Both UAE and foreign foundations, trusts or similar entities may qualify as a fiscally transparent Family Foundation if the following conditions are met:
- Be established for the benefit of ”Identified” or ”Identifiable” natural persons and/or a public benefit entity
- Engage only in asset/investment management and not in any Business or Business Activity
- Not be used for tax avoidance
- Ensure timely income distribution to non-exempt public benefit entities
- Be 100% owned and controlled in any tiered structure
The “no Business Activity condition” may appear challenging for some foundations.
To meet this condition, the foundation, trust, or similar entity must not engage in activities that would be regarded as a business if carried out directly by the founder or beneficiary.
Permitted activities are those which, if conducted by an individual, qualify as:
- Personal investment income,
- Real estate investment income,
since such activities are not considered a Business or Business activity and are not subject to tax under the Corporate Tax Law.
Example from The GuideFoundation J owns residential units and a motel in the UAE.Leasing residential properties generally does not require a licence – the “no Business Activity” condition is met.Operating a motel requires a licence – this is considered a business. The condition is not met.Conclusion: Since the Family Foundation conducts an activity regarded as a business, it cannot be recognized as fiscally transparent and is not eligible for the Family Foundation status.