UAE Tax Guidance on Family Foundations
In late May, the UAE tax authorities published official guidance on the taxation of family foundations. The document outlines how the “tax transparency” regime applies to private structures, including foundations — a popular tool among Russian entrepreneurs for holding foreign assets.
Two possible tax regimes for UAE foundations:
- The standard corporate tax regime (as a regular corporate taxpayer);
- The tax transparency regime — available if the foundation meets the criteria outlined in Article 17(1) of UAE Corporate Tax Law No. 47.
What does tax transparency mean?
- The foundation’s income is treated as received directly by its beneficiaries rather than by the foundation itself.
- If the beneficiaries are individuals not engaged in business activities in the UAE, such income is not subject to UAE tax.
Conditions for applying the transparency regime:
- The foundation must be established for the benefit of identifiable or identifiable beneficiaries.
- Its core activity must involve receiving, holding, investing, distributing, or otherwise managing assets or funds related to savings and investments.
- The foundation must not engage in commercial or other active business activities.
- The purpose of applying the transparency regime must not be corporate tax avoidance, but rather the proper management of assets in the interest of the beneficiaries.
