New View on the Real Estate Nexus under Cabinet Decision No.35/2025

Examples of Artificial Transfers

Example 1. Sale of a UAE Real Estate Holding Company

A non-resident investor owns 100% of HoldCo Ltd, a foreign company whose only asset is a commercial building in Dubai. Rather than selling the building itself, the investor sells shares in HoldCo Ltd to a buyer.

Although legally framed as a “share sale,” the true subject of the transaction is the Dubai property. If there is no valid economic reason for structuring the deal this way — aside from deferring or avoiding tax — the Federal Tax Authority (FTA) may consider the structure artificial.

Outcome under Article 3 is that The FTA may recharacterize the share deal as a disposal of a right in rem in UAE real estate, thereby making the gain taxable.

Example 2. Tokenized Real Estate Assets Sold

A non-resident investor buys tokens from a blockchain platform that represent fractional interests in a villa compound in Dubai. The tokens reflect ownership and distribute rental income. The investor later sells these tokens at a gain.

Though structured as a sale of digital assets, the tokens clearly represent an underlying right in rem in UAE real estate.

Outcome under Article 3 is that the transaction may be recharacterized as a disposal of immovable property, making the gain taxable under Corporate Tax.

What if an Emirati company holds other assets too?

Let’s consider a more nuanced scenario:

A non-resident sells shares in MidCo Ltd, a foreign company that holds:

• 70% of its value in a Dubai logistics park
• 30% in a UAE-based operating business with no real estate

In this case, immovable property is not the only asset, but is clearly the dominant one. So the question arises: when does an indirect transfer of a company become a taxable disposal of UAE real estate?

Applying the OECD 50% immovable property test

Article 13(4) of the OECD Model Tax Convention provides a widely accepted solution: if 50% or more of the value of a company’s shares is derived (directly or indirectly) from immovable property located in a country, that country may tax the sale of the shares as a transfer of immovable property.

While the UAE Corporate Tax Law does not explicitly reference this test, Article 3 clearly calls for a substance-over-form approach. Applying the OECD standard offers a principled and internationally consistent way to interpret artificial transfers involving UAE real estate.

Practical Consequences

• If the entity being sold derives ≥50% of its value from UAE real estate, and there's no valid non-fiscal reason for the structuring, Article 3 may apply.
• If UAE real estate is not the dominant asset, and a genuine commercial rationale exists, the structure is less likely to be challenged.

Summary of practical scenarios

Final Reflections: Form vs. Substance in the New Nexus Landscape

Article 3 gives the Federal Tax Authority the power to look through form and enforce substance, especially in cases where real estate value is hidden behind equity or token structures.

While Article 2 ensures that any income from UAE immovable property triggers a taxable nexus, Article 3 goes further: it prevents circumvention by denying artificial advantages and enabling recharacterization.

As a guiding principle, the OECD’s 50% immovable property test offers a practical and internationally aligned method to identify disguised real estate disposals.

Ultimately, structures that lack valid commercial or non-fiscal justification are vulnerable to challenge under Article 50 of the Corporate Tax Law, and Article 3 is the mechanism by which such structures will be neutralized.

The disclaimer

Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.

The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here.

You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.