New Tax Rules for Non-Resident Investors – 2025
The United Arab Emirates (UAE) has recently introduced significant updates to its tax regulations, particularly affecting non-resident investors. On April 7, 2025, the UAE Ministry of Finance issued Cabinet Decision No. 35 of 2025, which outlines the circumstances under which non-resident juridical investors in Qualifying Investment Funds (QIFs) or Real Estate Investment Trusts (REITs) are considered to have a taxable presence, or “nexus,” in the UAE.
Key Provisions of the New Tax Rules:
Qualifying Investment Funds (QIFs):
Real Estate Threshold Breach: If a QIF exceeds the specified real estate investment threshold, a non-resident investor’s nexus is established based on:
Dividend Distribution: The date when dividends are distributed, provided the QIF distributes at least 80% of its income within nine months of the financial year-end.
Ownership Interest Acquisition: The date the investor acquires ownership interest, if the QIF fails to meet the 80% distribution criterion.
Diversity of Ownership Conditions: Failure of a QIF to meet diversity of ownership conditions in any tax period results in a nexus for non-resident investors during that period.
Real Estate Investment Trusts (REITs):
Dividend Distribution: A nexus arises on the date of dividend distribution if the REIT distributes at least 80% of its income within nine months of the financial year-end.
Ownership Interest Acquisition: If the REIT does not meet the 80% distribution requirement, a nexus is established on the date the investor acquires ownership interest.
These measures aim to streamline tax compliance for foreign investors and underscore the UAE government’s dedication to fostering an attractive investment climate.
In addition to these updates, the UAE is set to implement a 15% Domestic Minimum Top-up Tax (DMTT) on large multinational enterprises starting January 1, 2025. This aligns with the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution, ensuring that multinational companies with consolidated global revenues of €750 million or more pay a minimum effective tax rate of 15% in every country they operate.
Furthermore, the Ministry of Finance is considering introducing corporate tax incentives to promote sustainable growth and innovation. These include a Research and Development (R&D) Tax Incentive, offering a potential 30-50% refundable tax credit for qualifying R&D activities conducted within the UAE, and a refundable tax credit for high-value employment activities, targeting key roles such as C-suite executives and senior personnel contributing significantly to the UAE economy.
These developments reflect the UAE’s proactive approach to aligning with international tax standards while enhancing its appeal as a global investment hub.
