FTA clarifies tax-transparent treatment for family foundations and trusts under Article 17

The UAE Federal Tax Authority has issued updated guidance on the taxation of Family Foundations, clarifying how these structures are treated under the UAE Corporate Tax regime. Key clarifications include: Family Foundations are not automatically exempt from Corporate Tax but may elect tax-transparent treatment if conditions under Article 17 are met. Trusts and similar contractual arrangements can qualify for tax-transparent treatment where conditions are satisfied. Tax-transparent treatment can extend through multiple layers of entities, provided every entity in the chain qualifies—a single non-qualifying entity disrupts the chain. Individuals transferring personal investments or real estate into a Family Foundation generally face no UAE Corporate Tax consequences, though corporate transferors must apply arm's-length transfer pricing rules. Companies changing tax status (entering or leaving transparent treatment) do not trigger asset revaluation. Pre-existing entities acquired by a Family Foundation can qualify for transparent treatment if conditions are met going forward. Family offices generally do not qualify for the same tax-transparent treatment as Family Foundations, as they typically carry commercial activities and generate fee income, remaining subject to Corporate Tax.