Unincorporated (and foreign) Partnerships & Family Foundations – Introduction
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.
Key Amendments
Family Foundations
Overview
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:
- Ownership and Control:
- The juridical person must be wholly owned and controlled by the Family Foundation, either directly or indirectly through an uninterrupted chain of entities also treated as Unincorporated Partnerships under Federal Decree-Law No. 47 of 2022 (the CT Law).
- Compliance with the CT Law:
- The juridical person must satisfy the requirements of Article 17(1) of the CT Law.
Implications
- Entities such as holding companies and juridical persons owned by Family Foundations can elect for tax transparency under these provisions.
- Income derived by these entities will be assessed directly at the level of the natural person beneficiaries of the parent Family Foundation.
This amendment provides greater flexibility for Family Foundations in structuring their ownership and tax arrangements.
Unincorporated Partnerships
Overview
Article 3 of MD261 revises the notification requirements for Unincorporated Partnerships treated as Taxable Persons under the CT Law:
- Previously, partnerships were required to notify the FTA within 20 business days whenever a partner joined or left the partnership.
- MD261 now allows such changes to be reported as part of the Tax Return for the relevant Tax Period in which the change occurred.
Implications
This amendment simplifies compliance for Unincorporated Partnerships, reducing the administrative burden of immediate notifications.
Foreign Partnerships
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.
Unincorporated (and foreign) Partnerships & Family Foundations – Conclusion
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.
Final Thoughts
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