The UAE’s Federal Tax Authority (FTA) has issued new guidance clarifying the corporate tax treatment of investors in Real Estate Investment Trusts (REITs) that qualify as exempt funds. The clarification, which applies to tax periods starting on or after January 1, 2025, outlines how resident and non-resident legal persons holding interest in REITs will be taxed under the new corporate tax regime.
According to the FTA, investors in qualifying REITs will be liable for corporate tax on 80% of the income derived from immovable property, calculated on a pro-rata basis according to their shareholding. This income includes net profits from rights in UAE-based immovable assets, such as property sales, leases, transfers, and other forms of use or exploitation. These figures must be derived from the REIT’s financial statements and reflect income from property fully owned and controlled by the trust.
However, the FTA notes that if a REIT distributes its immovable property income within nine months following the end of its financial year, and an investor has sold their entire holding before the distribution, that investor will not be taxed on the property income distributed by the REIT. For the purposes of the UAE corporate tax framework, the investor is recognised as the legal owner of the REIT units and is taxed accordingly.
The clarification also sets out compliance obligations for both REITs and their investors. REITs are required to provide relevant financial information to help investors calculate their tax liabilities, including data on property income, distributions, and any tax depreciation claimed. Investors may deduct expenses related to their investment and must account for gains or losses upon disposal of their holdings.
In cases involving non-resident investors, the FTA allows for the appointment of a tax agent—either directly or via the REIT or investment manager—to assist in meeting UAE tax compliance requirements.
The public clarification is part of the FTA’s broader efforts to clarify how exempt entities and special investment structures, such as REITs, will be treated under the new corporate tax regime, which comes into force at the start of 2025. It follows a series of similar updates aimed at aligning investor obligations with the UAE’s federal tax law.
