Cabinet Decision No. 35 of 2025 redefines when a non-resident juridical person has a taxable presence — a nexus — in the UAE. Issued on 27 March 2025 and applying to tax periods commencing on or after 1 January 2025, it replaces Cabinet Decision No. 56 of 2023 and, for the first time, can create a nexus for foreign investors in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs).
Key takeaways
- Cabinet Decision No. 35 of 2025 determines when a non-resident juridical person has a UAE corporate tax nexus; it replaces Cabinet Decision No. 56 of 2023 and applies to tax periods commencing on or after 1 January 2025.
- The Decision must be read with Cabinet Decision No. 34 of 2025, which sets the tax framework for Qualifying Investment Funds (QIFs) and limited partnerships.
- A nexus still arises from income connected to UAE immovable property — including sale, letting, subletting and other forms of exploitation.
- New: a non-resident investor in a QIF or REIT can create a nexus where income is attributed to it under specified ownership thresholds, extending the rules to indirect property holdings.
- For qualifying fund investors, the nexus date depends on distributions — the distribution date if the fund pays out at least 80% of its immovable-property income within nine months of year-end, otherwise the date the ownership interest was acquired.
- Once a nexus exists, the non-resident must register for corporate tax under Article 51 of the Corporate Tax Law.
What "nexus" means for a non-resident
A nexus is the connection that makes a non-resident taxable in the UAE on certain income even without a physical permanent establishment. For a foreign entity, the presence of a nexus is what triggers a corporate tax registration and filing obligation. The significance of Cabinet Decision No. 35 of 2025 is that it widens the circumstances in which that connection is treated as existing — reaching beyond direct property income into certain indirect holdings through funds.
When a nexus is created
The Decision establishes a nexus for a non-resident juridical person in three main situations:
- Direct immovable property income in the UAE — including income from a right in rem, and from the sale, disposal, assignment, direct use, letting, subletting or any other exploitation of immovable property.
- QIF investor with attributed income under Article 3(2) of Cabinet Decision No. 34 of 2025 — where the fund has fewer than 10 investors and the investor, with related parties, holds 30% or more control; or the fund has more than 10 investors and the investor, with related parties, holds 50% or more control.
- QIF investor with income adjusted under Article 3(5) or Article 4(3) of Cabinet Decision No. 34 of 2025 — where the fund holds more than 10% of its value in immovable property, or where it is a REIT.
The second and third categories are the substantive change: they attribute property-linked income to the investor, so holding UAE real estate indirectly through a fund can now bring a foreign investor into scope.
Timing: when does the nexus arise for fund investors?
For fund and REIT investors, the Decision ties the timing of the nexus to how quickly the fund distributes its property income.
| Fund's distribution behaviour | Date the nexus is created |
|---|---|
| Distributes 80% or more of its immovable-property income as dividend within 9 months of the financial year-end | The date the dividend is distributed |
| Does not distribute that percentage within 9 months | The date the ownership interest in the fund was acquired |
The timing rule has planning consequences: a fund that distributes promptly changes when, and how, the nexus crystallises for its non-resident investors.
Registration and anti-avoidance
Once a nexus is established, the non-resident must register for corporate tax under Article 51 of the Corporate Tax Law. The Decision also carries an anti-avoidance edge: artificial transfers of property rights by non-residents designed to avoid tax are treated as a trigger under the General Anti-Abuse Rule (GAAR), consistent with Article 50 of the Corporate Tax Law.
The reach into fund and REIT investors closes a gap. Holding UAE property indirectly through an exempt fund no longer automatically keeps a foreign investor outside the tax net — ownership thresholds and the fund's distribution timing now decide whether, and when, a nexus and a registration obligation arise.
What non-resident investors should do
Foreign investors with UAE property exposure should map their ownership percentages in any QIF or REIT (including related-party holdings), track each fund's distribution status against the nine-month test, and review structures that were built on the assumption that indirect holdings stayed outside UAE tax. In practice, SBC advisers find the ownership test is where investors slip, because it aggregates related-party holdings — a stake that looks comfortably below the 30% or 50% threshold on its own can breach it once connected parties are counted in. Where a nexus is triggered, registration under Article 51 follows. Compliance systems should be updated to track investor ownership and fund distribution status on an ongoing basis, since both inputs determine whether a nexus exists and the date on which it arises. Where property-linked investments are being structured or restructured, the position is best tested before the investment is made rather than after. Because related-party thresholds and anti-avoidance are central, transfer pricing and international tax analysis should sit alongside the corporate tax review.
Frequently asked questions
What creates a UAE corporate tax nexus for a non-resident?
A nexus arises from direct income connected to UAE immovable property, and — under Cabinet Decision No. 35 of 2025 — from being an investor in a Qualifying Investment Fund or REIT where income is attributed to the investor under specified ownership thresholds.
Does Cabinet Decision No. 35 of 2025 tax foreign investors in UAE property funds?
Yes, in defined cases. Where a non-resident invests in a QIF or REIT and meets the ownership thresholds set out with Cabinet Decision No. 34 of 2025, property-linked income is attributed to the investor and a nexus is created, bringing indirect holdings into scope.
When does the nexus arise for a QIF or REIT investor?
If the fund distributes at least 80% of its immovable-property income within nine months of the financial year-end, the nexus arises on the distribution date. If it does not, the nexus arises on the date the investor acquired its ownership interest in the fund.
Do non-residents with a nexus have to register for UAE corporate tax?
Yes. Once a nexus is established under these rules, the non-resident must register for corporate tax under Article 51 of the Corporate Tax Law.
How SBC Tax Consulting can help
SBC helps non-resident investors and fund managers assess whether Cabinet Decision No. 35 of 2025 creates a UAE nexus, quantify the ownership thresholds with related parties, and manage the timing of distributions. We handle corporate tax registration under Article 51, review structures for GAAR exposure, and align international tax and transfer pricing positions. To review your investments, contact our team.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.