Is income from real estate investment trusts taxed?
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Income from a real estate investment trust (REIT) is not taxed if the REIT qualifies as an exempt Qualifying Investment Fund and meets the conditions. If it does not, its income is taxed normally. Investors in an exempt REIT may still be taxed on part of the income unless the trust distributes 80% or more within 9 months of year-end.
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The detail
Income from a REIT is taxed at the REIT level unless the REIT is exempt as a Qualifying Investment Fund under Cabinet Decision No. 34 of 2025. That exemption is conditional (Article 4(1)) and requires an application to the Authority. If exempt, the REIT's income is not taxed, but investors who are juridical persons must include 80% of prorated Immovable Property Income (i.e., rental income from real estate) in their Taxable Income, unless the REIT distributes 80% or more of that income within 9 months of the financial year end (Article 4(3)-(4)). Disposal rules trigger additional adjustments (Article 4(5)-(6)).1
What the law says
- Under Cabinet Decision 34 of 2025, a REIT may be exempt from Corporate Tax as a Qualifying Investment Fund if it meets the conditions in Article 4(1) (e.g., AED 100M+ in immovable property, 20% floated shares or institutional ownership, 70% rental-income assets).1
- Investors in such an exempt REIT must include 80% of their prorated Immovable Property Income in Taxable Income; this inclusion is avoided if the REIT distributes 80% or more of that income within 9 months of the financial year end (Article 4(3)-(4)).1
- For disposals of REIT interests or property, the investor's Taxable Income is adjusted to exclude previously included undistributed income, up to the disposal gain, and depreciation previously deducted is recaptured (Article 4(5)-(6)).1
What it depends on
- The REIT must apply to the FTA and meet all conditions of Article 4(1) of Cabinet Decision 34, including the 70% rental-income asset test and the ownership or listing tests.1
- The investor inclusion applies only to investors that are juridical persons and only to prorated Immovable Property Income (rental income, not real estate gains).1
- The 80% distribution exception requires the REIT to distribute at least 80% of Immovable Property Income within 9 months from the end of the relevant financial year.1
Check before you rely on it
- Confirm the REIT has an approved exemption as a Qualifying Investment Fund from the FTA.
- Verify the REIT distributes 80% of its rental income within 9 months of each year-end, if you rely on that exception.
- Check whether your disposal of a REIT interest triggers the recapture rules.
Note: The specific income type (rental vs. gains) matters; real estate gains are treated differently and are not covered by these distribution rules.
Sources (1) — read the official text
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Article 4 – Conditions to Exempt a Real Estate Investment Trust
Read the article
Article 4 – Conditions to Exempt a Real Estate Investment Trust from Corporate Tax 1. A Real Estate Investment Trust shall meet all of the following conditions, in addition to the conditions under Clause (1) of Article (10) of the Corporate Tax Law, in order to apply to the Authority to be exempt from Corporate Tax as a Qualifying Investment Fund: a. The value of Immovable Property, excluding land, under the management or ownership of the Real Estate Investment Trust and any Exempt Person specified under paragraphs (f), (h) and (i) of Clause (1) of Article (4) of the Corporate Tax Law wholly directly or indirectly owned and controlled by the Real Estate Investment Trust exceeds AED 100,000,000 (one hundred million United Arab Emirates dirhams). b. Where any of the following is met: 1) At least 20% (twenty percent), or any other percentage as specified by the Minister, of its shares are floated on a Recognised Stock Exchange and the Real Estate Investment Trust and its Related Parties or Connected Persons do not subscribe to or purchase any of the floated shares. 2) It is directly wholly owned by (2) two or more institutional investors specified in Clause (8) of this Article, provided that at least (2) two of those Cabinet Decision No. 34 of 2025 – As published by the Ministry of Finance 7 institutional investors are not Related Parties. c. The Real Estate Investment Trust, including any Exempt Person specified under paragraphs (f), (h) and (i) of Clause (1) of Article (4) of the Corporate Tax Law wholly directly or indirectly owned and controlled by the Real Estate Investment Trust, must have an average value of rental income-generating Immovable Property, excluding Immovable Property held solely for capital appreciation, of at least 70% (seventy percent) of the total value of its assets during the relevant Financial Year. d. To provide its investors with all information, documents and data necessary for the purposes of calculating their Taxable Income adjusted pursuant to this Decision. 2. Clauses (1), (8), (10) and (11) of Article (3) of this Decision shall apply to a Real Estate Investment Trust that is exempt from Corporate Tax as a Qualifying Investment Fund. 3. Without prejudice to Clause (1) of Article (3) of this Decision, the Taxable Income of a juridical person that is an investor in a Real Estate Investment Trust that is exempt from Corporate Tax as a Qualifying Investment Fund, for the relevant Tax Period shall be adjusted to include 80% (eighty percent) of the prorated Immovable Property Income. Such investor may adjust its Taxable Income to include depreciation adjustments in accordance with Clause (8) of Article (3) of this Decision. 4. As an exception to Clause (3) of this Article, if the Real Estate Investment Trust distributes 80% (eighty percent) or more of its Immovable Property Income to the investors in relation to the relevant Financial Year within (9) nine months from the end of that Financial Year, the income of the investor, who did not receive this distribution due to the disposal of its Ownership Interest in the Real Estate Investment Trust, shall not be adjusted proportionate to that disposal. 5. If the investor disposes of its Ownership Interest in a Real Estate Investment Trust and Article (23) of the Corporate Tax Law does not apply to such disposal, the investor’s Taxable Income in the Tax Period in which the disposal took place shall be adjusted to exclude undistributed income that was included in its Taxable Income in relation to that interest in accordance with Clause (3) of this Article in that Tax Period and any previous Tax Periods, subject to not exceeding the taxable Cabinet Decision No. 34 of 2025 – As published by the Ministry of Finance 8 gain arising from such disposal. 6. The Taxable Income of the investor shall be increased by the depreciation amount previously deducted under Clause (3) of this Article in the Tax Period in which any of the following occur, whichever is earlier: a. Disposal of the Immovable Property by the Real Estate Investment Trust. b. Disposal of the Ownership Interests in the Real Estate Investment Trust by the investor. 7. Paragraphs (a) and (b) of Clause (2) of Article (2) of this Decision shall apply to a Real Estate Investment Trust that is exempt from Corporate Tax as a Qualifying Investment Fund, and reference to resident investment fund in that Clause shall be replaced with reference to Real Estate Investment Trust. 8. An institutional investor is any of the following: a. A Government Entity. b. A Government Controlled Entity. c. Any juridical person wholly owned and controlled by any entity specified under paragraph (a) and (b) of this Clause. d. A foreign government, its institutions and authorities or the juridical persons wholly owned and controlled by any of them. e. International organisation. f. A Bank. g. An Insurance Provider. h. A pension or social security fund. i. An investment fund licensed and regulated by a relevant competent authority or a similar regulatory authority in or outside of the State. j. Any other juridical person determined by the Authority. Cabinet Decision No. 34 of 2025 – As published by the Ministry of Finance 9
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Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer
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