Is a family foundation subject to Corporate Tax?

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

In this situation, the partner would need to assess if they had any other Business (other than the partnership) which may be subject to Corporate Tax based on the principles explained in the previous sections. If not, such partner would not be subject to Corporate Tax (other than through the partnership). 5.4. Family Foundation Natural persons can set up a Family Foundation using different structures such as a contractual trust, a private trust company, a foundation or any other similar entity to hold and manage personal assets and investments for asset protection, succession, etc. Some of these structures (such as a trust or foundation) may be considered to have a separate legal personality i.e. a juridical person as per the applicable legislation in the UAE, for example the Federal Trust Law.39 A juridical person is treated as a Taxable Person and not a fiscally transparent entity for Corporate Tax purposes. Where a Family Foundation is a juridical person, it would be subject to Corporate Tax. In particular, any investment income of its founder, settlor or any of its beneficiaries would be subject to Corporate Tax at the Family Foundation level. Any income received by natural persons, as beneficiaries, from a Family Foundation that is a Taxable Person would not be Taxable Income in the hands of the beneficiary as it would be investment income already subject to Corporate Tax at the Family Foundation level. However, a Family Foundation can make an application to the FTA to be treated as an Unincorporated Partnership (and, therefore, transparent from a Corporate Tax perspective) where certain conditions are met.40 One of these conditions is that the Family Foundation does not conduct any activity that would have constituted a Business or Business Activity as per Article 11(6) of the Corporate Tax Law had the activity been undertaken, or its assets been held, directly by its founder, settlor, or any of its beneficiaries. Therefore, if the Family Foundation is eligible to be treated as an Unincorporated Partnership and is treated as such where an application is submitted and approved by the FTA, the share of income of the natural persons as beneficiaries would not constitute Taxable Income for the natural persons. This reflects the requirement that the Family Foundation does not conduct any activity that would have constituted a Business or Business Activity had the activity been undertaken, or its assets been held, directly by the natural persons. 39 Article 3 of the Trust Law. 40 Article 17(1) of the Corporate Tax Law. Corporate Tax Guide | Taxation of natural persons under the Corporate Tax Law | CTGTNP1 36

7. Corporate Tax implications for a Family Foundation that is treated as an Unincorporated Partnership This section deals with the Corporate Tax treatment of Family Foundations that are treated as (fiscally transparent) Unincorporated Partnerships, whether that is by virtue of an application approved by the FTA (in the case of a juridical person) or because they are an Unincorporated Partnership by default (e.g. an unincorporated trust). Family Foundations and juridical persons wholly owned and controlled by the Family Foundation that do not meet the conditions of Article 17(1) of the Corporate Tax Law, or do not submit an application to be treated as Unincorporated Partnerships, or do not receive an approval from the FTA, will continue to be subject to Corporate Tax in their own right. 7.1. Family Foundation Where a Family Foundation is treated as an Unincorporated Partnership, it is considered fiscally transparent and hence not subject to Corporate Tax in its own right. Therefore, the beneficiaries will be deemed to be partners in an Unincorporated Partnership and, for Corporate Tax purposes, each beneficiary is treated as:50 • conducting the activity of the Family Foundation.51 • having the status, intention and purpose of the Family Foundation, • holding assets that the Family Foundation holds, and • being party to any arrangement to which the Family Foundation is a party. For Corporate Tax purposes, the assets, liabilities, income and expenditure of the Family Foundation will be allocated to each beneficiary in proportion to their distributive share (i.e. the beneficial interest) for each relevant Tax Period. This applies even if a trustee has legal ownership of the trust assets, for instance, in an unincorporated trust. The Corporate Tax treatment will then be assessed at the level of each beneficiary, in accordance with the general rules for determining Taxable Income under the Corporate Tax Law. Accordingly, the relevant entities in such structures should provide each beneficiary with sufficient information in relation to their Corporate Tax obligations for each relevant Tax Period. For practical purposes, this allocation is only required where any of the beneficiaries will be subject to Corporate Tax on the income generated by the Family Foundation, 50 Article 16(2) of the Corporate Tax Law. 51 Note the activity (for example, Real Estate Investment and Personal Investment conducted by the Family Foundation) would not be considered to be a Business if it would not be considered as such in case it is conducted directly by each beneficiary. Corporate Tax Guide | Taxation of Family Foundations | CTGFF1 35

Article 5 – Treatment of a Family Foundation as an Unincorporated Partnership 1. Where one or more of the beneficiaries of a Family Foundation are public benefit entities, the Family Foundation must meet any of the following additional conditions to be treated as an Unincorporated Partnership: a. Such beneficiaries are not deriving income that would be considered as Taxable Income in the event they had derived it in their own right. b. The income that would be considered as Taxable Income is distributed to the relevant beneficiaries within (6) six months from the end of the relevant Tax Period. 2. A juridical person, that is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership, can make an application to the Authority to be treated as an Unincorporated Partnership pursuant to Article (17) of the Corporate Tax Law where all of the following conditions are met: a. The juridical person is wholly owned and controlled by the Family Foundation either directly or indirectly through an uninterrupted chain of other entities which are treated as Unincorporated Partnerships in accordance with the Corporate Tax Law. b. The juridical person meets the conditions of Clause (1) of Article (17) of the Corporate Tax Law.

Article 9 – Submitting an Application for a Family Foundation to be treated as an Unincorporated Partnership 1. For the purposes of Clause 2 of Article 17 of the Corporate Tax Law, a Family Foundation or a juridical person wholly owned and controlled by a Family Foundation must make an application before the end of the relevant Tax Period. If the application is approved, the Family Foundation or the juridical person wholly owned and controlled by a 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 the next Tax Period as specified in the approval of the Application. 2. As an exception to the provisions of Clause 1 of this Article, where an application is made by a Family Foundation or a juridical person wholly owned and controlled by a Family Foundation on or before 31 December 2025, the Authority may approve to treat the Family Foundation as an Unincorporated Partnership effective from the commencement of any Tax Period ending on or before 31 December 2025 as specified in the application. Federal Tax Authority Decision No. 5 of 2025 – Unofficial translation 5