CT Exemption Norms for Real Estate Investment Trusts
Investment funds, including Real Estate Investment Trusts (“REITs”), are exempted from the UAE Corporate Tax. The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (UAE Corporate Tax Law) has set out the conditions for investment funds including REITs to be treated as a Qualifying Investment Fund and apply for exemption. Moreover, the UAE Ministry of Finance recently released Cabinet Decision No. 81 of 2023, setting out additional conditions for Qualifying Investment Funds such as REITs to apply for corporate tax exemption.
In this blog, we will walk you through the additional conditions stipulated in Cabinet Decision No 81 as well as the primary conditions outlined in the UAE corporate tax law for REITs to be exempted from the scope of corporate tax. Corporate tax advisers in Dubai can help you further. Let us explore the topic in detail:
Conditions as per the UAE Corporate Tax Law
Any investment fund, including REITs, can apply to the Federal Tax Authority (FTA) to be exempt from the UAE Corporate Tax as a Qualifying Investment Fund if it meets all of the following conditions:
- The Investment Fund or its manager must be regulated by a competent authority in the UAE or a foreign competent authority recognized for the purpose of the UAE corporate tax law
- Interests in the investment fund must be traded on a Recognized Stock Exchange or must be marketed and made available sufficiently widely to investors
- The main or principal objective of the investment fund should not be avoiding corporate tax
- Any other conditions outlined in a decision issued by Cabinet at the suggestion of the UAE Minister of Finance
Additional Conditions for REITs Exemption
A REIT is required to meet all of the following conditions, in addition to the conditions under the Corporate Tax Law, to apply to the FTA to be exempt from Corporate Tax as a Qualifying Investment Fund:
- The value of real estate assets, excluding land, under the management or ownership of the REIT must exceed the threshold limit of AED 100,000,000
- At least 20% of the share capital of the REIT must be floated on a Recognised Stock Exchange, or it is directly wholly owned by two or more institutional investors specified in Article (5) of the Cabinet Decision, provided that at least two of those institutional investors are not Related Parties
- The REIT need to have an average Real Estate Asset Percentage of at least 70% during the relevant Gregorian calendar year, or the relevant 12 periods for which the financial statements are prepared
Who is an Institutional Investor?
Article 5 of Cabinet Decision No 81 lists the following as an institutional investor for the purpose of corporate tax in the UAE:
- The Federal Government.
- A Local Government.
- A Government Entity.
- A Government Controlled Entity.
- A foreign government, its institutions and authorities or the companies fully owned by any of them.
- International organizations.
- A Bank.
- An Insurance Provider.
- A pension or social security fund.
- An investment entity licensed by a relevant competent authority or a similar regulatory authority in or outside of the UAE.
- Any other juridical person determined by the FTA
Consult with Corporate Tax Experts at Tax Gian
Since the UAE corporate tax regime is at a nascent stage, businesses need to keep track of the latest developments and make appropriate tax decisions. Only highly qualified corporate tax consultants in Dubai can help businesses navigate through the complexities of the direct tax regime. Tax experts at Tax Gian, a brand of Jitendra Tax Consultants (JTC), can offer valuable insights and guidance related to corporate tax requirements in the UAE.
Tax Gian is a leading tax expert in the UAE with more than two decades of experience. We offer bespoke corporate tax services in Dubai in line with regulatory expectations. Our highly qualified tax agents in Dubai can help companies to guide you through complex areas of corporate tax to mitigate the risk of non-compliance.