UAE family foundations: Efficient structure to navigate new tax horizons along with succession planning

In the ever-evolving landscape of wealth management and asset protection, the UAE has introduced a ground-breaking approach for family foundations to optimise their financial strategies. Under the UAE Corporate Tax regime, family foundations now have the option to be treated as unincorporated partnerships, a move designed to provide flexibility and transparency in managing personal assets and investments.

Family foundations play a pivotal role in safeguarding and growing a family’s wealth, ensuring a seamless transition across generations, and contributing to philanthropic endeavours. The key players in this structure are the founder, board, and beneficiaries, each holding distinct responsibilities in the management and distribution of assets.

One of the recent developments in UAE’s financial regulations is the provision allowing family foundations to apply for tax transparency, specifically to be treated as Unincorporated Partnerships. This designation comes with a set of conditions to ensure the foundation’s activities align with the intended purpose and do not serve as a means to evade corporate taxes.

For a family foundation to be considered an unincorporated partnership, it must meet several criteria:

a) The foundation is established for the benefit of identified or identifiable natural persons or a public benefit entity; b) Its principal activity is the management of assets or funds associated with savings or investment; c) The foundation does not engage in any business or business activity; d) The primary purpose is not the avoidance of corporate tax; e) Compliance with any additional conditions prescribed by the minister.

The writer is Partner, MICS