UAE Corporate Tax and Family Foundations:
What You Need to Know in 2025
As the UAE continues to enhance its regulatory and tax frameworks, Family Foundations are gaining importance both as wealth management tools and as tax-transparent entities under the UAE Corporate Tax Law. If you’re considering setting up a Family Foundation or are already involved with one, understanding the latest tax treatment is essential. Here’s what you need to know in 2025.
What is a Family Foundation or Family Office?
Under Federal Decree-Law No. 47 of 2022, a Family Foundation includes any foundation, trust, or similar entity that meets specific conditions as outlined in Article 17 of the Corporate tax law. These entities are commonly used in the UAE to manage wealth across generations, support charitable causes, or consolidate family-owned assets.
Why Tax Treatment of Family Foundations Matters
Previously, the tax treatment of Family Foundations was unclear, especially regarding whether such entities would be taxed as standalone juridical persons or as transparent structures. The FTA’s Corporate Tax Guide CTGFF1 (May 2025) now clarifies that a Family Foundation may opt to be treated as an Unincorporated Partnership, thus allowing for pass-through taxation, meaning tax is not levied at the foundation level but at the level of the beneficiaries.
Conditions to Qualify as a Family Foundation
To benefit from this treatment, the entity must satisfy five key conditions:
Beneficiary Condition: Beneficiaries must be natural persons or qualifying public benefit entities.
Principal Activity Condition: The main purpose must not be conducting a business.
No Business Activity Condition: The foundation must not actively engage in business activities.
No Tax Avoidance Condition: The structure must not be established to avoid tax.
Distribution Condition: Special rules apply if any public benefit entities are beneficiaries.
Tax Implications for Family Foundations
If the Family Foundation qualifies, it can be treated as a fiscally transparent entity:
- No Corporate Tax at entity level.
Beneficiaries are taxed on their share of the foundation’s income.
Distributions to beneficiaries are not subject to double taxation.
Deductions may be available for services rendered to the foundation. If the foundation fails to meet the conditions, it is treated as a Taxable Person and subject to UAE Corporate Tax at 9% on profits exceeding the threshold set by Cabinet decision.
Registration and Compliance
Family Foundations must register with the Federal Tax Authority (FTA) for Corporate Tax purposes.
They must submit an application if they want to be treated as an Unincorporated Partnership.
An Annual Confirmation is required to maintain transparency status.
Failure to meet ongoing conditions can result in loss of pass-through status and exposure to tax liabilities and penalties.
Why JETUP?
At JetUp, we specialize in UAE Corporate Tax compliance. Whether you’re setting up a Family Foundation, managing a multi-tier structure, or navigating beneficiary obligations, our experts provide end-to-end advisory and compliance services. Trust us to help you structure your foundation in a tax-efficient and legally sound manner.
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