast potential nexus outcomes and associated tax liabilities. This proactive approach supports strategic decision-making and helps investors plan for potential tax impacts on cash flows and returns. Sixth, for funds considering changes to distribution policies, assess whether adjustments could move certain events into or out of the nexus framework, balancing corporate tax considerations with investment objectives and liquidity needs. While the law provides explicit triggers, the way a fund structures its distributions and ownership changes may influence tax results and investor experience. Finally, remain vigilant for any further regulatory updates or amendments to Cabinet Decisions No 34 and No 56 (or their replacements), as the UAE tax regime is subject to refinement in response to market practice, international standards, and policy goals. Active engagement with counsel and tax professionals will help stakeholders stay compliant and adaptable to any future changes in the nexus framework or related provisions.
Summary takeaways for participants
- Nexus for non-resident investors in QIFs hinges on two main triggers: (a) distribution of 80% or more of income within nine months, with nexus on the distribution date; or (b) ownership acquisition date if distributions fall short of the 80% threshold within nine months.
- A third trigger exists if the QIF fails to meet diversity of ownership conditions during the tax period, creating nexus under that period.
- For REITs, the same two main triggers apply: nexus on the distribution date if 80%+ is distributed within nine months; or nexus on the ownership acquisition date if distributions are below 80% within that timeframe.
- A diversity-of-ownership failure in a REIT also creates nexus during the relevant tax period.
- Outside of these triggers, non-resident juridical investors who exclusively invest in QIFs and/or REITs are not considered to have a taxable presence in the UAE.
- The decision aligns with Cabinet Decision No 34 of 2025, and supersedes Cabinet Decision No 56 of 2023, contributing to a coherent policy framework for qualifying investment funds and related structures.
- The practical effect is to enhance clarity and reduce compliance burdens for foreign investors, while maintaining robust tax governance and preventing gaming of the system through contrived ownership or timing of distributions.
- Fund managers should implement rigorous distribution tracking, meticulous ownership records, and governance policies that encourage diversified ownership. Investors should seek tax guidance to assess nexus exposure under various distribution and acquisition scenarios, ensuring that investment strategies align with tax obligations.
- The policy’s emphasis on transparency, predictability, and administration should support continued foreign investment in QIFs and REITs, while underscoring the UAE’s commitment to a robust corporate tax regime.
Conclusion
Cabinet Decision No 35 of 2025 represents a significant step in clarifying how a non-resident investor’s nexus is determined in the UAE for corporate tax purposes. By establishing explicit thresholds and timing for QIF distributions and ownership acquisitions—and by extending the same logic to REITs—the decision provides a clear, predictable framework that reduces ambiguity for foreign investors and fund managers. The inclusion of a diversity-of-ownership criterion further strengthens tax integrity by discouraging structures that could be exploited to avoid taxation. The decision’s alignment with Cabinet Decisions No 34 of 2025 and No 56 of 2023 underscores a coordinated approach to policy design in the UAE’s evolving corporate tax landscape, ensuring consistency across related investment structures. For non-resident investors, this means better foresight into when tax obligations may arise, improved planning for distributions and acquisitions, and a clearer understanding of how ownership dynamics can influence nexus. For fund managers, the rules translate into practical compliance measures, including enhanced record-keeping, governance, and reporting to navigate nexus determinations efficiently. Taken together, these developments reinforce the UAE’s commitment to maintaining an attractive, competitive investment climate while upholding rigorous tax standards, signaling to global capital markets that the UAE continues to balance openness with prudent fiscal governance. As the regime evolves, stakeholders should monitor for further refinements to the nexus framework, ensuring ongoing alignment with market practice and international standards.