[World Tax News] UAE Waives Corporate Tax Penalties | REIT Clarification | Spain’s Pillar 2 Law

Editorial Team – [2025] 174 Taxmann.com 363 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week –

1. UAE waives penalties for late corporate tax registration

The UAE Federal Tax Authority (FTA) has introduced an initiative to waive or refund penalties for late corporate tax registration, provided that tax returns or annual declarations are submitted within 7 months from the end of the first tax period. (The standard filing deadline is 9 months.)

Conditions for Penalty Waiver

• Taxable persons must file their tax return within 7 months of the first tax period’s end.
• Exempt persons must file their annual declaration within the same timeframe.

Who Can Benefit

Entities required to register for corporate tax, whether –

• Already penalised but unpaid;
• Penalised and paid;
• Yet to register.

When the Waiver Applies

• Scenario 1 – The taxpayer completed registration, received an unpaid late registration penalty, and submitted the tax return within seven months from the end of the first tax period. The penalty will be waived.
• Scenario 2 – The taxpayer completed registration, received an unpaid penalty, but has not yet filed the return. If the return or annual declaration is filed within seven months from the end of the first tax period, the penalty will be waived.
• Scenario 3 – The taxpayer completed registration and paid the penalty, but has not filed the return. If the return or annual declaration is filed within seven months, the paid penalty will be refunded to the tax account.
• Scenario 4 – The taxpayer completed registration, paid the penalty, and filed the return within seven months. The penalty amount will be refunded to the tax account.
• Scenario 5 – The taxpayer has not registered. To qualify for the waiver, registration and submission of the return or annual declaration must be completed within seven months from the end of the first tax period. Any imposed penalty will be waived.

Source – Announcement

2. UAE clarifies tax rules for investors in exempt REITs

The UAE Federal Tax Authority has released Public Clarification CTP005 regarding the Corporate Tax treatment of investors in a Real Estate Investment Trust (REIT) that qualifies for exemption as a Qualifying Investment Fund.

Under Federal Decree-Law No. 47 of 2022, effective for Tax Periods starting on or after 1 June 2023, a REIT that satisfies the conditions in Article 10(1) of the Corporate Tax Law and Article 4(1) of Cabinet Decision No. 34 of 2025 may apply to the FTA for exemption as a Qualifying Investment Fund. The exemption applies from the start of the Tax Period stated in the application or another date set by the FTA.

This clarification concerns REITs that are, or will be, exempt under this provision.

From 1 January 2025, investors—both Resident and Non-Resident juridical persons—will be subject to Corporate Tax on 80% of their share of the REIT’s Immovable Property Income. However, if the REIT distributes this income within 9 months of its Financial Year-end, and the investor no longer holds an interest due to full disposal before the distribution, no Corporate Tax will apply on that income to the former investor. This clarification addresses –

(a) The portion of REIT income taxable in the hands of juridical investors.

(b) The applicable Tax Period for such taxation.

(c) Compliance obligations of both the REIT and its investors.

Source – Guidance

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