UAE corporate tax for unincorporated partnerships, foreign partnerships, and family foundations

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Understanding UAE corporate tax for unincorporated partnerships, foreign partnerships, and family foundations

It has been a challenging process to deal with corporate tax issue, particularly for organizations such as unincorporated partnerships, foreign partnerships, and family foundations. But that is clearer, more recently so, for UAE as the issue was clarified with the Ministerial Decision No. 261 of 2024 by amending rules under Federal Decree-Law No. 47 of 2022. This post will explain new updates and what it means for organizations.

What's Changed?

This is Ministerial Decision No. 261 dated 1 June 2023, which elaborates on the treatment of such entities under the UAE corporate tax law. Essentially, this one overrides the other guidelines, which are Ministerial Decision No. 127 of 2023, to set in more particularized rules. Let’s examine each type.

Unincorporated partnerships: 

Generally, unincorporated partnerships are not considered taxable entities unless they are “juridical persons” under the law. That is, unless your partnership is classified as a “juridical person” under the law, it will probably not be taxed directly. But if an unincorporated partnership is considered a taxable person, the accountable partner has to maintain a detailed record of changes in the membership of the partnership for the tax year.

Foreign Partnerships:

Foreign partnership are treated differently depending on their home country’s tax system. It means that if the foreign jurisdiction has no corporate tax equivalent to the one in the UAE, then each partner is taxed on his share of income in the partnership. This is a very important point for international businesses in the UAE. In fact, foreign partnerships are also obligated to submit an annual declaration stating that they meet the tax requirements of the UAE.

Family Foundations 

A family foundation can sometimes be treated as an unincorporated partnership, with a couple of important conditions. That is whether any of the beneficiaries are public benefit entities. In that case, it must be shown that income those beneficiaries receive wouldn’t be taxable if they received it directly. It must also be noted that income must be distributed within six months of the tax year’s end. Family foundations, if they satisfy the laid out specific criteria for ownership and control by the regulations, can formally apply to be treated as unincorporated partnerships.

Why These Changes Matter

It comes as much-needed clarity to the landscape of taxation concerning these kinds of organizations in the UAE, enhancing compliance and ensuring a uniform way of tax administration.

Key Take-A-Way:

New rules coming into effect 1 June 2023.

It supersedes the old one: Ministerial Decision No. 261 of 2024 canceled all provisions in Ministerial Decision No. 127 of 2023.

Objective-Clearness: With the intention to bring clarity and conformity in the tax treatment,.

Disclaimer : This is an information blog with no legal   or tax advice. Please seek a proper professional advisory for your specific case.

Unicorn Global Solutions  streamlines UAE corporate tax compliance for Unincorporated Partnerships, Foreign Partnerships, and Family Foundation through the transparent explanation of the relevant laws and requirements in the necessary documents. We explain your tax liability to businesses and individuals, ensuring income distribution in time, as well as annual declarations with minimal error. Our simplified procedure ensures tax compliance under the UAE tax code without any hustle. Text us on whatsApp  or call us today Contact us on WhatsApp or call us for customized support in managing your corporate tax needs effectively.

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