Recently some amendments were introduced vide Ministerial Decision No. (261) for UAE Partnerships including Family Foundations in line with Federal Law No. 47/2022. These changes create opportunities for businesses at the domestic and international levels, lessen compliance cost, and promote the UAE as an International Business Centre.
Family Foundations are also recognized as Family Trusts having legal structure under the UAE Corporate Tax Law to administer and preserve the assets & wealth of families with the aim of:
Unincorporated Partnerships or Agreements take the form of Share Agreements by two or more people/entities for the distribution of profits and losses.This obligation was frustrating, created unnecessary administrative hitches, and limited operational focus. The amended framework does not have this requirement, which means that businesses can focus on doing business. This also brings efficiency in terms of compliance with the tax administration of the UAE.
| Type | Tax Treatment |
| Juridical persons | Liable for UAE corporate taxes. Limited to legally registered entities, which are subject to UAE Corporate Tax. |
| Juridical persons | Liable for UAE corporate taxes. Limited to legally registered entities, which are subject to UAE Corporate Tax. |
| unincorporated partnerships | Income tax at the level of the beneficiaries or founders − not that of the foundation − so income of the foundation is not taxed at the corporate level. |
Read more: Exempt businesses under corporate tax in UAE
Under Unincorporated Partnership for tax transparency, Family Foundation must comply with the following:
Individuals creating a Family Foundation may request tax exemptions in line with Article 17 of Federal Decree-Law No. 47 of 2022. Once approved by FTA:
| Benefit | Details |
| Corporate Tax Saving | Beneficiaries are ascertained tax on their income received but not taxed at the level of the foundation. |
| Asset Protection | Family wealth is exposed against risks such as lawsuits or creditors' claims. |
| Succession Planning | Helps to ensure that wealth is efficiently transferred to the selected beneficiaries under the interests of the founder. |
| Supporting Beneficiary | Can help to make donations or sponsorship to the areas of education, charity, and social welfare. |
Where a public benefit entity fails to comply with the criteria set out in Cabinet Decision No. 37 of 2023, that entity shall automatically be deemed a taxable person even if that entity derives benefits from a Family Foundation.
Step wise guidance for a UAE Family Foundation:
When a Family Foundation is requested to FTA, the classification is accepted as Unincorporated Partnerships, when approved: two out of three things are stated to happen:
| Condition | Requirement |
| Beneficiaries | Must be natural persons or public benefit entities qualifying for taxation relief. |
| Asset Management | The foundation will not engage in any activities that would warrant paying taxes while still managing assets for the purpose of planning their wealth. |
| FTA Application | Any appeal concerning the classification of a foundation as an unincorporated partnership has to be approved by the FTA. |
The reforms do not disregard the tax transparent status of foreign partnerships, making it easier for those in cross-border businesses. The partnerships that are transparent when a business is cross-border are treated the same way in the UAE.
| Key Impact | Details |
| No Individual Approval Required | no longer require seeking individual approval for their tax arrangements at FTA. |
| Double Taxation Avoidance | Tax transparency ensures no double taxation of income for one entity, promoting the UAE as an ideal middle point for others. |
In the case of family foundations which are classified as unincorporated partnerships, the beneficiaries are regarded as real members of the partnership. They are required to:
Payments to non-resident beneficiaries are fully taxable under UAE corporate tax laws, per Article 12 and Cabinet Decision No. 49 of 2023.
| Reform Area | Direction |
| Simplified Tax Framework | Reduction of administrative burdens for partnerships and foundations. |
| Double Taxation Avoidance | Ensures foreign partnerships are tax transparent and that their foreign residence does not subject them to dual taxation. |
| Management of Family Wealth | Charitable purposes,succession planning, and asset protection |
| Improved Compliance Flexibility | Appears to assist Family Foundations and beneficiaries in complying very easily. |
The changes made by Ministerial Decision No. (261) in the UAE take into account the specific requirements of Unincorporated Partnerships, Family Foundations, and Foreign Partnerships, improving transparency, simplifying compliance processes, and harmonizing with global standards. Such changes are beneficial to both businesses and individuals as these changes provide compliance with regulatory requirements while optimizing tax schedules within Dubai. Tax experts and practitioners are advised to make use of the reforms in a proper manner.