FTA clarifications relate to investor tax status in ”qualified funds’
Dubai: Clarity Issued for Investors on Corporate Tax Rules for REITs
Investors now have a clearer understanding of their tax obligations when involved in real estate investment trusts (REITs) that qualify as tax-exempt under the ‘qualified fund’ category.
Starting from tax periods on or after January 1, 2025, both resident and non-resident entities holding stakes in REITs exempt from corporate tax will be liable to pay taxes on a pro-rata share of 80% of the income derived from immovable property held by the REIT.
However, if the REIT distributes this income from immovable property within nine months following the financial year-end, and the investor has not received a dividend payout, then corporate tax will not apply to the income earned from the fund by that investor.
As outlined in the UAE Corporate Tax law, an investor in a REIT is treated as the legal holder of the ownership interest in the fund.
The clarification from the Federal Tax Authority covers several aspects of how investors in tax-exempt qualified REITs will be treated. This includes:
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How profit distributions made by the real estate fund to investors are handled.
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Costs incurred by the investor in connection with their investment in the fund.
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The process involved in selling the investment in the fund.
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Fee adjustments owed to the investment manager.
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The fund’s responsibility to provide investors with the relevant data to compute their taxable income.
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The role of a tax agent who may represent a non-resident investor in a REIT to assist in meeting their tax obligations.
