UAE Family Foundations

Background:

Any foundation, trust or similar entity that meets the five conditions of Article 17(1) of the UAE CT Law the beneficiary, principal activity, no-business-activity, no-tax-avoidance and distribution conditions, can be considered as a Family Foundation. If the conditions are met, a juridical-person i.e. a foundation can apply to the FTA to be treated as a fiscally transparent Unincorporated Partnership, and taxability will be then determined in the hands of beneficiaries.

FTA had earlier released a guide on the UAE CT Law implications on Family Foundation in May 2025. The said guide is now updated vide the new guide released in June 2026. The important updates and clarifications are summarized in this alert.

Key Updates in June 2026 Family Foundation Guide

1. SPVs owned by more than one Family Foundation can now be considered fiscally tax transparent - the most important shift.

The earlier May 2025 guide stated that where an SPV was owned jointly by two Family Foundations, SPV was not eligible to apply under Article 17(1) of the UAE CT Law to be treated as fiscally transparent and the income derived by SPV would have been subject to Corporate Tax.

The June 2026 guide explains and concludes that a juridical person can be "wholly owned" jointly by more than one Family Foundation, provided both foundations are themselves treated as Unincorporated Partnerships under the UAE CT Law. If the ownership condition is met, and all the conditions to claim unincorporated partnership provided under the Article 17(1), the SPV may apply to be treated as transparent.

For families that pooled assets into a shared investment vehicle across two or more foundations, this opens a transparency route that the earlier guide had closed.

 2. New guidance on Single and Multi-Family Offices

The guide clarifies that an SFO/MFO that is wholly owned and controlled by a Family Foundation is unlikely to qualify for transparency, because its activities will usually breach the no-business-activity condition as Family offices are generally expected to carry on Business or Business Activities.

As a Resident Person, the SFO/MFO is subject to Corporate Tax on all its income, including management fees. Services to Related Parties and Connected Persons must be remunerated at arm's length (Articles 34 and 36).

A Free Zone SFO/MFO may access the 0% rate on Qualifying Income subject regulatory oversight and satisfaction of all other conditions for claiming qualifying free zone person status.

3. Transfers into a Family Foundation

Contributions by a founder or settlor who is a Related Party must meet the arm's length principle, and any gain or loss may be taxable depending on whether the transferor is (or becomes) a Taxable Person. Where the transferor is a natural person and the assets are Personal Investments or Real Estate Investments, the transfer shall be outside Corporate Tax.

4. Acquisition or sale of juridical persons by Family Foundation

The guide clarifies that when a juridical person flips its tax status from fiscally transparent to fiscally opaque — for example, when it is acquired or sold by a Family Foundation — there is no adjustment to the base cost of assets held by that entity and the previous values will be carried forward for UAE corporate tax law purpose.

5. An LLC cannot itself be a Family Foundation

The guide now clarifies that a LLC is not a "similar entity" and cannot apply to be transparent in its own right as a Family Foundation. It can, however, be treated as transparent under the ownership route which mentioned as above i.e. if wholly owned and controlled by a qualifying Family Foundation.

6. Clarifications on Multi-tier structures

In a multi‑tier structure, a juridical person can be treated as an Unincorporated Partnership (i.e., fiscally transparent) if it is wholly owned and controlled—directly or through an uninterrupted chain of fiscally transparent entities i.e. by a Family Foundation that itself is treated as an Unincorporated Partnership, and if it meets the conditions for claiming unincorporated partnership under Article 17(1). The guide clarifies that each juridical person in the structure must meet the relevant conditions separately.

The guide further clarifies that the conditions should be met throughout the tax period. If the conditions are not met continuously during the Tax Period, the entity and any juridical person wholly owned and controlled by it, will no longer be treated as an Unincorporated Partnership from the beginning of that Tax Period. However, the guide clarifies that the entities within the uninterrupted ownership chain are not required to have the same financial year.   

7. Refined trust definition

The new version of the guide clarifies that the settlor “transfers and assigns assets to be held and managed upon trust by a trustee”, whereas the old version stated that the settlor “transfers assets to either the trust or to a trustee” and separately mentioned that the trustee manages the assets. It emphasizes that assets are legally assigned into a trust relationship, with the trustee holding and managing them as part of that arrangement.

The refined definition provides greater legal clarity and reduces ambiguity though there is no change in substance and tax implications under the CT Law and it broadly remains the same.

What taxpayers should look into

• Pooled SPVs across multiple foundations.

If you treated a jointly-owned SPV (by two or more Family Foundations) as a Taxable Person on the strength of the May 2025 guide, the transparency route is now available. It is important to reassess the implications in light of the updated guide on Family Foundations.

• Family offices.

Confirm the SFO/MFO is registered and taxed in its own right and that intra-group service fees are set at arm's length.

• Settlor contributions.

Identify whether the transferor was a Related Party and a Taxable Person, and whether the arm's length standard was applied. Natural-person transfers of Personal/Real Estate Investments stay outside the ambit of corporate tax provided it satisfies the conditions.

• Entities that changed status.

Where an entity moved between transparent and opaque, make sure no base-cost step-up or step-down was assumed.

• Direct LLC applications.

Any position treating an LLC as a Family Foundation in its own right needs to be re-routed through the ownership/multi-tier structures and satisfaction of the relevant conditions throughout the tax period.

Speak with our Crowe UAE Tax team

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Our team advises a diverse client base spanning multinational corporations, regional conglomerates, family-owned businesses, and financial institutions, and has extensive experience advising on complex technical matters.