The government in the United Arab Emirates has rolled out new laws and rules to clarify the tax status of foreigners and others who do not live in the country long term but have real estate holdings in the country. This will deal with investment funds and real estate.
The new rules were rolled out by the Ministry of Finance and the aim is to get greater transparency and cut down the burdens of compliance requirements. This was reported by the Emirates News Agency which is a mouthpiece of the government of Abu Dhabi and is also known as WAM.
Now, corporate tax will be levied on people in the UAE. Previously, foreigners were not bound to pay corporate taxes.
Now under the new rules and laws that have been rolled out is that a nexus is going to be considered to be in place for non resident juridical investors in the right kind of qualifying investment funds in particular cases and instances. If they pay out a minimum of 80 percent of their income in the last nine months. This time begins at the end of the financial year of any business. The date of the dividend distribution is the key time to keep in mind.
When a business hits the threshold then the nexus is set up at the same time that the interest ownership of the person is set. The nexus is also going to be applicable in case the fund is unable to meet the ownership diversity in the time of the tax period.
The same thing is going to work for Real Estate Investment Trusts. The nexus becomes operational either at the time of the distribution of dividends. This is in the case that 80 percent of them are paid out in the last nine months. The other trigger time is the ownership acquisition if the dividend condition is not met as reported by WAM.
This is because a lot of companies do not distribute dividends. A lot of the giants of industry like Berkshire for instance do not pay out dividends. The government wants to tax gains as they come.
If they had not done this then businesses could just hold on to their funds and not distribute dividends. Another way that companies in other countries dodge gains is through things like buybacks. In the UAE the system is clear without any serious kind of confusion.
For real estate companies or real estate investment trusts the same thing is going to apply as it will for other businesses. Companies like Nouba Real Estate are helping companies navigate the new environment for real estate companies in the UAE.
Other than these cases, non-resident people who have put down their capital just into REITs or QIFs are still going to be tax exempt.
The authorities say the reason that they have updated these rules is because of the new compliance laws is to make it easier for global investors. At the same time the goal of the country is to increase transparency. The country was even put on the grey list and does not want to get back on these lists anytime soon.
Also, as the world moves away from a zero tax system, the UAE is updating its tax codes to make sure they remain in the game.
In December of last year the country rolled out 15 percent taxes on all businesses that are under the legal control of the UAE.
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