emirates7 - As part of its continued efforts to boost tax transparency and foster a more business-friendly environment, the UAE Ministry of Finance has announced a new Cabinet Decision outlining the tax treatment of unincorporated partnerships.
According to the announcement, unincorporated partnerships can now opt—subject to prior approval from the Federal Tax Authority—to be treated as a taxable person under Federal Decree-Law No. (47) of 2022 concerning Corporate and Business Tax.
By default, the Corporate Tax Law considers unincorporated partnerships as tax-transparent entities. This means the partnership itself is not taxed; instead, the individual partners are taxed on their share of the income. However, the law also allows the partners to request that the partnership be treated as a taxable person, similar to a corporate entity.
A key aspect of the new decision is that, once the partners’ application is approved, the unincorporated partnership will be recognized as a legal and resident person for tax purposes. Consequently, it will be taxed like any other legal entity.
The decision also lays out guidelines for calculating the taxable income of such partnerships, aiming to provide greater clarity and ensure consistent tax compliance.
This measure is designed to promote tax neutrality and allow unincorporated partnerships to access the same exemptions and reliefs that are available to legal entities under the Corporate Tax Law.
According to the announcement, unincorporated partnerships can now opt—subject to prior approval from the Federal Tax Authority—to be treated as a taxable person under Federal Decree-Law No. (47) of 2022 concerning Corporate and Business Tax.
By default, the Corporate Tax Law considers unincorporated partnerships as tax-transparent entities. This means the partnership itself is not taxed; instead, the individual partners are taxed on their share of the income. However, the law also allows the partners to request that the partnership be treated as a taxable person, similar to a corporate entity.
A key aspect of the new decision is that, once the partners’ application is approved, the unincorporated partnership will be recognized as a legal and resident person for tax purposes. Consequently, it will be taxed like any other legal entity.
The decision also lays out guidelines for calculating the taxable income of such partnerships, aiming to provide greater clarity and ensure consistent tax compliance.
This measure is designed to promote tax neutrality and allow unincorporated partnerships to access the same exemptions and reliefs that are available to legal entities under the Corporate Tax Law.