The UAE Ministry of Finance has released Ministerial Decision No. 261 of 2024, addressing the regulations surrounding unincorporated partnerships, foreign partnerships, and family foundations.

Unincorporated partnerships

Under Article 3 of Ministerial Decision No. 261, unincorporated partnerships no longer need to notify the Federal Tax Authority (FTA) of changes in partnership composition, such as a partner leaving or joining the unincorporated partnerships within 20 business days. These changes can now be reported with the tax return for the specific tax period during which the partner either joined or left the partnership.

Family foundations

A juridical person that is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership can make an application to the Authority to be treated as an Unincorporated Partnership under Article (17) of the Corporate Tax Law where all of 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 the Corporate Tax Law.
  • The juridical person meets the conditions of Clause (1) of Article (17) of the Corporate Tax Law.

This means that family foundations, holding companies, and other legal entities wholly owned and controlled by family foundations in the UAE can apply for tax transparent status if they meet the specified criteria.

Foreign partnerships

Foreign partnerships are considered tax transparent in the UAE if recognised as such in its home country, eliminating the need for individual partners to verify their tax status with the FTA. Under Article (16) of the Corporate Tax Law, each partner in the Foreign Partnership shall be considered to be subject to tax with regards to their distributive share of any income of the Foreign Partnership if the Foreign Partnership is not subject to tax in its own right in the foreign jurisdiction.

Ministerial Decision No. 261 of 2024 repeals Ministerial Decision No. 127 of 2023 and will be retroactively effective as of 1 June 2023.