Set when an unincorporated partnership is tax transparent or may elect to be taxed in its own right, the conditions for foreign partnerships to be treated as transparent, and the conditions for a family foundation to be treated as an unincorporated partnership; repealed by Ministerial Decision No. 261 of 2024.
Ministerial Decision No. 127 of 2023 was the first set of rules under Articles 16 and 17 of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022) on when an Unincorporated Partnership, a Foreign Partnership or a Family Foundation is treated as tax transparent rather than as a Taxable Person. It was issued on 24 May 2023 and took effect the day after publication. It has been superseded: Ministerial Decision No. 261 of 2024 repealed it and replaced it with rules that apply retroactively from 1 June 2023, so for practical purposes the 2024 decision governs every Tax Period.
Article 2 set the basic rule: for Article 16(1) of the law, an Unincorporated Partnership is not a Taxable Person in its own right provided it is not a juridical person. Article 3 dealt with partnerships that apply under Article 16(8) to be taxed as a Taxable Person: the application was irrevocable except in exceptional circumstances with FTA approval, and the partnership had to notify the FTA within 20 business days of any partner joining or leaving.
Article 4 added conditions for a Foreign Partnership to be treated as an Unincorporated Partnership under Article 16(7)(c): an annual declaration to the FTA confirming that the partnership is not taxed in its home jurisdiction and that each partner is individually subject to tax on their share, and adequate arrangements for tax information exchange between the UAE and the partnership's home jurisdiction. A partner was treated as subject to tax if they would be taxed on their distributive share in the jurisdiction where they are tax resident.
Article 5 covered Family Foundations under Article 17(1)(e). Where one or more beneficiaries are public benefit entities, the foundation had to show either that those beneficiaries derive no income that would be Taxable Income in their own hands, or that any such income is distributed to them within six months of the end of the Tax Period.
Article 6 provided for commencement the day after publication. The 2024 replacement kept the structure but dropped the 20-business-day notification in favour of disclosure in the Tax Return, removed the information-exchange condition for Foreign Partnerships, and added the ability for a juridical person wholly owned and controlled by a transparent Family Foundation to apply for the same treatment. The 2023 text is kept here for the history of the rules and for understanding filings made before the 2024 decision was issued.
Unincorporated Partnerships, Foreign Partnerships and Family Foundations seeking tax-transparent treatment under Articles 16 and 17 of the Corporate Tax Law, together with their partners and beneficiaries. Superseded by Ministerial Decision No. 261 of 2024 with effect from 1 June 2023.
| Article 2 | An Unincorporated Partnership is not considered a Taxable Person in its own right for Article 16(1) of the Corporate Tax Law, provided it is not a juridical person, without prejudice to Articles 16(7) and 17. |
| Article 3(1) | An approved application under Article 16(8) for a partnership to be taxed as a Taxable Person in its own right is irrevocable, except in exceptional circumstances with FTA approval. |
| Article 3(2) | A partnership taxed in its own right had to notify the FTA within 20 business days of any partner joining or leaving the partnership. |
| Article 4(1) | A Foreign Partnership qualified as an Unincorporated Partnership only if it filed an annual declaration confirming the Article 16(7) conditions and there were adequate arrangements for exchanging partners' tax information between the UAE and its home jurisdiction. |
| Article 4(2) | Each partner was treated as subject to tax if they would be taxed on their distributive share of the partnership's income in the jurisdiction of their tax residence. |
| Article 5 | A Family Foundation with public benefit entity beneficiaries had to show those beneficiaries derive no income that would be Taxable Income in their own right, or distribute such income to them within six months of the end of the Tax Period. |
| Article 6 | The decision was published and came into effect the day following publication; it was issued on 24 May 2023. |
Foundations and partnerships we set up in 2023 and 2024 relied on this decision for their tax-transparent status, and the applications we lodged with the FTA in that period were framed on its conditions. We now work from Ministerial Decision No. 261 of 2024, which replaced it with effect from 1 June 2023, but we keep the 2023 text on file for two reasons. First, where a client's foundation or partnership filed under the old rules, we can show the FTA what the position was when the filing was made. Second, the public benefit beneficiary test in Article 5 survived unchanged into the 2024 decision, so our foundation charters still address it: where a charitable beneficiary is named, we document either that it receives no income that would be Taxable Income or that distributions are made within six months of the Tax Period end.
Unincorporated Partnerships and Family Foundations Decision (2024)
Replaces Ministerial Decision No. 127 of 2023 with effect from 1 June 2023, setting when unincorporated partnerships, foreign partnerships and family foundations are trea…
Corporate Tax Law
Imposes federal corporate tax on the taxable income of UAE companies and businesses at 0% up to a Cabinet-set threshold and 9% above it, with 0% on the qualifying income …
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