UAE’s FTA Publishes Comprehensive Guide on Taxation of Family Foundations

The UAE’s Federal Tax Authority (FTA) has issued a pivotal guide titled “Taxation of Family Foundations”, released on 27 May 2025, offering clear and practical guidance on how Family Foundations can obtain Unincorporated Partnership status for Corporate Tax purposes. This initiative forms part of the FTA’s ongoing compliance enhancements aligned with Federal Decree‑Law No. 47 of 2022 and Ministerial Decision No. 261 of 2024, bringing clarity to wealth structures increasingly prevalent in the UAE’s evolved tax landscape.

Under Article 17 of the Corporate Tax Law, Family Foundations—entities like trusts established to preserve wealth across generations—can now elect to be treated as tax‑transparent Unincorporated Partnership, provided they meet certain conditions. The guide outlines that such foundations:

• Must be established for the benefit of identifiable natural persons and/or public benefit entities.
• Should primarily hold, invest, and manage assets without engaging in direct business activities.
• Cannot have tax avoidance as their main purpose

A significant update under Ministerial Decision 261 allows not only the foundations themselves but also their wholly‑owned juridical entities (e.g., holding companies) to apply for the same tax‑transparent status, so long as they satisfy conditions in Article 17(1). This flexibility enables structures involving multiple layers to benefit from transparency as long as the entities remain wholly owned and controlled..

On 10 March 2025, the FTA launched a dedicated application via the EmaraTax digital platform for Family Foundations seeking this status. Once approved, the foundation is relieved from filing Corporate Tax returns—tax obligations shift to the individual beneficiaries, who must assess their own registration and reporting responsibilities .

The guide also highlights streamlined compliance mechanisms introduced via Decision 261, including:

• Eliminating short‑notice filings for partner changes in a foundation’s structure.
• Requiring partnership‑status changes to be declared within the annual tax return, rather than within 20 days of change

Implications for Wealth Structures

This updated framework reflects the UAE’s commitment to aligning with global best practices, offering tax‑efficient transparency while avoiding misuse. Family offices and wealth‑holding structures benefit from clarity, simplified filing, and the ability to fine‑tune succession arrangements through juridical entities.

Beneficiaries, including natural persons, must assess:

• Whether their activities and income exceed the AED 1 million Corporate Tax threshold and trigger registration.
• If eligible, actively maintain compliance and record‑keeping to preserve transparent status

In Conclusion

With the latest guide and new Ministerial Decision, the FTA empowers Family Foundations to adopt a tax‑transparent structure, complementing the UAE’s broader aim to foster a business‑friendly, transparent, and globally aligned tax environment. The introduction of a digital application via EmaraTax further underscores the country’s move toward efficient and clear corporate tax processes.

To learn more about how these developments could impact your Family Foundation structure or to receive assistance with the application process,Contact SFM Corporate Services. Our team of experts specializes in UAE tax compliance and family wealth structuring, and we are ready to guide you through the requirements outlined by the FTA. Whether you are establishing a new foundation or adapting an existing one, SFM ensures you remain compliant while optimizing your structure for long-term success.