The Essentials

The UAE Federal Tax Authority (FTA) has clarified corporate tax of family wealth management structures, including family foundations, holding companies, SPVs, and family offices. The guidance explains when entities and family members qualify for tax transparency, outlines compliance requirements, and highlights exemptions on investment and real estate income, helping families manage wealth efficiently while staying fully compliant.

The UAE Federal Tax Authority (FTA) has recently issued clarifications on the corporate tax of family wealth management structures, offering crucial guidance for high-net-worth individuals, family offices, and their advisors. The clarification addresses the tax implications for entities such as family foundations, holding companies, Special Purpose Vehicles (SPVs), Single Family Offices (SFOs), Multi-Family Offices (MFOs), and family members, referencing Article 17 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 261 of 2024.

This guidance is intended to enhance transparency, clarify compliance obligations, and provide clarity on the conditions under which family wealth management structures may achieve tax-efficient status.

Corporate Tax of Family Wealth Management Structures

1. Family Foundations
 Foundations, trusts, or similar domestic or foreign vehicles can achieve tax transparency, meaning they are not considered taxable persons in their own right, if they meet the criteria outlined in Article 17(1) of the Corporate Tax Law.

• Foundations with a separate legal personality must apply to the FTA for tax-transparent treatment.
• Vehicles without a separate legal personality are automatically considered tax transparent.
• This ensures that income generated through the foundation flows directly to beneficiaries without being taxed at the entity level, simplifying reporting and reducing potential tax liabilities.

2. Holding Companies & SPVs
 Entities wholly owned or controlled by a tax-transparent family foundation may also apply for tax transparency, provided they meet the relevant conditions.

• If they do not qualify as tax transparent, these entities are taxable in their own right.
• Such entities may still benefit from exemptions on certain income, including dividend income and income from holding activities if it is a QFZP.
• Entities located in UAE Free Zones may qualify for a 0% corporate tax rate, subject to specific Free Zone criteria.

3. Single Family Offices (SFOs) & Multi-Family Offices (MFOs)
SFOs and MFOs are generally subject to corporate tax unless they meet the conditions for tax transparency. Key considerations include:

• SFOs/MFOs must charge arm’s length fees when providing services to related parties to comply with transfer pricing rules.
• Free Zone offices may benefit from a 0% corporate tax rate on Qualifying Income if they are regulated by competent authorities such as the DFSA, FSRA, or UAE Central Bank.
• Unregulated offices do not qualify for these preferential rates on management or financial services income.

Corporate Tax Treatment of Family Members

Family members generally remain exempt from corporate tax of family wealth management structures on income received from:

• Tax-transparent vehicles
• Qualified family wealth management structures
• Personal investment or real estate income

Exception: Tax liability arises if commercial business income from these holdings exceeds AED 1 million per year, ensuring that personal investment activities remain largely tax-efficient while larger business operations are appropriately taxed.

Corporate Tax of Family Wealth Management Structures: Implications and Key Takeaways

• Assess Tax Transparency: Family foundations and other wealth management vehicles should evaluate whether applying for tax transparency is beneficial.
• Prefer Regulated Free Zone Entities: Using regulated Free Zone structures can result in substantial exemptions for qualifying income.
• Compliance Matters: Ongoing compliance and annual confirmation to the FTA are mandatory to maintain tax transparency status.
• Family Member Considerations: Personal investment and real estate income generally remain exempt, but commercial business income thresholds must be monitored.
• Dividend and Capital Gains Exemptions: Even non-transparent entities may benefit from exemptions on qualifying income streams.

How MS Can Help in Corporate Tax of Family Wealth Management Structures

MS provides comprehensive support to family offices, foundations, holding companies, and SPVs in understanding and applying corporate tax of family wealth management structures in the UAE. From evaluating eligibility for tax transparency and preparing FTA applications to advising on Free Zone benefits, compliance, and corporate tax planning, we help families and their advisors manage wealth efficiently, optimize tax outcomes, and ensure long-term preservation and growth of their assets.