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The UAE Ministry of Finance (MoF) has issued Ministerial Decision No. 261 of 2024 (MD261) concerning Unincorporated Partnerships, Foreign Partnerships, and Family Foundations.
MD261 repeals the earlier Ministerial Decision No. 127 of 2023 and applies retrospectively from 1 June 2023.
This article highlights the key amendments introduced by MD261 and their implications.
Under Article 5(2) of MD261, juridical persons wholly owned and controlled by Family Foundations treated as Unincorporated Partnerships may now apply to the Federal Tax Authority (FTA) for the same tax-transparent status, provided the following conditions are met:
This amendment provides greater flexibility for Family Foundations in structuring their ownership and tax arrangements.
Article 3 of MD261 revises the notification requirements for Unincorporated Partnerships treated as Taxable Persons under the CT Law:
This amendment simplifies compliance for Unincorporated Partnerships, reducing the administrative burden of immediate notifications.
MD261 also introduces changes regarding the classification of foreign partnerships as Unincorporated Partnerships under the CT Law.
These amendments refine the conditions under which foreign partnerships may elect for tax transparency, ensuring consistency with the updated provisions.
Ministerial Decision No. 261 of 2024 introduces meaningful changes for Family Foundations, Unincorporated Partnerships, and Foreign Partnerships, providing greater clarity and flexibility under the UAE’s corporate tax framework.
These amendments reduce compliance burdens and enhance tax structuring options for eligible entities.
If you have any queries about this article on Unincorporated (and foreign) Partnerships & Family Foundations or tax matters in the UAE more generally, please get in touch.
Alternatively, if you are a tax adviser in the UAE and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
On 31 July 2024, the Cayman Islands introduced the Beneficial Ownership Transparency Act 2023 (BO Act) along with the Beneficial Ownership Transparency Regulations, 2024 (BO Regulations).
Alongside these regulations, guidance titled Guidance on Complying with Beneficial Ownership Obligations in the Cayman Islands (BO Guidance Notes) was also made available on the General Registry’s website.
This new framework, known as the New BO Regime, revises the rules for entities registered in the Cayman Islands.
For those involved in private client structures, especially with trust arrangements and underlying companies incorporated in the Cayman Islands, these changes may have significant implications.
This article explores what the New BO Regime entails and how it may impact trusts and other wealth management entities.
The New BO Regime broadens the types of Cayman Islands entities required to comply with beneficial ownership reporting obligations.
Under the new rules, some entities that were previously exempt now fall within scope, meaning more wealth structuring vehicles, including foundation companies and private trust companies (PTCs), must adhere to these requirements.
While trusts themselves are exempt from registration, companies or other entities under a trust, known as “Trust Underlying Entities,” must comply with beneficial ownership reporting if they meet certain criteria.
Under the New BO Regime, several types of entities are classified as “Legal Persons” and fall within the scope of the regulations, including:
Entities designated as Legal Persons must maintain a Register that identifies their beneficial owners.
The BO Act sets out who qualifies as a “Registrable Beneficial Owner.” This includes individuals or legal persons who:
In the absence of a Registrable Beneficial Owner, a senior managing official, like a director or CEO, must be listed as the contact person on the Register.
For each Registrable Beneficial Owner, the following information must be provided:
The Register needs to be updated monthly to ensure compliance.
The responsibility for maintaining and filing the Register lies with the Legal Person itself, typically in collaboration with a corporate services provider (CSP). Failure to comply with these reporting requirements may lead to civil or criminal penalties.
The New BO Regime enforcement begins in January 2025, providing a grace period for entities to meet compliance obligations.
Trustees of trusts with a Trust Underlying Entity may need to report beneficial ownership details if there are no other identifiable Beneficial Owners.
Trustees must meet specific criteria, demonstrating ultimate control over the trust’s activities, unless this control is limited to advisory or managerial functions.
Foreign trustees also need to report details of a nominated individual within their organisation.
Foundation companies commonly used in private wealth structuring may also require review.
Depending on the constitutional documents, a Registrable Beneficial Owner could be the Supervisor, founder, or another individual with control.
For PTCs, previously exempt unlicensed PTCs now fall within scope, requiring identification of Registrable Beneficial Owners.
Privacy and Future Changes
However, draft regulations are under consultation, exploring a possible framework for public access in the future.
If public access is introduced, requests will be subject to a “legitimate interest” test to safeguard against risks like extortion or violence.
The New BO Regime places a significant regulatory responsibility on entities and individuals managing trusts and wealth structures in the Cayman Islands.
With the January 2025 deadline approaching, private clients, trustees, and wealth management advisors should carefully assess their current structures to ensure compliance.
If you have any queries about this article on beneficial ownership, or tax matters in the Cayman Islands, then please get in touch.
Alternatively, if you are a tax adviser in the Cayman Islands and would be interested in sharing your knowledge and becoming a tax native, there is more information on membership here.
In the realm of wealth structuring for high-net-worth individuals and families, private trust companies (PTCs) have gained significant traction.
A rising trend among private clients is the establishment of their own PTCs to act as trustees for trusts, as opposed to entrusting these responsibilities to professional trustee companies provided by offshore service providers.
Lets look at Cayman PTCS a bit more closely.
Central to the regulation of Cayman’s trust company industry is the Banks and Trust Companies Act (BTC Act), which mandates licensing by the Cayman Islands Monetary Authority (CIMA) for any company engaging in “trust business” within or from the Cayman Islands.
“Trust business” includes acting as a trustee for express trusts on a professional basis, as well as acting as an executor or administrator.
Since 2008, Cayman PTCs that meet specific criteria have been exempted from the licensing requirement under the BTC Act.
These PTCs must register with CIMA, demonstrating their eligibility for unlicensed status, as outlined in the Private Trust Companies Regulations (PTC Regs).
The scope of “connected trust business” hinges on the relationship between the settlors/contributors of the trusts in question.
PTCs acting as trustees for family trusts, for instance, typically meet this criterion seamlessly.
Unlicensed PTCs are required to maintain certain documents at their registered office in Cayman, including copies of trust terms, trustee and beneficiary details, settlor and protector information, and financial records related to their connected trust business.
The combined government incorporation fees and disbursements total around US$900 for an exempted company.
Registered office service providers charge additional fees, which vary among providers.
If the service provider also serves as the trustee for orphaning the PTC, an extra fee applies.
The CIMA application fee for PTC registration is approximately US$4,200.
PTCs can be owned in various ways, influenced by tax considerations and client circumstances.
Common ownership structures include individual ownership, purpose trusts, or charitable/non-charitable purpose trusts such as STAR Trusts.
At least one director must be an individual, but beyond this requirement, the board composition can align with the settlor’s preferences.
Control mechanisms may be established through the constitutional documentation of the PTC and the terms of the purpose trust, influencing the appointment or removal of directors.
Settlor involvement can take various forms, such as serving as a protector, a board member, or an advisor. The settlor’s role can be pivotal in key decisions related to the underlying trusts and businesses.
The PTC’s board must ensure alignment with the trust terms, seek professional advice as necessary, and maintain proper records.
For orphaned PTCs, funding strategies should be devised to ensure self-sufficiency or rely on invoicing for trustee services.
Cayman’s legal and regulatory environment positions it as an excellent choice for establishing PTCs.
These flexible structures enable bespoke trustee services and offer a platform for family members’ active participation in trust administration and business management.
If you have any queries about Cayman Islands Private Trust Companies, or other Cayman matters, then please do get in touch.