The United Arab Emirates’ Ministry of Finance has introduced a Cabinet Decision that sets out a new tax treatment option for partnerships that are not legally incorporated.
This initiative aligns with the government’s broader objective to promote tax transparency and create a more conducive environment for businesses.
Under Federal Decree-Law No. (47) of 2022 regarding the taxation of corporations and businesses, unincorporated partnerships are typically considered tax transparent.
This means the partnership itself is not subject to corporate tax; instead, each partner is responsible for paying tax on their individual share of the partnership’s income.
The Cabinet Decision gives unincorporated partnerships the opportunity—pending prior approval from the Federal Tax Authority (FTA)—to be recognised as a taxable person.
The statement explained that once the partners’ application is approved, the unincorporated partnership will be treated as both a legal and resident entity for tax purposes.
This means the partnership will receive the same tax treatment as other incorporated entities under the law.
The Decision also sets out clear rules for how the taxable income of unincorporated partnerships should be calculated, ensuring transparency and compliance.
