Family Foundation Guide

June 12, 2026

Background

The UAE Federal Tax Authority (FTA) has issued an updated Corporate Tax (CT) Guide on the Taxation of Family Foundations in June 2026, replacing the earlier version issued in May 2025.

Family Foundations are commonly used by families for succession planning, asset protection, wealth preservation and inter-generational transfer of assets. Under the UAE CT, a foundation, trust or similar entity may apply to the FTA to be treated as an Unincorporated Partnership (UIP), provided the relevant conditions under Article 17 of the UAE CT Law are satisfied.

Where such application is approved, the Family Foundation is treated as fiscally transparent for UAE CT purposes. In simple terms, this means that the Family Foundation itself is not taxed separately. Instead, the income, expenditure, assets and liabilities are treated as arising directly to the beneficiaries in accordance with their respective shares.

The updated guide does not fundamentally change the overall tax framework for Family Foundations. However, it provides important clarifications on practical matters such as multi-tier structures, asset transfers into Family Foundations, acquisition or sale of entities by Family Foundations, and the Corporate Tax treatment of family offices.

Key Updates in June 2026 Guide

The June 2026 guide updates Sections 2.5, 3.3, 3.4, 6 of the earlier guide and adds Sections 7.8, 7.9 and 7.10.

1. Legislative References Updated

The updated guide includes additional legislative references, including Free Zone-related decisions. These references are particularly relevant where Family Foundation structures involve Free Zone entities or family offices carrying out wealth management, investment management or fund management activities.

2. Trust-related Wording Clarified

The updated guide refines the description of trusts and clarifies the role of the settlor, trustee and beneficiaries. This is largely a legal drafting clarification and does not appear to change the underlying Corporate Tax treatment.

3. Clarification on LLCs and Similar Entities

The updated guide expressly clarifies that an LLC is not considered a ‘similar entity’ to a foundation or trust.

Therefore, an LLC cannot itself apply to be treated as fiscally transparent on the basis that it is a Family Foundation.

However, an LLC may still be eligible to apply for fiscally transparent treatment where it is wholly owned and controlled by a qualifying Family Foundation and satisfies the applicable conditions.

4. Multi-tier Structures Expanded

The updated guide provides more detailed guidance on the treatment of multi-tier Family Foundation structures, particularly where a Family Foundation holds assets through one or more underlying companies, SPVs or holding entities.

Where the Family Foundation owns one or more underlying juridical persons, the eligibility of each entity in the ownership chain must be assessed separately. In other words, an underlying SPV or holding company will not automatically be treated as fiscally transparent merely because it is owned by a qualifying Family Foundation.

For a juridical person in a multi-tier structure to apply for fiscally transparent treatment, it must be wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership. This ownership and control may be direct or indirect. However, where the ownership is indirect, it must be through an uninterrupted chain of entities that are themselves fiscally transparent for UAE Corporate Tax purposes. The updated guide specifically confirms that each juridical person in the structure must meet the relevant conditions separately.

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

A key clarification in the June 2026 guide relates to structures where an underlying entity is held by more than one Family Foundation. The earlier May 2025 guide had taken the position that where an SPV was owned partially by two Family Foundations, SPV was not considered wholly owned and controlled by one Family Foundation. Accordingly, SPV was not eligible to apply under Article 17(1) of the 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 now revises this position. In the updated example, Family Foundation 1 and Family Foundation 2 are both juridical persons that have been approved by the FTA to be treated as Unincorporated Partnerships. They jointly incorporate a real estate investment SPV, with Family Foundation 1 holding 80% and Family Foundation 2 holding 20%. The updated guide clarifies that a juridical person can be ‘wholly owned’ by more than one Family Foundation. Accordingly, SPV is considered wholly owned, jointly, by two Family Foundations, and the ownership condition is met where both Family Foundations are treated as Unincorporated Partnerships.

This is a significant practical clarification. It means that the ownership condition is not restricted to cases where a single Family Foundation owns 100% of the underlying entity. A jointly held SPV may also qualify, provided it is wholly owned by one or more qualifying Family Foundations and the control condition is satisfied.

5. New Guidance on Transfers to Family Foundations

The updated guide introduces a new section on transfers of assets to a Family Foundation.

Where a founder or settlor transfers assets to a Family Foundation, the CT implications will depend on the status of the transferor and the nature of the assets transferred.

Where the transferor is a Taxable Person, the transfer may give rise to CT implications. Further, where the transfer is between Related Parties, the arm’s length principle need to be adhered to.

However, where a natural person transfers assets that qualify as Personal Investments or Real Estate Investments, such transfer should generally remain outside the scope of UAE Corporate Tax.

This clarification is particularly relevant for families planning to transfer shares, investment portfolios, real estate or other assets into a Family Foundation structure.

6. New Guidance on Acquisition or Sale of Entities by Family Foundations

The updated guide also includes new guidance on the treatment of juridical persons acquired or sold by a Family Foundation.

Where a juridical person becomes wholly owned and controlled by a qualifying Family Foundation, it may be eligible to apply for fiscally transparent treatment, provided the relevant conditions are met.

Conversely, where such entity ceases to be wholly owned and controlled by the Family Foundation, it may lose its fiscally transparent status and become subject to Corporate Tax in its own right.

Importantly, the guide clarifies that a change in tax status from fiscally opaque to fiscally transparent, or vice versa, does not result in any adjustment to the base cost of assets held by that entity. Therefore, a Family Foundation structure should not be viewed as creating a tax-free uplift or reset in the tax base cost of assets.

7. New Guidance on Family Offices

The updated guide introduces a new section on Single Family Offices and Multi Family Offices.

The FTA clarifies that family offices are generally expected to carry on Business or Business Activities, particularly where they provide management, administrative, investment or support services. As a result, family offices are unlikely to meet the conditions for fiscally transparent treatment as a Family Foundation.

Accordingly, a family office would generally be subject to UAE CT on its income, including management fees or other service income. Where services are provided to Related Parties or Connected Persons, transfer pricing and arm’s length considerations should also be assessed.

Where a family office is established in a Free Zone, it may potentially benefit from the 0% Corporate Tax rate on Qualifying Income, provided all relevant Free Zone conditions are satisfied. However, the updated guide indicates that merely holding a licence should not be considered sufficient; the activity and regulatory oversight requirements should also be reviewed.

Key Takeaway

The June 2026 update is particularly relevant for families, founders, trustees, family offices, wealth managers and advisors using Family Foundations, trusts, SPVs or holding companies for succession planning, asset protection and wealth management.

Existing and proposed structures should be reviewed to assess:

whether the Family Foundation continues to meet the conditions for fiscally transparent treatment;
whether each underlying SPV or holding company independently satisfies the relevant conditions;
whether jointly held entities meet the ownership and control requirements;
whether transfers of assets into the Family Foundation could trigger Corporate Tax or transfer pricing implications;
whether the acquisition or sale of underlying entities affects the tax status of the structure;
whether there is any expectation of base cost uplift, which the updated guide clarifies should not arise merely due to a change in tax status; and
whether a family office should be treated as a taxable service entity rather than a fiscally transparent Family Foundation.

The updated guide does not overhaul the UAE Corporate Tax treatment of Family Foundations. However, it provides important practical guidance on areas that are commonly encountered in private wealth and succession planning structures.