Updated guidance applies to tax periods beginning on or after January 1, 2025
The Ministry of Finance (MoF) issued Cabinet Decision No. 34 of 2025 (replacing Cabinet Decision No. 81 of 2023) providing updated guidance on the requirements for investment funds and real estate investment trusts (REITs) to attain status as tax-exempt qualifying investment funds (QIFs), and setting out rules for taxing income derived through such funds in the hands of investors. The MoF also issued Cabinet Decision No. 35 of 2025 (replacing Cabinet Decision No. 56 of 2023) providing updated nexus rules for nonresidents.
Cabinet Decisions 34 and 35 both apply to tax periods beginning on or January 1, 2025.
In addition, the MoF issued Cabinet Decision No. 96, making a small change to the condition for REIT exemption. The Federal Tax Authority (FTA) also recently issued a Public Clarification on the taxation of investors in tax-exempt REITs as QIF (CTP005), which provides various examples on the timing of taxation, implications in case of distributing vs. non-distributing REITs and tax implications of having a different tax period from the REIT.
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The updated guidance shows a clear intent to bring income from immovable property under the tax net. The nexus rules for nonresident juridical investors have also been expanded, potentially resulting in non-exempt income becoming subject to tax.
The new rules also introduce significant investor reporting obligations for investment managers, which are a prerequisite for a QIF or REIT to obtain tax-exempt status.
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