The UAE Ministry Of Finance (MoF) Releases New Decision For Unincorporated Partnerships, Family Foundations And Foreign Partnerships
On November 18, 2024, the UAE Ministry of Finance (MoF) released Ministerial Decision No. (261) of 2024, which superseded the Ministerial Decision No. 127 of 2023. This new decision introduces major changes to the tax treatment of unincorporated partnerships, family foundations and foreign partnerships under Federal Decree-Law No. 47 of 2022 on Corporate Tax
These changes give clarity, administrative relief, and offer tax benefits while simplifying compliance procedures for the specific taxable persons. Hence, these amendments offer considerable opportunities for businesses operating under the UAE jurisdiction.
Key Takeaways of This Decision:
Unincorporated partnerships: The need for notifying the authority within 20 business days of the partners leaving or joining the unincorporated partnership is no longer required. It is expected to be done during the time of filing a tax return.
Foreign Partnerships: Foreign partnerships operating in the UAE is now eligible to be treated as tax transparent as they are treated as the same in their home jurisdiction.
Family Foundations: Juridical person fully owned by or under control of the family foundation, is now eligible to be treated as unincorporated partnership and also can apply for tax transparency status.
Old Decision Vs New Amendment:
- For Unincorporated Partnerships
| Criteria | Decision No.127 of 2023 | Decision No.261 of 2024 | Impact |
| Amendments in the Notification of unincorporated partnership | The unincorporate partnership are required to notify the FTA within 20 days from the joining or leaving the partnership | The concerned partner is required to provide the details at the time of filing tax return during the relevant tax period | Reduces administrative burden and compliance pressures for partnerships |
- For Foreign Partnerships
| Criteria | Decision No.127 of 2023 | Decision No.261 of 2024 | Impact |
| Relaxation of Conditions for Tax Transparency | Individual partners need to verify their tax status with the FTA. Foreign partnership must fulfil certain conditions to be treated as unincorporated partnership: The partnership shouldn’t be subject to tax under foreign jurisdiction The distributive share of the partnership income need be taxed in the partnership Need to submit an annual declaration regarding the compliance of partnership Adequate arrangements need to implement for tax-information sharing between the UAE and foreign jurisdiction | Foreign partners are treated as tax transparent if treated the same in their home jurisdiction Condition & Criteria are relaxed for foreign partnerships to be treated as unincorporated partnerships: The partnership shouldn’t be subject to taxation in the foreign jurisdiction which is similar to corporate tax in the UAE For fiscally transparent partnerships, relief is provided by deeming their partners as liable to tax on their distributive shares The annual declaration requirement to unincorporated partnership status has not been altered Tax-information sharing arrangements is no longer required | Eliminates the need for individual partners to verify their status with FTA. Streamlines procedures, removes redundancies and enables ease of operability for foreign partnerships |
- For Family Foundations
| Criteria | Decision No.127 of 2023 | Decision No.261 of 2024 | Impact |
| Eligibility for Tax Transparency | Family foundations couldn’t be considered for the treatment of tax transparency for juridical persons | Any juridical person wholly owned and under control of family foundation, either directly or through chain of entities can apply for tax transparency status in the UAE | Enhances the appeal of family foundations as vehicles for wealth preservation and asset management within the UAE, while also offering tax advantage |
The amendments in Ministerial Decision No. (261) of 2024 provides some reliefs regarding reporting requirements and tax preparation for foreign partnerships, unincorporated partnerships and family foundations. This decision also fortifies UAE’s attractiveness as a global business and investment hub. Family-owned businesses and foreign entities operating in the UAE, will significantly benefit with this decision with new opportunities while simplifying compliance procedures and enhancing tax transparency.
To understand whether or how this new decision will impact your business and personalized guidance, connect with KGRN tax consultants today!
What KGRN Clients are saying?
Related posts:
Chapter Four – Taxable Person & Corporate Tax Base Under UAE Corporate Tax Law
Chapter Three – Exempt Person Under UAE Corporate Tax Law
Corporate Tax Accounting Standards in UAE: A Guide For Businesses
Complete Guide to General Interest Deduction Limitation Rule in UAE Corporate Tax
Caculation of Corporate Tax liability & Reliefs