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Investors Gain Clarity on Tax Regulations for Investments in Approved Real Estate Investment Trusts (REITs) via FTA Guidelines

FTA provides insight into corporate tax handling for REIT investors classified as exempt funds under UAE legislation.

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FTA Officially Explains How Corporate Tax is Handled for REIT Investors who are Exempt Funds as Per...
FTA Officially Explains How Corporate Tax is Handled for REIT Investors who are Exempt Funds as Per UAE Law

Investors Gain Clarity on Tax Regulations for Investments in Approved Real Estate Investment Trusts (REITs) via FTA Guidelines

Hey there! The Feds are spilling the tea on taxes, specifically for investors in Real Estate Investment Trusts (REITs) that fall under the category of exempt funds in the UAE.

Here's the lowdown: Starting 2025, both resident and non-resident legal entities investing in these exempt REITs will be taxed on 80% of the REIT's UAE immovable property income, but there's a catch. If the REIT distributes its property income within nine months of the financial year-end and the investor no longer holds any ownership interest at the time of distribution, they can dodge the tax bullet.

Now, let's talk about what qualifies as UAE immovable property. It's pretty straightforward—it's the net profit from leasing, selling, or using such property. The Feds have also outlined how this income should be calculated based on the REIT's financial statements.

The Feds have also assigned responsibilities to both the REIT and its investors. REITs need to provide financial information, while non-resident investors should appoint a tax agent. This new tax treatment covers profit distributions, investment-related expenses, asset disposals, and management fees.

This clarification is part of the Feds' efforts to increase compliance readiness and ensure a smooth transition as corporate tax regulations take effect across the UAE. So, buckle up, investors, get your tax agents ready, and let's navigate this new tax terrain together!

According to the enrichment data, here are the key points:

  1. Investors will be taxed on 80% of the prorated immovable property income of the REIT, based on their shareholding.
  2. Investors can avoid tax if the REIT distributes its property income within nine months of the financial year-end and the investor no longer holds any ownership interest at the time of distribution.
  3. Investors are treated as the legal owners of their REIT units and must accurately calculate and report their share of taxable income.
  4. This new corporate tax treatment applies to both resident and non-resident juridical persons investing in qualified REITs, effective for tax periods starting 2025.
  5. REITs need to meet specific conditions to qualify for exemptions, such as being listed or widely held, deriving most income from UAE-based immovable property, distributing a substantial portion of income to investors, and operating in accordance with relevant regulatory guidelines.

Investors in Real- Estate Investment Trusts (REITs) must prepare for a tax change starting 2025, as they will be taxed on 80% of the REIT's UAE immovable property income. However, if the REIT distributes its property income within nine months of the financial year-end and the investor no longer holds any ownership interest at the time of distribution, they can avoid the tax. This tax treatment applies to both resident and non-resident legal entities investing in qualified REITs.

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