2 July 2025 • 6 minute read
FTA clarifies compliance obligations for Partnerships and Family Foundations under UAE Corporate Tax
Background
Under the UAE Corporate Tax regime, unincorporated partnerships (UIPs) are not taxed in their own right, unless they opt to be treated as a taxable person1 in which case they are referred to as opaque partnerships. Otherwise, the partners are taxed individually on their share of the partnership’s income.
An unincorporated partnership is broadly defined as a relationship established by contract between two or more Persons (such as a partnership, trust, or similar association), in accordance with UAE law.
Under Article 16 of the UAE Corporate Tax Law2, unless a partnership elects to be taxed as an opaque entity, each partner is considered to:
- Conduct the business of the partnership,
- Share its assets, liabilities, and arrangements,
- Include their proportionate share of the partnership’s income and expenses in their own taxable income.
If the distributive share of each partner cannot be determined, it is allocated equally.
To formalize their tax status, UIPs must register for Corporate Tax and appoint one of the partners as the authorized partner. This partner acts on behalf of all partners, submits an annual declaration (i.e., an information return), and must also file for tax deregistration if the partnership ceases operations.
Foreign partnerships and family foundations may also be treated as UIPs if certain conditions are met.
To clarify compliance obligations of UIP, the Federal Tax Authority (FTA) first issued Decision No. (16) of 2023 (Initial Decision), which has now been repealed and replaced by FTA Decision No. (5) of 2025 (New Decision), issued on 19 May 2025. The New Decision significantly expands and further clarifies the tax compliance obligations for unincorporated partnerships, foreign partnerships, and family foundations.
Overview of main changes and amendments
The newly issued FTA Decision No. (5) of 2025 (effective 1 July 2025) replaces Decision No. (16) of 2023 and includes several important updates and clarifications.
Below is a summary of the key provisions and how they differ from the 2023 decision:
- Registration
Under the Initial Decision, the FTA had already clarified that UIPs must appoint an authorized partner to submit a tax registration application on behalf of the partnership.
However, the New Decision now introduces specific registration deadlines:
- If the first financial year ended before 1 July 2025, the UIP must register by 31 August 2025.
- If the first financial year ends after 1 July 2025, the UIP must register within 3 months of the end of the financial year.
- Annual declaration filing
The obligation to file an annual declaration within 9 months from the end of the financial year is retained. However, the New Decision includes a one-time extension until 31 December 2025 for financial years ending on or before 31 March 2025.
- Distributive shares
Similar to the Initial Decision, the New Decision confirms that if partner shares cannot be identified, the assets, liabilities, income and expenditure of the UIP will be allocated equally among partners in the UIP.
- Deregistration
The New Decision clarifies that the authorized partner must file a deregistration application within 3 months of business cessation resulting from dissolution or termination of the UIP or due to any other reason. Deregistration was not addressed under the Initial decision. Accordingly, this is a welcome clarification of the general deregistration obligation included in Article 52(1) of the Corporate Tax Law.
- Election to be treated as a taxable person
UIPs can elect to be treated as a taxable person (i.e., opaque partnership) by submitting an application to the FTA.
The New Decision provides clarity regarding the timing of this application:
- In general, the application must be made before the end of the relevant tax period.
- With respect to tax periods ending on or before 31 December 2025, opaque tax treatment can be applied retroactively provided the application is submitted on or before this date.
If approved, the UIP will be treated as a taxable person either from the start of the tax period in which the application is made or from the following tax period, as specified in the application.
- Tax return filing and payment for opaque partnerships
For partnerships treated as taxable persons, the New Decision introduces transitional provisions whereby Corporate Tax returns and payments for tax periods ending on or before 31 March 2025 must be submitted and paid by 31 December 2025.
- Foreign partnerships
The New Decision explicitly confirms that the Corporate Tax compliance obligations also apply to foreign partnerships that qualify as UIPs. A UAE-based partner must submit the annual declaration on the partnership’s behalf. Foreign Partnerships were not covered in the Initial Decision.
- Family foundations
Family foundations can submit an application to the FTA to be treated as UIPs, provided certain conditions are met3. As a general rule, this application must be submitted before the end of the relevant tax period. The New Decision includes transitional provisions that allow deferral of this application until 31 December 2025 for tax periods ending on or before the same date.
If approved, the Family Foundation will be treated as an UIP either from the start of the tax period in which the application is made or from the following tax period, as specified in the application.
If a family foundation's status as an UIP is approved, the family foundation must file an annual declaration within 9 months of each tax period, confirming its continued eligibility. Transitional relief allows deferral of this filing until 31 December 2025 for tax periods ending on or before 31 March 2025.
Key takeaway
FTA Decision No. (5) of 2025 provides clearer and more comprehensive guidance on the corporate tax obligations of unincorporated partnerships, foreign partnerships, and family foundations. It introduces specific registration deadlines, clarifies the process for unincorporated partnerships electing to be treated as a taxable person, and sets out deregistration and annual declaration requirements.
Reference
1Article 16(8) Corporate Tax Law
2Federal Decree-Law No. (47) of 2022
3Article 17(1) Corporate Tax Law