UAE: Federal Tax Authority Clarifies Corporate Tax Rules for REIT Investors

The Finance World, 7 May 2025: The UAE Federal Tax Authority (FTA) issued a clarification CTP005 on the Taxation of investors in a Real Estate Investment Trust (REIT) that is exempt from Corporate Tax as a Qualifying Investment Fund

The clarification covers the income that will be taxed in the hands of juridical persons that are investors in a REIT and the relevant Tax Period in which the income will be taxed for such investors. It also provides information on the compliance obligations of the REIT and the investors.

A REIT that meets the conditions of Article 10(1) of Federal Decree-Law No. 47/20221 and Article 4(1) of Cabinet Decision No. 34/20252 can make an application to the Federal Tax Authority to be exempt from Corporate Tax as a Qualifying Investment Fund. Where a REIT is exempt from Corporate Tax, the Taxable Income of a juridical person that is an investor in the REIT is adjusted to include 80% of the prorated Immovable Property Income of the REIT. However, if the REIT makes a distribution within nine months from the end of its Financial Year and the investor has not received the dividend distribution due to the disposal of its entire Ownership Interest in the REIT, the investor will not be subject to Corporate Tax on the Immovable Property Income of the REIT.

A REIT must provide specific information in respect of the period to which the distribution relates, or the relevant Financial Year of the REIT, as the case may be. This includes the amount of Immovable Property Income of the REIT; whether the REIT is a distributing fund for such Financial Year; and the amount of tax depreciation deduction for each investment property.; any disposals of investment property for which a tax depreciation deduction was previously claimed. A REIT is not required to provide investors with information that is not relevant to the investor’s Corporate Tax obligations or which the investor has an obligation to keep in their own records, such as the investor’s own acquisition cost or disposal proceeds of an Ownership Interest in the REIT.

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UAE: Securities Authority Imposes Disciplinary Actions for Market Violations

Mubasher, 6 May 2025: The UAE Securities and Commodities Authority (SCA) has issued a financial penalty of AED 100,000 to an investor for engaging in pre-emptive trading activities.

The relevant regulation governs trading, clearing, settlement, transfer of ownership, and custody of securities.

In a separate disciplinary action, the SCA revoked a preliminary approval of an employee holding the position of “Promotion Manager” at a licensed company. The revocation followed the employee’s proven misconduct during an examination on the UAE’s financial systems and regulations.

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UAE: FTA Clarified VAT Treatment of Barter Transactions

The Federal Tax Authority has issued a public clarification on the VAT treatment of barter transactions in the UAE.

The announcement clarified that, with barter transactions, the value of a supply is determined by combining any monetary consideration received with the market value of the non-monetary component, after excluding the tax element. This clarification specifically relates to taxable persons and VAT registrants – including social media influencers, restaurants, farmers, accounting firms, and furniture dealers – and has imposed an obligation on each party to issue tax invoices and account for VAT on both monetary and non-monetary components in accordance with the prescribed valuation rules. The clarification referenced Federal Decree-Law No. 8/2017 on Value Added Tax and Cabinet Decision No. 52/2017. This reinforces the way the current legal framework operates.

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UAE: Central Bank Imposes Financial Sanction on Bank for AML Failures

Gulf News, 21 April 2025: The UAE Central Bank has imposed financial sanctions on an unnamed banking entity following an examination that revealed significant gaps in its internal anti-money laundering (AML) processes.

This decision underscores the Central Bank’s commitment to ensuring all banks and their staff comply with UAE laws, regulations, and standards related to AML. The penalty was issued after the Central Bank assessed the findings of its examination, which indicated non-compliance with AML policies, reflecting the regulator’s stringent enforcement of compliance requirements across the financial sector, including banks, currency exchange houses, and insurers.

The sanctioned bank must address the identified deficiencies and align its operations with national AML standards. This development follows the Central Bank’s announcement last year that a new internal entity, the National Anti-Money Laundering and Combating Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC), would oversee anti-money laundering operations.

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UAE: Trade Licensing Authority’s Decision on Financial Year Sparks Confusion

The National News, 10 April 2025: A recent decision by a UAE trade licensing authority to standardise the financial year for entities under its jurisdiction to a calendar year has led to confusion among businesses.

A UAE trade licensing authority has required all entities under its jurisdiction to adopt a calendar financial year, running from January 2025 to December 2025. This decision will require thousands of companies to alter their memorandums of association and has caused confusion about the potential tax impact. Previously, businesses which came under the trade licensing authority had the flexibility to choose their financial year based on their month of formation, but the new directive has standardised the period.

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