UAE Cabinet Approves New Regulations on Non-Resident Corporate Tax Relationships
The decision outlines specific conditions under which non-resident entities will be liable for corporate tax in the UAE, following a recent amendment to investment fund regulations.
The Ministry of Finance of the United Arab Emirates announced the approval of Cabinet Decision No. 35 of 2025, which defines the connection of non-resident entities to the UAE for the purposes of the Federal Law on Corporate Tax No. 47 of 2022. This decision replaces Cabinet Decision No. 56 of 2023, updating the framework for corporate tax implications for investors.
Under the new regulations, a non-resident corporate entity that invests in qualified investment funds or real estate investment funds will have a taxable connection to the UAE in specific circumstances.
This decision is aligned with Cabinet Decision No. 34 of 2025 regarding qualified investment funds and limited partnerships, which also relate to the corporate tax law.
The regulations specify that a taxable connection arises for non-resident entities investing in a qualified investment fund when the entity’s ownership of real estate exceeds permissible limits.
This condition is evaluated either at the time of profit distribution—if the fund distributes 80% or more of its income within nine months of the end of its fiscal year—or at the time of acquisition of ownership shares if the fund does not distribute at least 80% of its income during that period.
Additionally, if a qualified investment fund fails to meet ownership diversification criteria, a connection is established for the non-resident entity during the tax period in which these criteria are not met.
For real estate investment funds, the taxable connection also occurs on the same grounds as mentioned above, depending on the timing of profit distributions or share acquisitions relative to the income distribution thresholds.
Apart from the outlined scenarios, a non-resident corporate entity investing solely in a qualified investment fund or real estate investment fund will not have a taxable presence in the UAE.
This regulatory development is designed to streamline compliance for foreign investors and underscores the UAE government's commitment to fostering a supportive investment environment.
Under the new regulations, a non-resident corporate entity that invests in qualified investment funds or real estate investment funds will have a taxable connection to the UAE in specific circumstances.
This decision is aligned with Cabinet Decision No. 34 of 2025 regarding qualified investment funds and limited partnerships, which also relate to the corporate tax law.
The regulations specify that a taxable connection arises for non-resident entities investing in a qualified investment fund when the entity’s ownership of real estate exceeds permissible limits.
This condition is evaluated either at the time of profit distribution—if the fund distributes 80% or more of its income within nine months of the end of its fiscal year—or at the time of acquisition of ownership shares if the fund does not distribute at least 80% of its income during that period.
Additionally, if a qualified investment fund fails to meet ownership diversification criteria, a connection is established for the non-resident entity during the tax period in which these criteria are not met.
For real estate investment funds, the taxable connection also occurs on the same grounds as mentioned above, depending on the timing of profit distributions or share acquisitions relative to the income distribution thresholds.
Apart from the outlined scenarios, a non-resident corporate entity investing solely in a qualified investment fund or real estate investment fund will not have a taxable presence in the UAE.
This regulatory development is designed to streamline compliance for foreign investors and underscores the UAE government's commitment to fostering a supportive investment environment.
Translation:
Translated by AI
