Replaces Ministerial Decision No. 127 of 2023 with effect from 1 June 2023, setting when unincorporated partnerships, foreign partnerships and family foundations are treated as tax transparent or as taxable persons, including the conditions a family foundation and entities it wholly owns must meet.
Ministerial Decision No. 261 of 2024 is the current rulebook for tax transparency of Unincorporated Partnerships, Foreign Partnerships and Family Foundations under Articles 16 and 17 of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022). It was issued on 28 October 2024, repeals Ministerial Decision No. 127 of 2023, and applies retroactively from 1 June 2023, the start of the Corporate Tax regime, so it governs every Tax Period.
Article 2 confirms that an Unincorporated Partnership is not a Taxable Person in its own right unless it is a juridical person. Article 3 deals with a partnership that applies under Article 16(8) to be taxed as a Taxable Person: once approved the application is irrevocable save in exceptional circumstances with FTA approval, and the responsible partner reports any partner joining or leaving during the Tax Period when filing the Tax Return under Article 53, replacing the 20-business-day notification in the 2023 decision.
Article 4 sets the tests for a Foreign Partnership to be treated as an Unincorporated Partnership. For Article 16(7)(a) the partnership must not be subject to a tax of a similar character to Corporate Tax in its home jurisdiction; for Article 16(7)(b) each partner is treated as subject to tax on their distributive share if the partnership itself is not taxed in that jurisdiction; and the partnership must file an annual declaration with the FTA confirming both conditions in the form and timeline the FTA prescribes. The 2023 requirement for a tax information exchange arrangement with the home jurisdiction has been dropped.
Article 5 covers Family Foundations. Where a beneficiary is a public benefit entity, the foundation must show either that such 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 5(2) is new: a juridical person wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership may itself apply to the FTA for the same treatment under Article 17, provided the ownership and control run directly or through an uninterrupted chain of entities that are themselves treated as Unincorporated Partnerships, and the juridical person meets the conditions in Article 17(1). This lets a foundation's underlying holding company be transparent as well, so income flows to the beneficiaries without a Corporate Tax charge at the company level.
Article 6 repeals the 2023 decision and Article 7 fixes commencement at 1 June 2023.
Unincorporated Partnerships and their partners, Foreign Partnerships with UAE-taxable partners, Family Foundations established in the UAE (including DIFC, ADGM and RAK ICC foundations) and the juridical persons they wholly own and control, for Corporate Tax purposes 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 unless it is a juridical person. |
| Article 3(1) | An approved application for an Unincorporated Partnership to be taxed as a Taxable Person in its own right under Article 16(8) is irrevocable, except in exceptional circumstances with FTA approval. |
| Article 3(2) | The responsible partner of a partnership taxed in its own right gives the FTA details of any partner joining or leaving during the Tax Period when filing the Tax Return under Article 53. |
| Article 4(1)–(2) | A Foreign Partnership qualifies if it is not subject to a tax similar to Corporate Tax in its home jurisdiction; each partner is treated as subject to tax on their distributive share if the partnership itself is not taxed there. |
| Article 4(3) | The Foreign Partnership submits an annual declaration to the FTA confirming it meets the Article 16(7)(a) and (b) conditions, in the form and within the timeline the FTA prescribes. |
| Article 5(1) | A Family Foundation with public benefit entity beneficiaries must 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 5(2) | A juridical person wholly owned and controlled by a transparent Family Foundation, directly or through an uninterrupted chain of entities treated as Unincorporated Partnerships, may apply to the FTA to be treated as an Unincorporated Partnership under Article 17 if it meets the Article 17(1) conditions. |
| Article 6 | Repeals Ministerial Decision No. 127 of 2023, the earlier decision on the same subject issued on 24 May 2023. |
| Article 7 | The decision was published and came into effect on 1 June 2023, applying retroactively to the start of the Corporate Tax regime. |
This is the decision under which the family foundations we form in DIFC, ADGM and RAK ICC, and the holding entities beneath them, obtain tax-transparent treatment for Corporate Tax. When we design a foundation structure we now plan for two FTA applications: one for the foundation itself under Article 17, and one under Article 5(2) for each wholly owned holding company, so that rental income, dividends and investment gains are attributed to the beneficiaries rather than taxed at 9% in the company. The chain condition matters in practice: every entity between the foundation and the operating asset must itself be transparent, so we keep ownership chains short and avoid inserting an ordinary company. Where a client wants a charity among the beneficiaries, we draft the charter so that distributions to it are made within six months of the Tax Period end. Partnership clients with foreign structures are reminded of the annual declaration to the FTA.
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