The clarification explains how corporate tax applies to entities commonly found in family wealth management setups, such as Family Foundations, holding companies, Special Purpose Vehicles (SPVs), SFOs, and MFOs, as well as the family members involved.
The UAE Federal Tax Authority (FTA) has issued Corporate Tax Public Clarification CTP008, providing guidance on the corporate tax treatment of family wealth management structures, including Single Family Offices (SFOs) and Multi-Family Offices (MFOs).
The clarification explains how corporate tax applies to entities commonly found in family wealth management setups, such as Family Foundations, holding companies, Special Purpose Vehicles (SPVs), SFOs, and MFOs, as well as the family members involved.
SFOs and MFOs that do not meet tax transparency requirements are treated as taxable entities. They are subject to corporate tax on all income, including management fees, and must apply the arm’s length principle when providing services within the family group.
For offices established in UAE Free Zones, the clarification notes that they may qualify for a 0% corporate tax rate on qualifying income only if they are regulated by authorities such as the UAE Central Bank or the Dubai Financial Services Authority (DFSA). Without such oversight, the zero percent rate does not apply.
Income earned by family members from tax-transparent wealth management entities is generally exempt from corporate tax when classified as personal investment or real estate investment income. However, family members involved in commercial activities may be taxed if annual income exceeds AED 1 million.
The FTA also provides examples of common family wealth structures, including SFOs held directly by family foundations or members, SFOs holding investments indirectly, and structures using regulated MFOs. Compliance with legal and regulatory conditions determines eligibility for tax transparency and free zone benefits.
