How New Tax Reforms Are Shaping Partnerships & Family Foundations

The major goal behind earning is that you can afford the lifestyle you have dreamed of, as well as enjoy the amenities. To be honest, it is the same for everyone. But money is not only for fun; it is also for savings, taxes, funds, insurance, and many other things. For all these things, the UAE Ministry of Finance has released some important factors transforming the tax landscape for family foundations, unincorporated partnerships, and foreign partnerships. These updates were released under the Ministerial Decision No. (261) of 2024.  The sole aim behind these changes is to provide greater tax flexibility, simplify compliance, and align with the global standards.

Now, let’s read how these new tax reforms are shaping the partnerships and family foundations.

• Treatment for family foundations and unincorporated partnerships: For family foundations earlier, the law was inclined towards only rental income and investment income made by the foundation being considered exempt from tax. But the new law enforcement is beneficial for the family foundation. Now, they have their income treated as if it were earned directly from the founder of the people running the foundation. This special tax treatment applies to companies completely owned by the family foundation, like single-family offices.
• Family foundation entities can apply for tax-transparent status: Now, with the new law, family foundations have to be treated as tax transparent. This law will be beneficial for the family foundation. Understand in this way. Family foundations having lots of assets in the UAE don’t have to go for complicated checks for every family member and the assets they own. Due to this, family foundations can enjoy easier and more predictable tax treatments.
• Aligning with the UAE corporate tax framework: New laws and rules laid by the UAE Ministry of Finance make it easier to work under the UAE corporate tax framework by treating them like partners. Due to this, families can keep their tax benefits while managing their wealth. Additionally, tax transparency also benefits from this law, making it easier to manage their wealth across different countries.
• Impact on succession planning and wealth management: Due to the new law enforcement family foundations can plan their succession and avail tax benefits that focus on more savings and growing family wealth for the coming days. Additionally, it eliminates dealing with complicated tax paperwork. One can smoothly hand over their assets from one generation to another.

As we have gotten the brief about the new tax reforms, now let’s just read some key updates.

• Unincorporated partnership: Earlier, the rule depicted that family foundations have to notify the Federal Tax Authority within 20 days if a person onboards or offboards. Now, the new rule has minimized this task, as you just have to add this information while paying your annual tax.
• Tax treatment of foreign partnerships: This new law is beneficial for companies that have foreign partnerships. By beneficial, it means that if the entity is tax transparent in its homeland, then it can also be tax transparent in the UAE. The great thing is they don’t have to submit additional documents notifying of the tax transparency. However, they just have to submit a yearly form stating that they still follow the same rules.

Now, let’s understand why these changes matter for family foundations and partnerships.

• Due to these updates, there are now more chances that offer greater flexibility and simplified compliance for companies under the UAE corporate tax frameworks. These altogether contribute to operating more efficiently while still benefiting from the UAE’s laws.
• Another option for a family foundation is to be treated as an unincorporated partnership, and applying for tax transparency can benefit wealth management and succession planning.

Conclusion

These new tax reforms are beneficial for family foundations and partnerships. They are inclined to give benefits as well as boost the economy. The ease in submitting the documents and getting the benefits is the most attractive part. If you are someone struggling with your business setup in Dubai, taxation, auditing, and bookkeeping services, or company formation in Dubai, Make My Firm is here to assist you with your queries. We have an expert team that can help you with auditing, bookkeeping, and taxation services. As well as our tax consultants also have a deep understanding related to all the tax rules and regulations. Reach out to Make My Firm and let us assist you with your taxation, auditing, and bookkeeping services.