New UAE Cabinet Decision Clarifies Tax Nexus for Non-Resident Investors
The UAE Ministry of Finance has taken another major step in refining the country’s corporate tax framework. On April 6, 2025, the Ministry announced Cabinet Decision No. 35 of 2025, which replaces the earlier Cabinet Decision No. 56 of 2023. This new regulation directly addresses the criteria under which non-resident juridical persons are deemed to have a nexus in the UAE for corporate tax purposes.
Context: UAE Corporate Tax Law
The update falls under the umbrella of Federal Decree-Law No. 47 of 2022, which introduced the UAE’s first federal corporate tax on business profits. As the UAE moves toward greater tax transparency and alignment with global standards, clarifying the tax obligations of non-residents has become critical.
What Does Cabinet Decision No. 35 of 2025 Say?
The newly issued decision provides specific guidance on how and when a non-resident juridical person—such as a foreign company or entity—will be considered to have established a nexus in the UAE, thereby becoming subject to UAE corporate tax.
The decision particularly affects non-resident investors involved in:
- Qualifying Investment Funds (QIFs)
- Real Estate Investment Trusts (REITs)
If a non-resident entity holds investments through these structures in the UAE, it may now meet the criteria for tax nexus—even in the absence of a traditional physical presence.
Why This Matters
Prior to this decision, many non-resident investors may have assumed that passive investments in UAE-based funds did not constitute a taxable presence. Cabinet Decision No. 35 changes that narrative, broadening the scope of who may be liable for corporate tax and under what conditions.
This aligns with global taxation efforts to reduce base erosion and profit shifting (BEPS), bringing the UAE into closer compliance with OECD standards.
Key Implications for Non-Resident Investors
- Tax Liability: Non-resident entities with certain investment profiles may now be required to register and pay UAE corporate tax.
- Compliance Requirements: Affected investors will need to evaluate their structures and consider whether their investment arrangements could be seen as having established a nexus.
- Increased Regulatory Oversight: The decision reflects the UAE’s broader strategy to enforce transparent and fair taxation across all sectors, including foreign investment.
What Should Investors Do Next?
Legal and tax advisors are urging non-resident investors to conduct an immediate review of their corporate holdings and fund structures to ensure compliance. Given the legal complexities and financial implications, proactive consultation is essential.
Conclusion
Cabinet Decision No. 35 of 2025 represents a pivotal move in shaping the UAE’s maturing corporate tax regime. Non-resident investors—especially those involved with QIFs and REITs—should treat this update as a compliance checkpoint and take appropriate steps to understand their new obligations.
“For a comprehensive understanding of the amendments, refer to the official document:Cabinet Decision No. 34 of 2025
