Corporate Tax
Understanding Corporate Tax Nexus for Non-Resident Investors in UAE Investment Funds
2025-04-09
Overview
With the introduction of Corporate Tax in the UAE under Federal Decree-Law No. 47 of 2022, understanding the Corporate Tax Nexus rules has become crucial—particularly for non-resident investors holding interests in UAE-based funds. The treatment of such investments depends on several factors, including the nature of the fund, dividend distribution timelines, and diversity of ownership.
This article provides a simplified and practical walkthrough for determining whether a juridical non-resident investor in UAE-based investment funds triggers a Corporate Tax Nexus under the new rules.
Step-by-Step Assessment: When Is Nexus Created?
1. Is the investor a juridical non-resident?
The first step is to determine whether the investor is a juridical person (i.e., a company or legal entity) that is not a resident in the UAE for Corporate Tax purposes.
If no: The investor falls under other Corporate Tax provisions.
If yes: Proceed to analyze the nature of the investment.
2. What is the nature of the UAE investment?
Two primary fund structures are examined under UAE Corporate Tax law:
Qualifying Investment Funds (QIFs)
Real Estate Investment Trusts (REITs)
a. Qualifying Investment Fund (QIF)
If the investor’s holding is in a QIF that meets all required regulatory conditions (including regulatory approval and economic substance):
The non-resident investor does not create a Nexus under Article 13(1)(f) of the UAE Corporate Tax Law.
No Corporate Tax is triggered.
b. Real Estate Investment Trust (REIT)
For REITs, the Corporate Tax Nexus determination depends on income distribution and ownership conditions.
3. Did the REIT distribute at least 80% of its income within 9 months after the financial year-end?
This test aligns with the conditions provided under Ministerial Decision No. 27 of 2023 for REITs.
If No: The fund does not meet the threshold, and no Nexus is created. ➤ Conclusion: The investor is not liable for UAE Corporate Tax.
If Yes: Proceed to the next condition.
4. Did the fund meet the ownership diversity condition?
The UAE Corporate Tax regime requires REITs to have diversified ownership for preferential treatment. If the REIT fails to meet the ownership diversity condition (e.g., majority ownership by a single entity or small group of related parties):
The juridical non-resident investor is considered to have Nexus in the UAE.
Corporate Tax Nexus is created from the date the ownership interest is acquired.
➤ Conclusion: The investor may be liable for Corporate Tax on attributable income.
Final Summary – When Is Corporate Tax Nexus Created?
Scenario | Nexus Created? | Taxable? |
Investor is not a juridical non-resident | ❌ | No |
Investor in a QIF meeting conditions | ❌ | No |
REIT distributed < 80% within 9 months | ❌ | No |
REIT distributed ≥ 80% and met ownership diversity | ❌ | No |
REIT distributed ≥ 80% but did not meet ownership diversity | ✅ | Yes |
Key Takeaways for Investors and Fund Managers
Always review fund classification: Is it a QIF or REIT?
Track income distributions carefully and ensure compliance with the 9-month rule.
Maintain diverse ownership in REITs to avoid triggering Nexus.
Non-resident juridical investors should seek professional tax advice to assess Corporate Tax exposure.
How We Can Help
At AEON Accounting and Auditing, our Corporate Tax specialists help you:
Assess Nexus risks
Review fund structures
Comply with REIT/QIF requirements
Prepare accurate tax filings for non-resident investors
📩 Contact us at naveed@aeon-global.com or 📞 +971-50-1653764 for tailored advice.
Disclaimer: This article is for informational purposes only and should not be considered legal or tax advice. For professional guidance, please consult a qualified tax advisor.