UAE Tax Update: Expanded Tax Transparency for UAE Holding Companies held by UAE Family Foundations
On November 18, 2024, the UAE Ministry of Finance announced important updates to Ministerial Decision No. (261) of 2024, bringing new benefits for Family Foundations under the UAE Corporate Income Tax regime (UAE CT). These changes, effective from tax periods starting on or after June 1, 2023, offer significant advantages for family wealth structures, including DIFC Foundations and DIFC holding companies.
What’s new?
- Expanded Tax Transparency for UAE Holding Companies held by UAE Family Foundations: Holding companies within family foundations can now opt to be treated as an Unincorporated Partnership for UAE corporate income tax (CT) purposes. This means that holding companies holding assets such as bank accounts, portfolios, and real estate properties will not be subject to UAE CT, without the need to meet the 12-month holding period requirement to qualify for tax relief. This change simplifies asset management within private wealth structures that are held by family foundations.
- Simplified Accounting & Audit Compliance: These holding companies will no longer need to conduct an annual financial audit and can follow basic accounting standards (no need for an IFRS accounting standard), just like the family foundation itself.
This update makes DIFC Foundations and DIFC holding companies even more attractive, offering a straightforward and effective solution for individuals and families to structure their family wealth in line with their succession planning needs.
As highlighted by H.E. Younis Haji AlKhoori, Undersecretary of the Ministry of Finance, these updates reflect the UAE's commitment to a flexible and competitive Corporate Tax system, ensuring certainty for taxpayers and reinforcing the UAE’s position as a leading global hub for business and investment.
In case you would like to know more about the DIFC Foundation and DIFC Prescribed Company possibilities, or learn about different alternatives depending on your situation, do not hesitate to contact us.
