UAE Ministerial Decision No. 261 Brings Change & Tax Relief for Family Foundations

Key Highlights of the Amendments

The UAE Ministry of Finance has updated Ministerial Decision No. 261, introducing significant changes to the taxation of Unincorporated Partnerships, Foreign Partnerships, and Family Foundations. These amendments provide tax transparency benefits to qualifying family foundations, allowing entities they own to apply for tax-transparent status, thereby improving tax efficiency under UAE corporate tax laws.

To qualify for these benefits, the following key conditions must be met:

Qualification as an Unincorporated Partnership: The family foundation must be recognized as an Unincorporated Partnership under UAE law.
Ownership and Control: The entity must be wholly owned and controlled by the family foundation through an uninterrupted chain of vehicles, each of which must also qualify as an Unincorporated Partnership.

Legal Provisions Supporting Tax Transparency

Under Article 16 of the UAE Corporate Tax Law, “an Unincorporated Partnership shall not be considered a Taxable Person in its own right.” This provision forms the foundation for tax-transparent treatment.

Furthermore, Article 17 of the law specifies the requirements for a family foundation to qualify as an Unincorporated Partnership:

The foundation’s principal activity must be limited to receiving, holding, investing, disbursing, or managing assets or funds associated with savings or investments.
The foundation must not engage in business activities requiring a license or that are subject to corporate tax obligations.

Implications for Wealth Planning in the UAE

These amendments represent a groundbreaking development for wealth and succession planning in the UAE. By enabling tax-relief measures for family foundations, the updated Ministerial Decision offers families a compelling incentive to establish foundation structures under UAE law.

This reform is expected to attract significant interest from families seeking efficient wealth management and asset protection solutions. As the UAE continues to cement its status as a global hub for private wealth structuring, this policy underscores its commitment to fostering an attractive, competitive environment for high-net-worth individuals and family businesses.

Contact Us

Families and their advisors who are looking to benefit from this new tax treatment offered in the UAE, may reach out to Cone Marshall Middle East CSP (registered with the Dubai Financial Services Authority). Our team based in Dubai stands available to assist you with setting up and administering DIFC structures including family foundations and their underlying prescribed companies.