Income Tax Exemption in the UAE for Family Foundations

Recent changes in UAE legislation have opened up new opportunities for tax exemption for companies owned by family foundations. Now, investment structures that manage assets for the benefit of a family can obtain the status of tax-transparent entities and avoid taxation at the foundation and subsidiary level.

What is a family foundation

A family foundation is a legal structure created to preserve, manage and transfer assets within a family. The foundation accumulates funds and assets, investing them and distributing them among beneficiaries. The main objective of the foundation is to protect assets and ensure their effective management.

Tax transparency and tax exemption

According to the UAE Ministry of Finance Decision No. 261 of 2024, family foundations and their wholly-owned subsidiaries, including family offices (SFOs), can obtain tax transparency status. This allows the foundation and companies to be exempt from taxation at the corporate level. Taxation occurs at the level of founders or beneficiaries, which, in the case of individuals, does not lead to additional tax liabilities in the UAE.

It is important to note that the exemption applies only to companies that are engaged in investment activities and asset management, and not entrepreneurial activities. Investments in real estate and securities in the UAE are not considered entrepreneurship for tax purposes.

The procedure for obtaining an exemption

The procedure for obtaining tax transparency includes:

• Establishment of a family foundation;
• Preparation and submission of an annual application through the EmaraTax portal;
• Indication of data of all beneficiaries and provision of financial information of the foundation.

At the moment, there is no separate application for subsidiaries, and it is assumed that the exemption will apply to all organizations under the management of the foundation.

IT-OFFSHORE is ready to provide full support for the establishment of a family foundation, development of statutory documents, preparation of an application for tax transparency and transfer of assets to the foundation. We will help you assess the feasibility of using the new benefit and ensure the correct implementation of all stages for exemption from income tax in the UAE.