8 October 2025
Public Clarification on the Corporate Tax treatment of family wealth management structures
Background
On 19 September 2025, the UAE Federal Tax Authority (FTA) issued a public clarification (Clarification) regarding the treatment of family wealth management structures under the UAE Corporate Income Tax (CIT) Law.
For the purposes of the Clarification, the term family wealth management structure encompasses:
- Family Foundations (including trusts and similar entities)
- Holding companies
- Special Purpose Vehicles (SPVs)
- Single Family Offices (SFOs) and Multi-Family Offices (MFOs)
- Family members
The Clarification builds on guidance issued earlier this year by the FTA on the taxation of Family Foundations. Our alert on that development can be accessed here.
Family Foundation
The UAE CIT Law broadly defines Family Foundations to include trusts and similar entities. The Clarification distinguishes “similar entities” as those with comparable legal characteristics to foundations or trusts and explicitly excludes Limited Liability Companies (LLCs).
Further, the Clarification confirms that Family Foundations which lack legal personality such as trusts formed under DIFC and ADGM laws are automatically treated as fiscally transparent (i.e., they are not taxable in their own right). On the other hand, entities with legal personality may apply for fiscal transparency if they meet specific conditions, most notably, that they do not conduct commercial or business activities.
Multi-tier structures
The Clarification addresses the treatment of multi-tiered structures, including wholly owned holding companies and other SPVs held by Family Foundations. Juridical persons held through a chain of fiscally transparent entities may themselves qualify as fiscally transparent, provided they meet the relevant conditions of fiscal transparence treatment with regard to Family Foundations.
SFOs and MFOs
The Clarification discusses the treatment of family offices. SFOs and MFOs that do not qualify for fiscally transparent treatment are generally subject to CIT on their income at the standard rate of 9%, for income exceeding the threshold of AED 375,000.
Alternatively, SFOs and MFOs may be treated as Qualifying Free Zone Persons (QFZPs), and taxed at 0% on their qualifying income, if they provide regulated fund or wealth management services and meet all other relevant conditions of a QFZP. The Clarification emphasizes that being subject to regulation by a competent authority is essential and that merely holding the relevant license is insufficient for the SFO/MFO to benefit from the Free Zone Tax Regime.
The Clarification also provides some helpful illustrative examples showcasing taxability depending on legal structure, ownership chain and regulatory status.
Taxation of family members
The Clarification confirms the principle expressed in the UAE CIT Law and FTA guidance that income earned by individuals is generally outside the scope of UAE CIT, provided it is not linked to a business or business activity. Passive income, such as income from personal investment or real estate, is typically not taxable in the hands of family members/beneficiaries.
Key takeaways
Family wealth management structures and stakeholders should take into account the FTA's views as expressed in the Clarification in assessing the tax treatment of their income/asset holdings under the UAE CIT law.