Non-Resident Person’s Nexus

UAE Corporate Tax: Nexus & Non-Residents—What You Need to Know

The UAE's corporate tax landscape is built on clear principles, and one of the most important is the concept of a "nexus." A nexus is a sufficient connection or presence in the UAE that makes a foreign entity subject to corporate tax here.

Cabinet Decision No. 35 of 2025 is a game-changer. It replaces an earlier decision (No. 56 of 2023) and provides a more detailed roadmap for when a non-resident person—specifically a foreign company—establishes a taxable presence in the UAE. This decision, effective from March 27, 2025, clarifies a critical area for global investors and businesses with an interest in the UAE.

The Three Scenarios That Create a Nexus

The decision outlines three key situations where a non-resident juridical person is considered to have a nexus in the UAE:

1. Direct Income from Immovable Property: The most straightforward condition. If a foreign company directly earns income from any immovable property in the UAE, it has a nexus. This includes everything from selling real estate and earning rental income to subletting or any other form of exploitation. It's a clear signal that the UAE will tax income from its real estate assets, regardless of where the owner is based.

2. Look-Through Rules from Investment Funds: This is a more complex, but crucial, part of the new framework. As explained in the related Cabinet Decision No. 34 of 2025, some non-resident investors in a Qualifying Investment Fund (QIF) or Real Estate Investment Trust (REIT) are required to include a prorated portion of the fund's net profit in their own taxable income. When an investor's income is adjusted in this way, it creates a nexus for them in the UAE. This prevents a foreign company from using a fund as a way to avoid tax on income that would otherwise be taxable.

3. Income from Immovable Property in a Fund: Building on the previous point, a nexus is also created for a non-resident investor when they are required to include income from immovable property in their own taxable income because the QIF or REIT they're invested in holds more than a certain percentage of its assets in real estate. The decision provides clarity on the exact timing of when this nexus is established, depending on whether the fund distributes its income on time.

Cracking Down on Artificial Transfers

To prevent tax avoidance, the decision includes a powerful anti-abuse provision. Article 3 states that if a non-resident person "artificially transfers" the rights to any immovable property in the UAE to another person without a genuine commercial or non-fiscal reason, it will be considered an arrangement to gain a corporate tax advantage.

This provision serves as a warning against using complex or contrived transactions solely to avoid paying tax on valuable UAE real estate assets. The tax authority will look at the economic reality of the transaction, not just the legal form.

The Obligation to Register

The most significant consequence of having a nexus is the obligation to register for corporate tax. According to the decision, any non-resident person with a nexus in the UAE must register with the Federal Tax Authority (FTA). This means that a foreign company that meets any of the conditions outlined above must file a tax return and comply with all the corporate tax laws, just like a resident company.

What This Means for International Investors

Cabinet Decision No. 35 of 2025 is a clear message from the UAE government that it is committed to a fair and transparent tax system that aligns with global standards. For international investors, especially those involved in real estate or investment funds, it's no longer enough to simply be based outside the UAE. You must now carefully evaluate your activities to determine if you have a taxable nexus.

At Essence, we understand these complexities. Our team can help you analyze your investment structures, determine if you have a nexus, and ensure you meet all your tax registration and compliance obligations. Don't leave your tax position to chance.

Contact Essence today to ensure your investments are on solid ground.