Page 11 - ICAI UAE TAX UPDATE_APRIL 2024

3.1.3 FTA Guide - Taxation of Partnerships

On March 4, 2024, the Federal Tax Authority (FTA) the partnerships and the partners which is also further
released a Corporate Tax Guide on “Taxation of discussed in the guide.
Partnerships”, offering insights into how Federal Decree-
Law No. 47 of 2022 on the Taxation of Corporations • Types of partnerships and types of unincorporated
and Businesses (CT Law) addresses partnerships and partnerhsips have also been explained in the guide
its application, alongside other clarifications related to along with their taxability.
compliance.
• The guide also elaborates regarding the tax
While the guide is not legally binding, the guide aims to implications of transition from fiscally opaque to fiscally
aid in comprehending the Relief provisions within the transparent and tax treatment of foreign entities.
CT Law. Following are the key takeaways that can be
summarized from the Corporate Tax Guide issued by the • Additionally, the guide also provides tax
FTA: implications in the hands of the partners or the
partnership, in case of change in distributive share of
Key takeaways: partner.

• Taxability and treatment for incorporated • Tax treatment in case a partner leaves or retires
partnership (to be taxed as separate Juridical taxable has also been elaborated in the guide.
persons) vis-à-vis unincorporated partnerships (Fiscally
opaque to be taxed as separate juridical person or fiscally • Corporate tax obligations have also been
transparent not treated as a Taxable Person, instead discussed in the guide.
each Partner shall be taxed on their distributive share
of assets, liabilities, income and expenditure). However,
the partners of an Unincorporated Partnership can file
an application with the FTA for the Unincorporated
Partnership to be treated as a Taxable Person in its own
right.

• The guide also outlines the procedure on how a
fiscally opaque person can be treated as taxable person.

• The Guide also sheds light on the CT Compliance
obligations and tax treatment of ForeignPartnerships.

• Interactions and interplays with provisions of Free
Zone and Small Business Relief are also addressed in
the guide.

• Partners in an Unincorporated Partnership shall
be Connected Persons and transactions between such
partners must be as per the arm’s length standard. This
shall also apply to any Related Party of a partner in an
Unincorporated Partnership.

• General Anti-Abuse Rules (GAAR) provisions shall
be applicable for all the transactions entered into by
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