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

Overview:

Ministerial Decision No. 261 has been recently issued by the UAE Ministry of Finance, which offers crucial insights into the taxation treatment of Unincorporated partnerships, foreign partnerships, and Family Foundations. These come under the purview of Federal Decree Law No. of 47 of 2022 on corporate taxation. Additionally, these updates are also significant for conducting business operations in the UAE as they clearly indicate the tax obligations and adherence to tax compliance, therefore ensuring alignment within the taxation framework. Understanding these compliances is essential for any business to optimize its tax provisions. Read more to find out more.

Key Tax Updates:

1. Unincorporated Partnerships: Classification and Taxation

• An unincorporated partnership, unless recognized as a judicial person shall not be classified as a taxable person.
• Once decided to be treated as a taxable person, the unincorporated partnership personnel cannot revoke its decision, except under exceptional circumstances which also require explicit approval from the tax authorities.
• The partner representing the unincorporated partnership must also provide relevant details in case of any partner change while filing a Tax return at the time of the Tax period.

2. Foreign Partnership: Taxation Rules

• Unless subject to a similar tax to corporate tax, a foreign partnership will be classified as an unincorporated partnership under the tax laws of foreign jurisdictions.
• Every partner falling under the foreign partnership category will be taxed individually on their respective shares of any income if the partnership is not taxed as an entity in its home jurisdiction
• A foreign partnership must submit an annual declaration to the tax authorities of the UAE to be able to qualify for such provisions.

3. Family Foundations: Tax Implications

• A Family Foundation can also be treated as an unincorporated partnership provided, at least one of the beneficiaries is a public benefit entity and meets either of the following conditions:

• The beneficiary does not derive taxable income that would be considered Taxable Income if received directly.
• Any taxable income generated by the Family Foundation must be distributed to the relevant beneficiaries within six months from the end of the tax period.

Additionally, a juridical person that is wholly owned and controlled by a Family Foundation may opt to be treated as an Unincorporated Partnership, provided it meets the following conditions:

• The entity is wholly owned and controlled by the Family Foundation, either directly or through an uninterrupted chain of entities treated as Unincorporated Partnerships.
• The juridical person complies with the provisions of Clause (1) of Article (17) of the Corporate Tax Law.

Why Is It Important?

The latest updates in Ministerial Decision No. 261 of 2024 have significant implications for businesses structured as partnerships or foundations in the UAE. Understanding the correct tax classification and ensuring compliance is crucial for businesses to avoid penalties and maximize tax benefits. Key takeaways include:

• Businesses must carefully assess whether their Unincorporated or Foreign Partnership qualifies as a Taxable Person under UAE tax laws.
• Foreign Partnerships must adhere to additional reporting requirements to ensure compliance with UAE Corporate Tax regulations.
• Family Foundations structured for public benefit purposes must meet specific tax conditions to benefit from being treated as an Unincorporated Partnership.

Navigating corporate tax regulations in the UAE can be complex, and non-compliance can result in hefty fines or legal complications. At AMCA, we specialize in corporate tax advisory, tax structuring, and compliance services, ensuring that your business remains aligned with the latest regulations.

Our team of tax experts can assist you in:

Assessing the best tax classification for your Unincorporated Partnership, Foreign Partnership, or Family Foundation.

Filing tax returns accurately and on time to avoid penalties.

Structuring your business to optimize tax efficiency while remaining compliant with UAE Corporate Tax laws.

Get a Free Consultation Today!

Ensure your business is on the right track with the UAE’s evolving tax framework. Contact Arnifi today for a 30-minute free consultation and let our experts guide you through the complexities of Ministerial Decision No. 261 of 2024.

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Also Read: Ministerial Decision No. 1 of 2025: A Major Step in UAE Excise Tax Implementation