Corporate Tax Law in the UAE: A Complete Guide for Businesses
28/07/2025
YOUNG AND RIGHT ACCOUNTING & TAX CONSULTANCY
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As global wealth preservation becomes more complex, high-net-worth individuals and families are increasingly exploring sophisticated legal vehicles to protect their assets, ensure succession planning, and achieve long-term financial sustainability. One such structure gaining prominence in the United Arab Emirates (UAE) is the family foundation.
Traditionally seen in jurisdictions like Liechtenstein, Jersey, or Luxembourg, family foundations have now found a strong foothold in the UAE. This shift is supported by progressive legal reforms, favorable tax treatment, and the country’s ambition to become a wealth management hub. With the UAE adopting international tax transparency standards and implementing new corporate tax laws, the treatment of family foundations under UAE tax law has become a topic of significant interest.
In this article, we explore the nature, function, and taxation of family foundations in the UAE. We examine how recent reforms affect these entities, their compliance obligations, and how they fit into the broader framework of UAE tax law. Whether you are establishing a family foundation in the UAE or advising clients on wealth planning, understanding the evolving legal and tax landscape is critical.
A family foundation is a unique legal and financial structure created primarily for private wealth preservation, estate planning, and succession management. Unlike a commercial company or transparent entities, a foundation does not have shareholders or traditional beneficiaries. Instead, it is a self-owned entity governed by a foundation charter and managed by a council or board in accordance with the founder’s vision. Features if Family Foundation are :
Once transferred, assets become legally distinct from the natural person who established the foundation. This structure is ideal for protecting wealth from personal liabilities and ensuring multi-tier structures of ownership are maintained.
Family foundations enable wealth to be passed on across generations without the fragmentation often seen in individual ownership, ensuring the long-term stability of residential units, investments, and family enterprises.
The founder can outline detailed governance protocols, including voting rights, distribution rules, and conditions for control transfers. This includes the ability to define a contractual relationship between different stakeholders and the foundation’s council.
Unlike charitable organisations or public benefit entities, family foundations in the UAE are typically set up for private purposes, such as managing family wealth or holding real estate and business interests. While some family foundations may support charitable or public benefit activities, their primary goal is not public service but private asset protection and family legacy planning.
From a tax perspective, the UAE's Federal Tax Authority (FTA) outlines specific rules for how family foundations are treated under the UAE tax law. Depending on their activities and structure, foundations may be treated as natural persons, similar entities, or even transparent entities for tax purposes. Foundations may also be required to register for corporate tax if they engage in commercial activities or derive real estate investment income during a relevant tax period or tax period defined by a ministerial decision.
The United Arab Emirates (UAE) has developed a sophisticated legal environment for the establishment and regulation of family foundations, offering flexibility and legal certainty across several jurisdictions. These foundations are recognized as legal entities with separate legal personality, making them ideal vehicles for managing assets, estate planning, and intergenerational wealth transfer. Each jurisdiction enforces strict Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance protocols, and mandates registration through licensed agents or administrators.
The Dubai International Financial Centre (DIFC) introduced a dedicated legal framework through Foundations Law No. 3 of 2018. This law, influenced by common law principles, allows families—especially international and high-net-worth ones—to establish foundations that benefit from privacy, asset protection, and perpetual existence. These entities are considered taxable persons under certain conditions, depending on their UAE residency status, business activities, and whether their income is derived from UAE sources.
The Abu Dhabi Global Market (ADGM) provides its own structure through the Foundations Regulations 2017. These regulations position family foundations as effective instruments to manage assets, facilitate succession planning, and achieve philanthropic goals. ADGM foundations can be classified as taxable persons if they meet the relevant economic substance criteria under UAE tax law, particularly where income is generated from UAE mainland legislation or where the foundation holds foreign entities that generate income in the UAE.
The RAK International Corporate Centre (RAK ICC) offers a cost-effective and flexible foundation regime under its 2019 regulations. RAK ICC is particularly appealing to families newer to wealth planning or with moderate asset bases. These foreign foundations, while benefiting from robust legal protections, may be considered taxable persons depending on whether their tax concept aligns with UAE residency requirements and if they are seen as foreign jurisdictions conducting relevant activities within the UAE.
Historically, the UAE attracted investors and ultra-high-net-worth individuals with its zero-income-tax regime. However, recent developments reflect a strategic shift toward aligning with international tax standards. With the enactment of the Corporate Tax Law under Federal Decree-Law No. 47 of 2022 and the implementation of global compliance measures such as the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, the UAE has begun a new chapter in fiscal policy.
As of 1 June 2023, corporate tax in the UAE is levied as follows:
→ 0% on taxable income up to AED 375,000
→ 9% on taxable income above AED 375,000
→ 15% for certain large multinational enterprises, specifically those within the scope of Pillar Two rules
In this evolving environment, understanding the tax position of family foundations becomes critical.
Under UAE tax law, a family foundation may be considered a distinct legal entity type, separate from the individuals who establish or benefit from it. However, depending on its structure and purpose, it may be treated as a fiscally transparent vehicle—particularly when it functions similarly to an unincorporated partnership or does not meet the conditions for corporate tax liability.
A fiscally transparent family foundation passes income through to its identified or identifiable natural persons or beneficiaries, who may be taxed individually. If the foundation is wholly owned and controlled by family members, and there is no intent of tax avoidance, the Federal Tax Authority (FTA) may consider it fiscally transparent for corporate tax purposes. However, where the tax avoidance condition is triggered—such as structuring solely to exploit low or no-tax outcomes—tax implications may arise.
Under UAE law, a family foundation is typically classified as a “juridical person.” This means it may be treated as a taxable entity unless it qualifies for an exemption.
Foundations may be treated similarly to trusts or investment vehicles depending on their activities. If a family foundation exists purely for wealth preservation, with no commercial operations, it may apply for exemption under Article 4(1)(d) of the Corporate Tax Law.
However, foundations engaging in business activities—such as holding shares in operating companies or earning rental income—are subject to corporate tax on that income. Foundations must evaluate:
→ Whether their income qualifies as “passive” or “active”
→ Whether they have a permanent establishment in the UAE
→ Whether they meet the criteria for being a Qualifying Investment Fund
The taxation of distributions to beneficiaries depends on their residency status and the nature of the foundation’s income. Generally, beneficiaries who are UAE tax residents may not face additional taxation on distributions, but international reporting obligations (like CRS) may still apply.
Once a family foundation falls within the scope of UAE corporate tax, it must comply with standard requirements:
Every taxable entity must register with the Federal Tax Authority (FTA), even if it earns below the taxable threshold. Early registration prevents penalties and demonstrates proactive compliance.
Foundations must maintain financial records aligned with IFRS standards. Bookkeeping services are essential to document income, expenses, and asset valuations. These records are crucial for:
→ Preparing tax returns
→ Substantiating exemption claims
→ Demonstrating arm’s length transactions
A foundation subject to tax must file a corporate tax return within nine months of the end of its financial year. This includes disclosing income, deductible expenses, and any tax liability due.
If a family foundation transacts with related entities, transfer pricing rules apply. It must justify that such dealings are conducted at arm’s length and prepare master and local files where applicable.
Proper structuring can help minimize tax exposure while preserving the foundation’s objectives. Key considerations include:
Many families use holding companies owned by the foundation to separate business risk from personal wealth. If structured carefully, dividends and capital gains may qualify for participation exemptions.
Foundations established in free zones may benefit from preferential tax treatment, including a 0% tax rate on qualifying income—provided they meet the substance requirements and do not conduct business with mainland entities.
Obtaining a Tax Residency Certificate allows the foundation to claim relief under the UAE’s wide network of double taxation treaties. This is especially valuable if the foundation earns foreign income or owns overseas assets.
This evolving tax environment demands comprehensive guidance to ensure that family foundations meet compliance requirements while maintaining their intended benefits. Family offices must now consider whether their structure qualifies for family foundation status under the UAE framework and whether their operations involve natural person beneficiaries or public benefit entity beneficiaries, as this affects their tax obligations and disclosure requirements.
The new regulations limit opportunities for corporate tax avoidance and require clarity around the minimum or maximum number of founders or beneficiaries allowed for a foundation to remain compliant. As a result, there is a growing need for:
→ Accounting firms with expertise in foundation structuring and family foundation taxation
→ Bookkeeping services that ensure audit-ready financial reporting
→ Corporate tax services that assess tax obligations and optimize filings under UAE corporate tax law
Founders must now balance the advantages of asset protection and succession planning with the responsibilities of compliance and reporting. The UAE’s drive toward fiscal transparency means that foundations can no longer operate in isolation—they must now navigate the broader regulatory landscape with detailed and comprehensive guidance to maintain both their operational integrity and tax efficiency.
→ Asset Protection: Legal segregation of assets shields them from personal claims, creditors, or political risks.
→ Succession Planning: Avoids probate and ensures orderly wealth transfer aligned with the founder’s wishes.
→ Tax Efficiency: With proper structuring, foundations can minimize tax liability while maintaining control.
→ Confidentiality: Foundation charters and documents are often private, especially in ADGM and RAK ICC.
→ Global Recognition: UAE foundations are increasingly accepted by banks, regulators, and counterparties.
→ Complex Compliance: Foundations must now meet FTA tax obligations, maintain records, and file returns.
→ Uncertain Classification: Tax treatment may differ based on activity, requiring legal and tax review.
→ Costs of Setup and Maintenance: Ongoing fees for registration, agents, accountants, and legal advisors.
→ International Reporting: CRS, FATCA, and other obligations may trigger disclosure of beneficiaries and transactions.
At Young & Right, we understand that creating a family foundation structure in the UAE is more than a legal formality—it’s a strategic initiative that balances wealth preservation, tax efficiency, and legacy planning. Our integrated team of legal, accounting, and tax professionals delivers tailored solutions that align with your goals under UAE corporate tax law.
We guide you through selecting the right jurisdiction—DIFC, ADGM, or RAK ICC—and assist in drafting constitutional documents and registering your family foundation. Our approach ensures the foundation meets regulatory standards, aligns with ministerial decisions, and avoids being viewed as an unincorporated partnership, which may be treated differently under tax law.
Understanding whether your foundation is treated as fiscally transparent or subject to corporate tax treatment is essential. We assess whether it qualifies as a qualifying public benefit entity or if it has a tax avoidance purpose, which can affect its tax obligations. From FTA corporate tax registration to timely return filing, we ensure your foundation complies with all relevant tax periods ending and ministerial decisions.
With our dedicated bookkeeping services, your foundation maintains accurate records, ensuring seamless financial reporting. We consider whether your entity is a fiscally transparent unincorporated partnership or a foundation with corporate tax status, tailoring compliance accordingly.
We assist your foundation in obtaining a Tax Residency Certificate, granting access to the UAE’s extensive double tax treaty network. This is especially beneficial for foundations holding global assets, ensuring income is not taxed twice and enhancing fiscal efficiency.
For foundations conducting commercial activities through subsidiaries or holding structures, we provide guidance on transfer pricing and related party transactions. Our services ensure alignment with UAE tax law, particularly where unincorporated partnerships or public benefit entities are involved, minimizing risk and maximizing legitimacy.
The introduction of UAE tax law has added complexity to how family foundations are used for wealth management. No longer purely private vehicles, they may now be treated as juridical persons, subject to corporate tax, financial reporting, and international compliance standards. If wholly owned and controlled by a family, these foundations may face specific regulatory requirements.
Clear distinctions must be made between family foundations, public benefit entities, and unincorporated partnerships, as each has different tax implications. In some cases, a family foundation may qualify as a public benefit entity, but this requires careful evaluation.
Despite these changes, a well-structured family foundation remains a powerful tool for personal investment, asset protection, and succession planning. At Young & Right, we offer the detailed guidance needed to ensure compliance while maximizing the long-term benefits of your foundation under UAE tax law.
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