The UAE Federal Tax Authority has issued an updated guide detailing the Corporate Tax treatment of Family Foundations, effective from May 2025. This guide clarifies how Family Foundations—commonly used for wealth management, succession planning, and philanthropy—are treated under UAE Corporate Tax Law.

What is a Family Foundation?

A Family Foundation refers to a foundation, trust, or similar entity that meets specific conditions under Article 17(1) of the Corporate Tax Law. These entities are often used to manage assets for the benefit of family members or charitable causes.

Conditions to Qualify as a Family Foundation: Article 17(1)

To be treated as a fiscally transparent Unincorporated Partnership (i.e., not taxed in its own right), a Family Foundation must meet these five key conditions:

1. Beneficiaries must be natural persons, public benefit entities, or both.
2. Principal Activity should involve managing investments or savings—not active business.
3. No Business Activity if such activity would be taxable if carried out by an individual.
4. No Tax Avoidance Purpose should be evident.
5. Public Benefit Entity Rule: If any beneficiaries are public benefit entities, their share of income must either be exempt or distributed within 6 months.

The definition of Family Foundation includes a “similar entity” to foundations or trusts. A similar entity is one that is intended to be used for the administration of family wealth and that is not a commercial company. Such an entity may wish to make an application to the FTA to be treated as fiscally transparent where the entity meets the relevant conditions.

There is no requirement for a Family Foundation to be an entity formed in the UAE. Hence, it is possible for a foreign (i.e. non-UAE) entity to meet the conditions to be a Family Foundation, as set out in Article 17(1) of the Corporate Tax Law.

Foreign and Multi-Tier Structures

• Foreign foundations can qualify if they meet UAE tax conditions.
• Juridical entities fully owned by a Family Foundation may also apply for tax transparency if structured appropriately.
• Multi-tier structures are permitted but must ensure continuous eligibility and ownership throughout the tax year.

Multi-tier structures

A juridical person, that is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership pursuant to Article (17) of the Corporate Tax Law where all of the following conditions are met:

1. 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
2. The juridical person meets the conditions of Clause (1) of Article (17) of the Corporate Tax Law.

Corporate Tax implications for a Family Foundation that is treated as an Unincorporated Partnership

Family Foundations that are treated as (fiscally transparent) Unincorporated Partnerships, whether that is by virtue of an application approved by the FTA (in the case of a juridical person) or because they are an Unincorporated Partnership by default (e.g. an unincorporated trust).

Family Foundations and juridical persons wholly owned and controlled by the Family Foundation that do not meet the conditions of Article 17(1) of the Corporate Tax Law, or do not submit an application to be treated as Unincorporated Partnerships, or do not receive an approval from the FTA, will continue to be subject to Corporate Tax in their own right.

1. Family Foundation

Where a Family Foundation is treated as an Unincorporated Partnership, it is considered fiscally transparent and hence not subject to Corporate Tax in its own right. Therefore, the beneficiaries will be deemed to be partners in an Unincorporated Partnership and, for Corporate Tax purposes, each beneficiary is treated as:

• conducting the activity of the Family Foundation.
• having the status, intention and purpose of the Family Foundation,
• holding assets that the Family Foundation holds, and
• being party to any arrangement to which the Family Foundation is a party.

For practical purposes, this allocation is only required where any of the beneficiaries will be subject to Corporate Tax on the income generated by the Family Foundation, such as public benefit entities which are not exempt from Corporate Tax as Qualifying Public Benefit Entities.

2. Natural person beneficiary

Any beneficiary who is a natural person will not be subject to Corporate Tax on their distributive share of income from the Family Foundation on the basis that such income would either be considered Personal Investment income or Real Estate Investment income.

3. Public benefit entity beneficiary

Where the beneficiary is, and remains, a Qualifying Public Benefit Entity, it will not be subject to Corporate Tax as it is an Exempt Person.

However, any beneficiary that is a public benefit entity which is, or becomes, a Taxable Person will include its distributive share of the Family Foundation’s income and expenditure in its Taxable Income.

A beneficiary that is a foreign public benefit entity which was not already a Taxable Person may become subject to Corporate Tax as a Non-Resident Person as a result of the Family Foundation being fiscally transparent, for example, by virtue of having a nexus in the UAE.

4. Deductible expenditure

The Taxable Income, if any, of the beneficiaries must take into account their distributive share of expenditure incurred by the Family Foundation in relation to that income.

Tax compliance

Registration for Corporate Tax purposes

Where an application to be treated as a fiscally transparent Unincorporated Partnership is approved by the FTA, the entity will not be subject to Corporate Tax in its own right.

Annual Confirmation of the Family Foundation

FTA requires the Family Foundation (or a juridical person wholly owned and controlled by a Family Foundation) which has made an application to be treated as an Unincorporated Partnership, to file an annual confirmation within 9 months from the end of the relevant Tax Period. The deadline to file an annual confirmation shall be 31 December 2025 for any Tax Periods that ended on or before 31 March 2025.

Failure to continue meeting the conditions

If a Family Foundation has applied to be treated as an Unincorporated Partnership and such application has been approved by the FTA, however, subsequently the Family Foundation fails to meet any of the conditions under Article 17(1) of the Corporate Tax Law, then it will lose its fiscally transparent status and revert to being a Taxable Person for Corporate Tax purposes from the beginning of the Tax Period in which such failure occurred.

Where an entity in a multi-tier structure ceases to meet the conditions, any entities it holds directly or indirectly will also cease to be eligible to be treated as fiscally transparent under the Family Foundation provisions.