New UAE Tax Guidelines Clarify Family Foundations and Their Fiscal Treatment

The UAE's latest Corporate Tax Law has introduced clear regulations regarding Family Foundations, providing a comprehensive framework for their classification and taxation. These structures, often used by wealthy families to manage assets and wealth, are now better understood under the new rules.

According to the new guidelines, Family Foundations are considered a special concept mainly for tax purposes rather than a separate legal entity. They can qualify for "fiscal transparency," meaning the foundation itself is not taxed directly. Instead, income and assets flow through to designated beneficiaries, usually family members or public benefit entities.

To qualify, Family Foundations must primarily benefit natural persons or public benefit organizations and avoid engaging in business activities aimed at tax avoidance. The rules also specify that multi-tier structures, where foundations control subsidiaries, can potentially enjoy this tax treatment if specific criteria are met.

Foreign entities and multi-layered structures are also addressed, with provisions enabling them to apply for similar transparent status, thereby simplifying cross-border wealth management.

The law emphasizes transparency and compliance, requiring annual filings and adherence to specific formation and distribution rules. Non-compliance or failure to meet criteria can lead to significant tax and legal consequences.

This new regulation aims to promote transparency while supporting wealthy families in efficient wealth management and succession planning, aligning with the UAE’s broader objectives of fostering a clear and predictable tax environment.

For more details you can refer to our blog on Family Foundations in UAE.