(FTA Clarification CTP008 – September 2025)
On 19 September 2025, the UAE Federal Tax Authority (FTA) issued Public Clarification CTP008: “Corporate Tax Treatment of Family Wealth Management Structures.”
This long-awaited clarification offers valuable direction on how Family Foundations, trusts, holding vehicles, and Family Offices — both Single-Family (SFO) and Multi-Family (MFO) — are treated under the Corporate Tax (CT) regime.
The guidance reinforces that passive family wealth structures can remain outside the Corporate Tax scope if they meet the Article 17 conditions. It also provides practical illustrations for multi-tier structures, subsidiaries, and family offices, ensuring greater certainty for families managing inter-generational wealth in the UAE.
Article 17 and the Transparency Mechanism
At the heart of the Clarification lies Article 17 of the Corporate Tax Law — a key provision allowing qualifying vehicles such as Family Foundations and trusts to elect tax transparency.
In essence, this means that the vehicle itself is not taxed, but rather that any taxable income flows through and is assessed at the beneficiary level.
To qualify, a Family Foundation must demonstrate that:
- It is established for identifiable natural persons or public-benefit entities.
- Its main purpose is to receive, hold, invest, and manage assets for savings or investment.
- It does not engage in any business activity the founder or beneficiaries could have carried out directly.
- Its formation is not primarily for tax-avoidance purposes.
- It satisfies any further conditions set by the Minister.
If beneficiaries include public-benefit entities, transparency applies only where such entities either do not earn taxable income directly or distribute it within six months after the tax period ends.
Once approved, the Family Foundation is treated as an Unincorporated Partnership for CT purposes, with transparency applying from the start of the relevant tax period (or another date specified by the FTA).
Importantly, the Clarification reiterates that Foundations with separate legal personality — such as those established in DIFC or ADGM — must formally apply for Article 17 treatment. Conversely, trusts or unincorporated structures are automatically transparent.
Legal Personality and Tax Treatment
The presence or absence of legal personality determines tax status:
- Foundations (DIFC / ADGM) – Taxable by default but may elect transparency under Article 17 if the conditions are met. Those remaining taxable may still access reliefs such as domestic dividend and participation exemptions, or the 0 % rate on qualifying income.
- Trusts (DIFC / ADGM / Federal) – Typically lack legal personality and are automatically tax-transparent. However, subsidiaries owned by such trusts must individually apply for transparency to preserve “look-through” treatment.
Multi-Tier Transparency and the “Uninterrupted Chain”
Ministerial Decision No. 261 of 2024 (effective retroactively from 1 June 2023) broadened Article 17’s scope to include subsidiaries wholly owned and controlled by a tax-transparent Family Foundation—directly or through an uninterrupted chain of similar entities.
The Clarification reaffirms this rule with examples showing how families can maintain transparency across layered holding structures—for example:
Foundation → SPV → Real Estate / Shareholdings
Each entity in the chain must meet Article 17 conditions and engage solely in passive investment activities.
If any entity breaches these requirements (for instance, by conducting a business), the entire chain below becomes taxable—a “break-the-chain” effect that underscores the need for disciplined structuring and clear investment-only mandates.
The FTA also confirms that LLCs do not qualify as “similar entities” unless they are wholly owned and controlled by the Family Foundation and independently meet Article 17 criteria.
Beneficiary-Level Taxation
Under transparent arrangements, tax is notionally assessed at the beneficiary level, but UAE-resident individuals remain exempt on:
- Personal investment income (dividends, capital gains, interest), and
- Real estate income (rental or sale of property not requiring a licence).
Accordingly, most Family Foundations incur no Corporate Tax — neither at the vehicle nor the beneficiary level — provided they remain passive and compliant.
However, income arising from business activities may still attract CT if a beneficiary’s share exceeds AED 1 million annually, consistent with Cabinet Decision 49 of 2023.
Family Offices under the Corporate Tax Regime
Family Offices — entities that manage family wealth, oversee foundations or trustees, and ensure regulatory compliance — are treated as Taxable Persons.
They must charge arm’s-length fees to related parties and adhere to transfer-pricing rules.
Where established in a Free Zone, a Family Office may benefit from the 0% CT rate if it qualifies as a Qualifying Free Zone Person earning Qualifying Income from Qualifying Activities (Cabinet Decision 100 of 2023).
- Wealth or fund-management services qualify only if regulated by a competent authority such as the DFSA, FSRA, or UAE Central Bank.
- Passive holding of shares or securities remains a Qualifying Activity by default.
The Clarification distinguishes between:
- Unregulated SFOs, generally taxable at 9%, and
- Regulated MFOs, which may access Free Zone relief when meeting regulatory and income conditions.
Strategic Takeaways
This Clarification reinforces the UAE’s position as one of the most strategically advantageous jurisdictions for family wealth planning — offering flexibility, predictability, and continued tax efficiency.
To capitalise on these benefits, families and advisors should:
- Review existing foundations, SPVs, and family offices for alignment with Article 17 conditions.
- Ensure continuity of transparency across multi-tier structures.
- Document substance and passive purpose at every level to avoid “chain breaks.”
- Evaluate Free Zone status for eligible family offices seeking 0% CT treatment.
Conclusion
The FTA’s Public Clarification CTP008 marks a significant milestone in the UAE’s family-wealth landscape — balancing regulatory transparency with fiscal competitiveness.
For family groups, private offices, and advisors, this is the time to re-evaluate, document, and optimise existing structures.
Those who act now can preserve both continuity and tax neutrality — ensuring that the UAE remains the jurisdiction of choice for multi-generational wealth preservation.