FTA Releases Key Guidelines on Foundation Setup and Annual Filing Requirements in UAE

 

The UAE Federal Tax Authority (FTA) has issued a comprehensive Corporate Tax Guide focused on the taxation of Family Foundations, offering clarity on their treatment under the UAE’s Corporate Tax framework. For families looking to establish or manage wealth through structures such as trusts or foundations, these new guidelines are essential, particularly in relation to foundation setup and foundation annual filing obligations.

Annual Confirmation Filing: A Core Requirement

One of the most significant developments in the updated FTA guide is the introduction of a mandatory foundation annual filing requirement. Family Foundations — or juridical persons they fully own and control that elect fiscal transparency — must file an annual confirmation with the FTA within 9 months of the end of their tax period.

For instance:

  • Tax periods ending on or before 31 March 2025 must submit confirmation by 31 December 2025.
  • To qualify for administrative penalty relief, those with a tax period ending 31 December 2024 are advised to submit their filing by 31 July 2025.

This obligation applies even in multi-tier structures, where either the foundation itself or each individual entity in the structure may fulfill the confirmation requirement.

Key Highlights from the FTA Guide

1. Fiscal Transparency for Foundations
 Foundations that meet the conditions under Article 17 of the UAE Corporate Tax Law can apply for fiscal transparency and be treated as Unincorporated Partnerships. This status exempts the foundation from paying corporate tax directly, instead passing tax responsibility to the beneficiaries, if applicable.

2. Structuring Flexibility for Trusts
 Unincorporated trusts are by default treated as fiscally transparent. They may also elect to be treated as a Family Foundation when it is beneficial — especially when managing entities or assets. If a trust owns a juridical person that meets Article 17 conditions, it can still meet the “wholly owned and controlled” requirement — even if the legal title is with the trustee.

3. Inclusion of Wholly-Owned Entities
 Entities fully owned and controlled by a Family Foundation — provided they are not conducting commercial activities — can also benefit from pass-through tax treatment. These entities may operate with independent accounting periods, offering additional flexibility in the overall foundation setup.

4. Beneficiary Tax Considerations
 If a non-qualifying public benefit entity is listed as a beneficiary, any taxable income (e.g., non-exempt dividends) must be distributed within six months after the tax period ends to retain compliance. Timely distributions remain critical in such cases.

5. Foreign Foundations Holding UAE Assets
 Foreign-based foundations that own assets in the UAE may also apply for fiscal transparency, provided they meet local legal and tax conditions — enhancing the UAE’s appeal for global families pursuing cross-border foundation setup strategies.

6. Reporting and Disclosure
 Only specific entities, such as non-qualifying public benefit entities, must receive sufficient information from Family Foundations to assess their tax liabilities. There is no blanket requirement for distributions or beneficiary disclosures unless income is taxable in the beneficiaries’ hands.

Payments made to beneficiaries in exchange for services are deductible by the foundation, provided they adhere to the arm’s length principle. However, the beneficiary’s own tax position on such income must be assessed separately.

Foundation Setup and Annual Filing in the UAE: MS Can Help

The FTA guide reflects a growing commitment to tax transparency, asset protection, and regulatory clarity in the UAE. With clearer rules around foundation setup, fiscal transparency elections, and mandatory foundation annual filings, the UAE continues to position itself as a trusted jurisdiction for succession planning and private wealth structuring.

At MS, we specialize in providing tailored solutions for high-net-worth families and individuals, including the strategic setup of DIFC Foundations. Our team ensures that your structure is not only compliant but also optimised for long-term tax efficiency and asset protection.

Comments

Post a Comment

Popular posts from this blog

Family Office Setup in DIFC: Why Global Wealth is Choosing Dubai

Image
  As global wealth becomes increasingly mobile, the United Arab Emirates (UAE) has positioned itself as a premier destination for ultra-high-net-worth individuals (UHNWIs) and family office setup in DIFC and across the country. With its attractive regulatory environment, tax benefits, and growing investment opportunities, the UAE is now a key wealth hub competing with traditional financial centers like London, Singapore, and Switzerland. Over the past few years, the UAE has seen a substantial influx of wealthy individuals and family offices in DIFC and ADGM relocating their wealth management operations. In 2024 alone, the country hosted 72,000 high-net-worth individuals (HNWIs), with over 75% of the region’s family offices now based in the UAE. This shift is driven by favorable policies, regulatory innovations, and access to a sophisticated financial ecosystem that caters to the needs of UHNWIs, single-family offices (SFOs), and multi-family offices (MFOs). Why UHNWIs Are Choosi...
Read more

Why Foundation Setup in DIFC is the Ultimate Wealth Protection Strategy

Image
  Dubai has solidified its reputation as the preferred destination for high-net-worth individuals and global investors. With its tax-efficient policies, world-class financial ecosystem, and strategic location, it offers unparalleled security and opportunities. However, wealth accumulation is just one aspect of financial success — the real challenge lies in protecting assets, managing them effectively, and ensuring seamless wealth transition for future generations. This is where setting up a foundation in DIFC emerges as a powerful solution. A DIFC Foundation provides full control, enhanced privacy, and long-term security, making it the ideal structure for wealth preservation, succession planning, and philanthropy. Why Setting Up a Foundation in DIFC is the Best Wealth Structuring Tool? A DIFC Foundation is a highly flexible wealth management tool that ensures asset protection through limited liability, keeping personal and business wealth separate. With no shareholders, founders m...
Read more

Salary Benchmarking for Transfer Pricing: Why It Matters in the UAE Corporate Tax Era

Image
As the UAE aligns with global tax standards, Transfer Pricing (TP) has become a key focus under the Corporate Tax regime — especially in the context of compensating Key Management Personnel (KMP) . When these individuals are also shareholders, directors, or Connected Persons , their remuneration comes under sharper scrutiny. With the Federal Tax Authority (FTA) and regulators closely assessing these payments, it’s vital for businesses to ensure compensation is justifiable, well-documented, and aligns with the Arm’s Length Principle (ALP) . What Is Transfer Pricing? Transfer Pricing governs transactions between Related Parties  — including those involving KMP remuneration . Under Article 34 of the UAE’s Corporate Tax Law, these transactions must be priced as if between independent parties, ensuring no manipulation of taxable income. Why Focus on KMP Remuneration? KMPs such as CEOs, CFOs, and board members significantly influence both strategy and execution. When they are also sha...
Read more