Can a family business run through several licences be taxed as one?

Article 17 – Family Foundation 1. A Family Foundation can make an application to the Authority to be treated as an Unincorporated Partnership for the purposes of this Decree-Law where all of the following conditions are met: a. The Family Foundation was established for the benefit of identified or identifiable natural persons, or for the benefit of a public benefit entity, or both. b. The principal activity of the Family Foundation is to receive, hold, invest, disburse, or otherwise manage assets or funds associated with savings or investment. c. The Family Foundation does not conduct any activity that would have constituted a Business or Business Activity under Clause 6 of Article 11 of this Decree-Law had the activity been undertaken, or its assets been held, directly by its founder, settlor, or any of its beneficiaries. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 24 d. The main or principal purpose of the Family Foundation is not the avoidance of Corporate Tax. e. Any other conditions as may be prescribed by the Minister. 2. Where the application under Clause 1 of this Article is approved, the Family Foundation shall be treated as an Unincorporated Partnership effective from the commencement of the Tax Period in which the application is made, or from the commencement of a future Tax Period, or any other date determined by the Authority. 3. For the purposes of monitoring the continued compliance by a Family Foundation with the conditions of Clause 1 of this Article, the Authority may request any relevant information or records from the Family Foundation within the timeline specified by the Authority. Chapter Five – Free Zone Person

Article 5 – Government Entity 1. A Government Entity shall be exempt from Corporate Tax and the provisions of this Decree-Law shall not apply to it. 2. Notwithstanding Clause 1 of this Article, a Government Entity shall be subject to Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 10 the provisions of this Decree-Law if it conducts a Business or Business Activity under a Licence issued by a Licensing Authority. 3. Any Business or Business Activity conducted by a Government Entity under a Licence issued by a Licensing Authority shall be treated as an independent Business, and the Government Entity shall keep financial statements for this Business separately from the Government Entity’s other activities. 4. The Government Entity shall calculate the Taxable Income for its Business or Business Activity specified in Clause 2 of this Article independently for each Tax Period, in accordance with the provisions of this Decree-Law. 5. Transactions between the Business or Business Activity specified under Clause 2 of this Article and the other activities of the Government Entity shall be considered Related Party transactions subject to the provisions of Article 34 of this DecreeLaw. 6. A Government Entity may apply to the Authority for all its Businesses and Business Activities to be treated as a single Taxable Person for the purposes of this DecreeLaw subject to meeting the conditions to be prescribed by the Minister.

Family Foundations Q Can a family company or a private company that invests in shares for the benefit of a natural person be a Family Foundation for the purposes of the Corporate Tax Law? A No, a Family Foundation is any foundation, trust or similar entity that meets the conditions of Article 17 of the Corporate Tax Law13. A “similar entity” means an entity that has a similar legal structure or character to a foundation or trust, and would, therefore, exclude a limited liability company or a private company, but can include an incorporated trust. Q Can a Family Foundation, whose beneficiaries are natural persons, qualify for tax-transparent status if it carries on an activity of real estate investment14? A Yes, but only if the real estate investment is not carried on through a licence (and is not required to be conducted through a licence), as such real estate investment would not be a taxable business activity if carried on by a beneficiary of the Family Foundation who is a natural person. Q A juridical person that is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership can itself make an application to the FTA to be treated as an Unincorporated Partnership15. Is this application possible if the juridical person is wholly owned by more than one such Family Foundation? A Yes, a juridical person can be “wholly owned” by more than one Family Foundation. The ownership condition would be met if the juridical person is only owned by Family Foundations, and all these Family Foundations are treated as Unincorporated Partnerships. Free Zones – Qualifying Free Zone Persons Q Can a discretionary trust, Unincorporated Partnership or other such body that is not a juridical person be a Qualifying Free Zone Person? A No, a Qualifying Free Zone Person must be a juridical person16, which means, broadly, an entity with a separate legal identity, and includes branches. It does not include a natural person or an agreement between persons. Q If a Taxable Person is based in a Free Zone and has a branch in another Free Zone, should the conditions for a Qualifying Free Zone Person be assessed for each location separately? A No, a branch of a Taxable Person does not have a separate legal identity, so if a Taxable Person has branches in one or more Free Zones, then the conditions for a Qualifying Free Zone Person are applied to the Free Zone branches collectively as one Taxable Person17. Each activity conducted by the Taxable Person should be assessed independently to determine whether it is a Qualifying Activity and the adequate substance test18 should be assessed separately for each activity for the Free Zone Person 13 Article 1 of the Corporate Tax Law 14 Article 17(1)(c) of the Corporate Tax Law 15 Article 17 of the Corporate Tax Law and Article 5(2) of Ministerial Decision No 261 of 2024 16 Article 1 of the Corporate Tax Law 17 Article 3(1) of Cabinet Decision No. 100 of 2023 18 Article 8(1) of Cabinet Decision No. 100 of 2023 4

managing investments and not to conduct a Business or Business Activity on a commercial basis. As mentioned in Section 4.3, in respect of a natural person, Turnover derived from Wages, Personal Investment income and Real Estate Investment income is not considered to be derived from a Business or Business Activity. The foundation, trust or similar entity may, therefore, undertake an activity that would be considered Personal Investment and/or Real Estate Investment had it been undertaken by the natural person beneficiaries directly (see Section 4.3 for the definition of Personal Investment and Real Estate Investment activity.) Example 1: Foundation conducting activity that would have constituted a Business or Business Activity for a natural person The J Foundation, a juridical person, holds and manages real estate properties which consist of several residential units in the UAE that are leased to tenants and a motel building that the J Foundation operates. Mr J and Mrs J each have a 50% beneficial interest in the J Foundation. The residential units are rented out without any existing or required Licence. Hence, in respect of these properties, the “no Business Activity” condition is met. The operation of the motel would have required a Licence if the motel was being operated by Mr J and Mrs J directly. Thus, in such case the activity would have constituted a Business or Business Activity (i.e. it would not have been a Real Estate Investment activity) and, therefore, the “no Business Activity” condition is not met. The J Foundation does not meet all the conditions to be a Family Foundation and, therefore, cannot apply to be treated as an Unincorporated Partnership. 5.4. No tax avoidance condition The main or principal purpose of a Family Foundation should not be for the avoidance of Corporate Tax.41 This condition will be met where a Family Foundation is used for the purposes envisaged by the Corporate Tax Law, namely to receive, hold, invest, disburse or/and manage assets for the benefit of individuals or charitable organisations. 41 Article 17(1)(d) of the Corporate Tax Law. Corporate Tax Guide | Taxation of Family Foundations | CTGFF1 20