UAE clarifies when foreign investors face corporate tax

The United Arab Emirates (UAE) Ministry of Finance has issued a new directive outlining when a foreign (non-resident) individual or entity is considered to have a taxable presence—or ‘nexus’—under the country’s Corporate Tax Law. This replaces an earlier decision from 2023.

The clarification focuses on non-resident juridical investors in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs). A taxable nexus arises only in specific circumstances.

In the case of QIFs that exceed the permitted real estate investment threshold, a nexus is established either:

• On the date dividends are distributed, provided the QIF allocates at least 80 percent of its income within nine months of the end of its financial year; or

• On the date of acquiring the investment, if the QIF fails to meet this 80 per cent distribution requirement.

A tax link will also apply if the QIF fails to meet the required level of investor diversity during a tax year.

The same rules apply to REITs. If they distribute 80 percent or more of income on time, the tax link is based on dividend payment. If not, it applies from the date of investment.

If these conditions are not met, non-resident investors in QIFs or REITs will not be taxed in the UAE.

This decision helps reduce tax-related burdens for foreign investors and supports the UAE’s aim to offer a welcoming, investment-friendly environment.