Ministerial Decision No. 261 of 2024: Key Corporate Tax Updates

The UAE Ministry of Finance has issued Ministerial Decision No. 261 of 2024, providing clarity on the taxation treatment of Unincorporated Partnerships, Foreign Partnerships, and Family Foundations under Federal Decree-Law No. 47 of 2022 on Corporate Taxation. These updates impact how businesses and entities structure their tax obligations and compliance strategies.

Key Highlights:

Treatment of Unincorporated Partnership as a Taxable Person:

1. An unincorporated partnership will not be considered a Taxable Person unless classified as a juridical person.
2. Any approved application to treat an unincorporated partnership as a Taxable Person, the application is irrevocable, except in exceptional circumstances and pursuant to approval by the authority.
3. The responsible partner is required to provide details of any partner who joins or leaves the Unincorporated Partnership during the relevant Tax Period, when filing the Tax Return.

Treatment of Foreign Partnership as an Unincorporated Partnership:

1. The Foreign Partnership itself must not be subject to a similar tax as Corporate Tax under the foreign jurisdiction's laws.

2. Each partner in the Foreign Partnership shall be subject to tax with regards to their distributive share of any income of the Foreign Partnership if the Foreign Partnership is not subject to tax in its own right in the foreign jurisdiction.

3. The Foreign Partnership must submit an annual declaration to the tax Authority to meeting the conditions specified above in (a) and (b).

Treatment of Family Foundation as an Unincorporated Partnership:

• 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:

1. Such beneficiaries are not deriving income that would be considered as Taxable Income in the event they had derived it in their own right.
2. That taxable income generated must be distributed to the relevant beneficiaries within six months from the end of the relevant Tax Period.

• A juridical person that wholly owned controlled by a Family Foundation can apply to be treated as an Unincorporated Partnership if it meets the following conditions:

1. The juridical person is wholly owned and controlled by the Family Foundation, either directly or indirectly through an uninterrupted chain of entities which are treated as Unincorporated Partnerships.
2. The juridical person fulfils the conditions of Clause (1) of Article (17) of the Corporate Tax Law.

Why This Matters

These provisions are crucial for businesses operating through partnerships or foundations, ensuring alignment with the UAE’s Corporate Tax framework. Proper classification and compliance are essential to avoid penalties and optimize tax structuring.

How AMCA Can Help

At AMCA, we specialize in corporate tax advisory, structuring, and compliance. Our experts can assist you in determining the best classification for your business, ensuring compliance with the latest tax regulations.

Let us help you navigate the UAE’s corporate tax landscape effectively!

Contact us today for a 30-minute free consultation: +971 4 240 8784

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