Page 12 - ICAI UAE TAX UPDATE_MAY 2024

4. ARTICLES FROM MEMBERS

4.1 Savings and Family succession

planning through

CA Naseer Mohammed
Family Foundation in UAE

Family Foundations mainly serve the purpose of prevent the income of the foundation from attracting
achieving succession plan. considering the main UAE Corporate Tax. In this case, each member of
objectives of creating a Family Foundation, the UAE Family Foundation will be treated as a Taxable person
Corporate Tax has given relief to Family Foundations. and the Tax provisions as per UAE Corporate tax law
A Family Foundation (as defined in the UAE Corporate applies to Individuals. A natural person will be subject
Tax Law) is a foundation, trust or similar entity used to UAE Corporate Tax when performing any Business
to protect and manage the assets and wealth of a or Business Activity generating an annual turnover in
natural person or family. The principal activity of a excess of AED 1 million. This excludes income generated
Family Foundation would generally be to receive, hold, by a natural person from the following sources, that are
invest, disburse, or otherwise manage funds and assets not considered as Businesses or Business Activities:
associated with savings or investment for the interest of
individual beneficiaries. Such activities are not generally As per Cabinet Decisions 49, the following incomes are
considered as “Business” activity. Applicability of UAE not treated as ‘Business Income’ In the hands of Natural
Corporate Tax on Family Foundations, as explained persons. (Without any limits) Employment income,
by Ministry of Finance, Family Foundations (including Personal Investment income, Real Estate Investment
certain trusts) are independent juridical persons with income. (If not conducted through license or requires a
separate legal personality, and would therefore be license) As per Cabinet Decision 49, Natural person can
subject to UAE Corporate Tax in their own right. have income from Real Estate (sale, lease etc) without
falling under Corporate tax purview if not conducted
The Relief: These types of Family Foundations can with a license or ‘not’ required to be conducted through
apply to be treated as transparent “Unincorporated a license (for example hotels, holiday homes etc). It will
Partnerships” for UAE Corporate Tax purposes, be a big relief for those who are planning for family
resulting in the founder/settlor and the beneficiaries of foundation.
the foundation to remain to be seen as owners of the
assets held by the foundation. This would generally

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UA E TAX UPD ATE NEWSLET TER ISSUE 02 - May 2024