New UAE tax rule: When foreign investors, non-residents are liable for corporate tax

The Ministry of Finance has issued a decision, which explains when a foreign (non-resident) person or company is considered to have a tax link (nexus) in the UAE under the Corporate Tax Law. This new decision replaces the earlier Cabinet Decision No 56 of 2023.

The new decision specifies the cases in which a non-resident juridical investor in a Qualifying Investment Fund (QIF) or Real Estate Investment Trust (REIT) is considered to have a nexus in the UAE and is therefore subject to taxation.

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Under the new decision, a nexus for a non-resident investor in a QIF that breaches the real estate threshold will arise either on the date of the dividend distribution if the QIF distributes 80 per cent or more of its income within nine months from its financial year-end, or the date the ownership interest is acquired, in the case where the QIF fails to distribute at least 80 per cent of its income within nine months from its financial year-end.

A nexus will also be created for a non-resident juridical investor in a QIF that fails to meet the diversity of ownership conditions in the tax period in which the failure occurs.

A nexus for a non-resident juridical investor in a REIT will arise either on the date of the dividend distribution if the REIT distributes 80 per cent or more of its income within nine months from its financial year-end, or the date the ownership interest is acquired, in the case where the REIT fails to distribute at least 80 per cent of its income within nine months from its financial year-end.

Other than the above cases, non-resident juridical investors investing exclusively in a QIF and/or REIT will not be considered to have a taxable presence in the UAE. This decision reduces foreign investors’ compliance burdens and reflects the UAE government's commitment to providing an attractive investment environment for such investors.