The Ministry of Finance, UAE has revised Decision No. 127 of 2023 through Ministerial Decision No. (261) of 2024 while bringing amendments related to Family Foundations, Unincorporated Partnerships and Foreign Partnerships in line with the Federal Law No. 47/2022 regarding the Business Corporate tax of UAE. The objective is to improve the tax framework while also facilitating compliance for the companies.
Key Highlights of the New Amendments
Definitions and Scope:-
All provisions and terms raised in the latest decision are all subsisting to Article 1 of Federal Law No. 47/2022 hereafter referred to as the “Corporate Tax Law”
Overview of Different Partnership Tax Treatments in the UAE
| Partnership Type | Taxable Person Status | Non-Taxable Status | Special Notes |
| Unincorporated Partnerships | Authority Approval is mandatory to be treated as Taxable Person | Non- taxable unless qualifying under Article (16)(1) | Approval for treatment as taxable is conclusive and can only be reviewed in very rare cases. The principal partner is required to report to the tax authorities any alterations of partners which occurred during the course of the tax year |
| Foreign Partnerships | Not applicable | Not applicable unless circumstances arise where home jurisdiction imposes similar taxes. | Potentially taxable based on country laws of origin for each partner’s share of income. Needs to give yearly notice to the relevant authority about the transfer. |
| Family Foundations | Apply for Unincorporated Partnership status if the provided req | Tax relief is available provided that the beneficiaries do not generate taxable income | All the taxable incomes should be remitted to the beneficiaries within 6 months from the end of the tax year. Family Foundation owned entities may apply for Unincorporated Partnership status as provided for in Article (17). |
Comparison of New Law with Overview of Previous Tax Treatments in the UAE
| Partnership Type | Overview of Different Partnership Tax Treatments | Ministerial Decision No. 127 of 2023 |
| Unincorporated Partnerships | Mandatory Authority approval | Application for such taxable status can only be correct when such status was suitable. |
| Non-Taxable Status | Exception has not been established, except by article (16)(1) | Shall not be regarded as taxable unless they are a juridical person |
| Special Notes | Such approvals are not revocable. Such approvals shall only be appealed in very exceptional cases. Except in those exceptional cases, the principal partner has to file partnership changes made within tax periods against the principal partner. | On the 20th business days after the registration to the authority of any partnership agreement or amendment of a registered partnership composed of requisite documents |
| Foreign Partnerships | Not applicable | All foreign partnerships will always have no dual tax if duties are met. |
| Family Foundations | Can apply as unincorporated partnership on criteria meeting | Increased benefits for corporate tax integration |
What are the Impacts on Businesses?
The amendments are evidence of the commitment of the UAE to being a competitive economy with attractive taxation deemed appropriate within the framework of the economy including reducing administrative burdens and specifying the tax classification of various economic entities. In addition, Mr. Younis Haji AlKhoori, Under Secretary of the Ministry of Finance also emphasized the fact that such changes are intended to make any taxable person more clear cut and reinforce the UAE’s global standing as a center for business and investment.The edits about Unincorporated Partnerships, Foreign Partnerships and Family Foundations, has helped the UAE to retain the position as one of the Seychelles as one of the desirable business locations. These changes do not only enhance the lucidity and surety within the taxable persons by improving the business environment in the UAE.
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