New UAE FTA Guide on taxation of Family Foundations

Private Clients | Tax Alert

3 June 2025
On May 28, 2025, the UAE Federal Tax Authority (FTA) issued its Tax Guide on corporate tax treatment of Family Foundations.

This long-awaited document brings clarity for high-net worth individuals, family offices, advisors, and wealth structuring professionals.

Under the current tax regime, a Family Foundation may be granted “fiscally transparent” status. In such case, a Family Foundation will not be treated as a taxpayer in its own right, whilst its profits might be attributed to its beneficiaries for tax purposes, in proportion to their ownership interests.

It is also important to note that “fiscal transparency” status in the UAE does not, in itself, exempt foreign Family Foundations from potential tax exposure in their tax residence country.
What's new and why it matters

The Guide provides an official clarification on key aspects of how Family Foundations can apply the fiscally transparent regime, addressing many important methodological and practical matters.

The Guide outlines:

1. Who Qualifies as a Family Foundation
  • Defines a Family Foundation
  • Clarifies the notion of “similar entities” other than trusts and foundations
  • Foundations covered might be established in Free Zones as well as trusts formed under UAE mainland legislation or foreign jurisdictions.

2. Who May Qualify as Beneficiaries of a Family Foundation
  • Identified or identifiable natural persons with no requirement for them to be from the same family and/or public benefit entities
  • A foreign public benefit beneficiary not previously taxable in the UAE may become subject to Corporate Tax as a non-resident due to the Family Foundation’s fiscal transparency — for example, through a UAE nexus
  • There is also no minimum or maximum number of beneficiaries.

3. Practical Examples — Five Conditions to Qualify as a Fiscally Transparent Family Foundation
  • In particular, a Family Foundation would not meet the “No Business Activity” condition if it engages in activities that would require a licence had they been conducted directly by a natural person (e.g., operating a motel in the UAE).

4. Multi-Tier Structure Capabilities
  • Special purpose vehicles owned by Family Foundations (SPVs, LLCs) may also be fiscally transparent — but only under strict conditions.

5. The requirement to file an annual confirmation to maintain tax-exempt status
  • Family Foundations (or their SPVs) with “fiscal transparency” status must file an annual confirmation within 9 months of each Tax Period’s end.
Overview of key clarifications
Tax residency certificates

While this aspect is not directly addressed in the Tax Guide, we find it important to note that, given fiscally transparent Family Foundations are not regarded as taxable persons in their own right, they should not be entitled to receive a tax residency certificate for the purpose of claiming benefits under a double tax treaty. Accordingly, such certificates would need to be provided directly by beneficiaries. Special provision might apply to fiscally transparent person under double tax treaties.

How we can help

  • Review your assets structure and determine how Family Foundation legislation can be applied to your situation
  • Support you with family wealth planning or restructuring options and provide you with optimal solutions
  • Provide you with ongoing tax compliance services, accounting and other related services.

Please, contact us if you have any questions. Email: private.info@baone.ae

AUTHORS:
  • Alexei Kuznetsov
    Partner
  • Ksenia Timofeeva
    Director, Private Clients
  • Anna Shevyreva
    Assistant Manager, Private Clients
  • Anna Adushkina
    Assistant Manager, Corporate Clients

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