Understanding the FTA’s Latest Tax Rules for Family Foundations in the UAE

Is Your Family Foundation Compliant with the New UAE Tax Rules? Here’s What You Need to Know

In an important move for succession planning and private wealth management in the UAE, the Federal Tax Authority (FTA) has released a detailed Corporate Tax Guide on the Taxation of Family Foundations. This guide introduces several key compliance requirements and offers clarity on how family foundations, trusts, and similar entities are treated under the UAE Corporate Tax regime.

If your foundation is involved in holding family wealth, investments, or managing assets across generations, these updates directly affect your tax obligations and structuring options.

Why the FTA’s Guide Matters

The UAE continues to position itself as a preferred destination for global wealth and succession planning. The FTA’s latest guide reflects this strategy by addressing how family foundations can:

• Benefit from fiscal transparency

• Maintain asset protection

• Navigate complex ownership structures

• Fulfill new compliance obligations

Key Changes and What They Mean for You

🔹 1. Annual Confirmation Filing Is Now Mandatory

Family Foundations—or entities treated as Unincorporated Partnerships—must submit an Annual Confirmation Filing to the FTA within 9 months after the end of each tax period.

• Tax period ending on or before 31 March 2025: File by 31 December 2025

• To qualify for penalty waivers: Submit by 31 July 2025, especially for periods ending 31 December 2024

🔹 2. Applying for Fiscal Transparency

Foundations can apply to be treated as Unincorporated Partnerships under Article 17, which allows income to pass through to beneficiaries, avoiding corporate tax at the foundation level.

🔹 3. Structuring Flexibility for Trusts

Unincorporated trusts are automatically treated as fiscally transparent but may opt to be treated as Family Foundations. This election is particularly useful when managing layered ownership or asset-holding entities.

🔹 4. Treatment of Wholly-Owned Entities

Subsidiaries fully owned by the Family Foundation (that do not engage in commercial activity) may also be considered fiscally transparent. This allows for operational flexibility and different accounting periods.

🔹 5. Implications for Beneficiaries

If a non-qualifying public benefit entity is a beneficiary, any taxable income must be distributed to a qualifying entity within six months of the end of the tax period to maintain compliance.

🔹 6. International Scope

Foreign foundations with UAE assets may also apply for fiscal transparency under UAE tax laws—expanding the UAE’s relevance in global estate and wealth planning.

🔹 7. Reporting and Disclosure Requirements

Family Foundations only need to provide information to beneficiaries when that income is taxable in their hands. Service-related payments are deductible if made on arm’s length terms, but tax treatment is assessed individually for each recipient.

What Should Families and Foundations Do Next?

These changes are a step forward in aligning with global best practices—but they also introduce new responsibilities. Ensuring compliance while optimizing tax benefits requires strategic planning and expert advice.

Partner with Al Wahat for Strategic Tax and Foundation Guidance

At Al Wahat Accounts and Internal Audit Services, we help families, trustees, and wealth managers navigate complex tax structures and compliance requirements. From establishing DIFC foundations to submitting the new Annual Confirmation Filing, we offer practical, end-to-end support.

📞 Contact us today to ensure your Family Foundation is aligned with the latest UAE tax regulations—and positioned for long-term success.

Disclaimer:
This blog is intended for general information only and should not be considered as legal, financial, or tax advice. For complete guidance, please refer to the official FTA Guide on Family Foundations