UAE Introduces Tax Exemption for Real Estate Investment Trusts (REITs)

UAE Introduces Tax Exemption for Real Estate Investment Trusts

The UAE Ministry of Finance has introduced new measures that provide tax relief for the Real Estate Investment Trusts (REITs), to enhance the real estate sector’s investment appeal. This new regime under the UAE federal law spells out certain conditions by which REITs may be exempted from corporate tax, for those established in the UAE including the ADGM and DIFC.

Key Aspects of UAE’s Tax Exemption for REITs

Aspect Details
What is REIT? A Real Estate Investment Trust, allowing investors to pool money into income-generating real estate.
Tax Exemption REITs are now exempt from UAE corporate tax, supporting real estate investments.
Investor Benefits The exemption incentivizes both local and international investors to enter the UAE market.
REIT Requirements REITs must distribute 90% of their net income as dividends to maintain tax-exempt status.
Economic Impact Aims to boost the real estate sector, increase foreign investments, and create job opportunities.

Key Conditions for Tax Exemption

To qualify for the tax exemption, REITs must meet several general and specific conditions:

  1. General Conditions:
    • Such fund or its manager must hold a license from a competent UAE or an internationally recognized foreign regulator.
    • Investment in the fund can only be made in securities listed on a recognized stock exchange or offered for sale to the public.
    • The major aim of the fund should not be to minimize the tax liability.
  2. Specific Conditions for REITs:
    • The investment in real estate assets other than land by the fund shall be at least AED 100million.
    • At least 20% of the fund’s share capital must be floated or owned by at least two institutional investors.
    • Not less than 70% of the total value of the assets of the fund must be in land or real estate which are rented out.
UAE Introduces Tax Exemption for Real Estate Investment Trusts (REITs)

It is up to the UAE Federal Tax Authority to allow these exemptions and REITs are encouraged to adhere to conditions in order to stay exempted. They could also require changes in their internal procedures and policies in order to meet the new standards.

Investment Growth and REIT Income Distribution

Implications and Future Developments

This is expected to boost the position of the UAE as one of the most important regional centres for real estate investment by increasing its attractiveness to UAE and foreign investors. But the interested parties should always be up-to-date with the changes in the procedures and rules of UAE tax authority.

UAE Introduces Tax Exemption for Real Estate Investment Trusts (REITs)

Any REITs intending to take advantage of these exemptions should consider the effect of any proposed modification to their structure or business on their exemption status.

FAQs About UAE’s Tax Exemption for REITs

What is a Real Estate Investment Trust (REIT)?
A Real Estate Investment Trust (REIT) allows investors to pool their money to purchase, manage, and profit from real estate, similar to mutual funds for real estate.
What is the tax exemption for REITs in the UAE?
REITs in the UAE are now exempt from corporate tax, allowing them to generate higher returns for investors by reducing their overall tax burden.
How does the tax exemption benefit investors?
The tax exemption incentivizes both local and foreign investors by offering them a more attractive, tax-efficient way to invest in the UAE’s real estate market.
What are the requirements to maintain REIT tax exemption?
REITs are required to distribute at least 90% of their net income as dividends to their investors in order to retain their tax-exempt status.
What is the impact of this policy on the UAE’s economy?
The policy is expected to boost the UAE’s real estate sector, increase foreign investment, and create more jobs, stimulating overall economic growth.

Test Your Knowledge About UAE’s Tax Exemption for REITs















Related Stories
Is it More Cost-Effective to Take a Loan in India or Dubai-UAE?
Comparing Interest Rates: India vs. Dubai-UAE
DMCC’s Impact on Dubai’s Economy: A Game Changer in FDI and GDP
Dubai to Host World’s Most Expensive Bodybuilding Championship This September
Dubai RTA Achieves Prestigious ISO 10007 Certification for Excellence in Configuration Management