The UAE Ministry of Finance has recently released a significant update regarding corporate tax rules for foreign investors, particularly those investing in Qualifying Investment Funds(QIFS) (QIFs)and Real Estate Investment Trusts (REITs). This update aims to clarify when non-resident investors are considered to have a taxable presence (also called a “nexus”) in the UAE.
If you’re a business owner, foreign investor, or part of a company planning to invest in the UAE, here’s everything you need to know—explained in simple terms.
What Has Changed?
The UAE has replaced its earlier Cabinet Decision No. 56 of 2023 with a new decision that gives better clarity on when non-resident companies or investors become subject to UAE Corporate Tax.
If you’re a non-resident company or investor putting money into a QIF or REIT in the UAE, you could now be considered as having a “nexus”—a link that makes you liable to pay corporate tax in the UAE—only under certain conditions.
What Is a “Nexus”?
“Nexus” refers to a legal or economic connection that establishes a tax obligation in a particular country. In the context of UAE Corporate Tax, even if a business is not physically based in the UAE, it may still be considered to have a taxable presence—known as a ‘nexus’—if it meets certain conditions set by the UAE Ministry of Finance. When a nexus is established, the entity becomes liable to pay corporate tax in the UAE.”
When Are Foreign Investors Taxable in the UAE?
The new rule is designed to reduce unnecessary tax burdens and make it clearer when a foreign investor becomes liable for tax. Here are the main cases where a nexus is created:
1. For Investors in Qualifying Investment Funds (QIFs):
You will be taxable in the UAE if:
The QIF distributes 80% or more of its income within 9 months of the end of its financial year → Your tax liability starts on the date of dividend distribution.
OR
The QIF fails to distribute at least 80% of its income in that time → Your tax liability starts on the date you acquired ownership.
Additionally, if the QIF fails to meet the diversity of ownership requirement (having multiple investors), the tax liability arises during the period of failure.
2. For Investors in Real Estate Investment Trusts (REITs):
Same logic applies:
If the REIT distributes 80% or more of its income within 9 months, the taxable date is the dividend distribution date.
If it fails to meet the 80% threshold, you become taxable from the date of acquiring ownership.
When Are Foreign Investors Not Taxable?
Foreign (non-resident) investors who invest exclusively in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs) will not be considered to have a taxable presence (nexus) in the UAE—provided none of the specified conditions that trigger a nexus apply.
In such cases, there is no corporate tax liability, resulting in reduced compliance requirements and administrative burden.
Why Is This Update Important?
✅ Clarity for Foreign Investors
The new decision clearly outlines when a non-resident investor is considered to have a taxable presence, removing uncertainty around corporate tax obligations.
✅ Promotes Investor Confidence
By defining specific scenarios that trigger tax liability, the UAE reinforces its commitment to maintaining a transparent and business-friendly environment for global investors.
✅ Reduces Compliance Burden
Only investors who meet clearly defined conditions need to register for corporate tax, helping most passive investors avoid unnecessary paperwork and filing requirements
How Unicorn Global Solutions Can Help
The latest corporate tax update from the UAE Ministry of Finance is a welcome move for foreign investors. It offers much-needed clarity, minimizes compliance challenges, and reinforces the UAE’s reputation as a business-friendly hub for global investment.
If you’re uncertain about your tax obligations or how this decision impacts your investment, Unicorn Global Solutions is here to guide you. We break down complex tax rules into simple, actionable advice—so you can focus on growing your business with confidence. For more details Text us on whatsApp or call us today
Frequently Asked Questions (FAQs)
A nexus is a legal connection that makes a person or company liable to pay taxes in a country. In this case, it means a foreign investor is liable for UAE corporate tax if they meet the conditions outlined by the Ministry of Finance.
Foreign investors are not taxable if a QIF or REIT distributes 80% or more of its income within 9 months after its financial year-end. If this threshold is not met, then the investor may become taxable from the date of ownership.
If the fund does not have a broad base of investors (i.e., it lacks diversity), then any foreign juridical investor during that tax period may be treated as having a taxable nexus in the UAE.
It depends. If your investment continues to meet the 80% distribution and diversity conditions, you remain non-taxable. However, if these conditions are not met, you could be liable for UAE corporate tax starting from the relevant date.
