The UAE Ministry of Finance (MoF) has released Ministerial Decision No. 261 of 2024 (MD261) on Unincorporated Partnerships, Foreign Partnerships and Family Foundations. MD261 repeals Ministerial Decision No. 127 of 2023 and is enacted with retrospective effect from 1 June 2023.
Below we briefly consider the noteworthy amendments.
Family Foundations
Article 5(2) now allows a juridical person that is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership (i.e. elected for Family Foundation status) to make an application to the Federal Tax Authority (FTA) to be treated as an Unincorporated Partnership where the following conditions are met:
- the juridical person is wholly owned and controlled by the Family Foundation either directly or indirectly through an uninterrupted chain of other entities which are treated as Unincorporated Partnerships in accordance with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the CT Law).
- The juridical person meets the conditions of clause 1 of Article 17 of the CT Law.
In effect, this means that holding companies, Foundations, and other juridical persons that are wholly owned and controlled by Family Foundations can elect to be treated as tax transparent entities, provided that the requirements outlined above are met. The taxation of the income derived by these tax transparent entities will thus ultimately be assessed at the hands of the natural person beneficiaries of the parent Family Foundation which wholly owns such entities.
Unincorporated Partnerships
Article 3 of MD261 removes the requirement for Unincorporated Partnerships that are treated as Taxable Persons in their own right under the CT Law to notify the FTA within 20 business days from the occurrence of a Partner leaving or joining the Unincorporated Partnership. Now, notification of such changes can be conducted when filling the Tax Return for the relevant Tax Period in which the Partner left or joined the Partnership.
Other Amendments
In addition to the amendments above, MD261 also introduces certain amendments with regard to how and when a foreign partnership would be treated as an Unincorporated Partnerships under the CT Law.
Our Tax Services
Our Tax Team are able to assist you in better understanding the impact of these recent changes on your personal tax affairs and provide you with tailored advice to ensure optimal tax structuring.
We provide clients with specialist tax advice, planning and implementation support to achieve optimal tax outcomes for their personal and business interests in the UAE. Should you require such support, please feel free to contact Theunis Claassen, our Head of Tax, to arrange an initial discussion regarding your taxes.