The UAE Federal Tax Authority (FTA) has introduced Federal Tax Authority Decision No. 5 of 2025, which outlines key compliance requirements for unincorporated partnerships, foreign partnerships, and family foundations under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022).
With the new rules taking effect on 1 July 2025, businesses, family offices, and tax advisors must understand the implications—especially regarding registration, annual declarations, and tax treatment.
This blog breaks down the critical changes, deadlines, and action points for family foundations and foreign partnerships to ensure compliance.
1. Key Changes for Family Foundations Under the New Decision
Family foundations in the UAE have traditionally been used for wealth preservation, succession planning, and asset protection. However, the new FTA decision introduces specific tax compliance measures:
(i). Option to Be Treated as an Unincorporated Partnership
- Under Article 17 of the Corporate Tax Law, a family foundation (or a juridical person wholly owned by one) can apply to be treated as an unincorporated partnership for tax purposes.
- Application Deadline: Must be submitted before the end of the relevant Tax Period.
- Exception: If submitted by 31 December 2025, the FTA may approve retroactive treatment for any Tax Period ending on or before this date.
(ii) Annual Confirmation Requirement
- Once approved, the family foundation must submit an annual confirmation within 9 months of the Tax Period’s end.
- This declaration must confirm that the foundation continues to meet the conditions under Article 17 of the Corporate Tax Law.
- Special Deadline: For Tax Periods ending before 31 March 2025, the deadline is extended to 31 December 2025.
Why This Matters for Family Offices
- Tax Efficiency: Structuring as an unincorporated partnership may allow income to flow directly to beneficiaries, potentially optimizing tax liability.
- Compliance Risk: Missing deadlines could lead to penalties, making it crucial to track submission dates.
2. New Rules for Foreign Partnerships in the UAE
Foreign partnerships operating in the UAE (or with UAE-based partners) must now comply with stricter reporting rules:
A. Annual Declaration Requirement
- A UAE-based partner in a foreign partnership must file an annual declaration when submitting their own tax return (Article 8).
- This ensures the FTA can assess the tax obligations of UAE-resident partners in foreign entities.
B. Equal Allocation of Income (If Shares Are Undefined)
- If the partners’ distributive shares are unclear, the partnership’s income, expenses, assets, and liabilities will be divided equally among partners (Article 4).
- This prevents tax avoidance through unclear profit-sharing structures.
Implications for International Businesses
- Increased Transparency: Foreign partnerships with UAE ties must maintain clear profit-sharing agreements to avoid forced equal distribution.
- Compliance Burden: UAE-based partners must now include partnership details in their tax filings.
3. Critical Deadlines You Can’t Miss
The FTA’s new decision includes strict deadlines for registration and filings:
Under the UAE Corporate Tax Law, various deadlines and requirements apply to unincorporated partnerships and family foundations:
- Tax Registration for Unincorporated Partnerships: Partnerships must register with the Federal Tax Authority (FTA) by 31 August 2025 if their financial year ended before the law’s effective date.
- Annual Declaration for Past Periods: Unincorporated partnerships and family foundations must submit an annual declaration for periods before 31 March 2025 by 31 December 2025.
- Tax Deregistration: If a partnership ceases operations, it must apply for tax deregistration within three months.
- Family Foundation Election for Unincorporated Status: Family foundations can elect to be treated as unincorporated partnerships by submitting an application before the end of the tax period, or by 31 December 2025 for retroactive treatment.
These provisions ensure compliance with the UAE’s corporate tax framework and provide clarity on the tax obligations of such entities.
4. How to Prepare for the New Rules (Checklist)
To ensure compliance with FTA Decision No. 5 of 2025, follow these steps:
For Family Foundations:
- Determine if electing unincorporated partnership status is beneficial.
- Submit the application before the Tax Period ends (or by 31 Dec 2025 for retroactive treatment).
- Prepare for annual confirmation filings (due within 9 months of the Tax Period).
For Foreign Partnerships:
- Ensure UAE-based partners are aware of the annual declaration requirement.
- Clarify profit-sharing agreements to avoid forced equal allocation.
For All Unincorporated Partnerships:
- Appoint an authorized partner for tax registration.
- File Tax Registration by 31 August 2025 (if applicable).
- Submit annual declarations on time (within 9 months of FY end).
5. Conclusion: Act Now to Avoid Penalties
The UAE’s new tax rules for family foundations and foreign partnerships introduce stricter compliance measures but also offer tax planning opportunities.
Family foundations in the UAE have the option to elect unincorporated partnership status under the Corporate Tax Law. This election allows the foundation’s income to be taxed at the individual beneficiary level, rather than at the foundation level. However, once this status is elected, the foundation must file annual confirmation filings to maintain compliance. Additionally, foreign partnerships with UAE partners are required to declare their income in local tax returns, ensuring transparency and adherence to UAE tax regulations.
The deadlines for these filings are approaching rapidly. Notably, the deadline for certain registrations is 31 August 2025, and 31 December 2025 for prior-year filings. To ensure smooth compliance before 1 July 2025, businesses and advisors should review their structures and make necessary adjustments promptly.
Need help navigating UAE corporate tax? Consult Maats Auditors and Consultants to align your entity with the latest FTA regulations.