In a significant development, the UAE has introduced enhanced tax relief measures under Ministerial Decision No. 261 of 2024, offering families with structured holdings (holding companies, trusts, or foundations) a unique opportunity to consolidate and manage their wealth more efficiently. This game-changing amendment not only provides corporate tax transparency for family foundations but also strengthens the UAE’s position as a global hub for private wealth management.

Understanding the Update

Effective retroactively from June 1, 2023, the revised regulations allow family foundations and their wholly owned subsidiaries, including single-family offices (SFOs), to apply for tax transparency. This means these entities may avoid corporate tax liabilities, provided they meet specific requirements related to their activities and asset management.

What is Tax Transparency?

Tax transparency essentially treats the income of a foundation and its subsidiaries as if it is earned directly by the beneficiaries, rather than by the foundation itself. As a result, corporate tax does not apply at the entity level, creating a streamlined and tax-efficient structure for managing family assets.

Under the updated framework:

• Non-business activities such as personal investments in shares, securities, and real estate are excluded from corporate tax.
• Eligible entities include proprietary investment companies and SFOs, provided their principal activity is limited to investments and asset management.
• Corporate tax relief applies to consolidated holdings under the foundation, offering tax neutrality for investments and revenue generated.

Why This Matters for Families

Families with assets in multiple jurisdictions often face challenges related to tax inefficiencies and regulatory complexities. By consolidating holdings under a UAE family foundation, they can:

• Achieve tax neutrality: Foundations and eligible subsidiaries engaging in personal investments or asset management can now operate without incurring corporate tax.
• Optimize wealth structures: Positioning a foundation at the top of a family’s ownership hierarchy ensures greater control, intergenerational wealth planning, and asset protection.
• Enhance global competitiveness: The UAE’s investor-friendly tax policies further cement its appeal to ultra-high-net-worth individuals (UHNWIs) and families seeking sophisticated financial solutions.

Key Opportunities and Open Questions

The updated tax framework presents families with several opportunities to:

1. Consolidate global holdings under a single jurisdiction.
2. Streamline intergenerational wealth transfer strategies.
3. Safeguard assets with enhanced regulatory clarity.

However, certain aspects remain to be clarified:

• The application process for tax transparency is pending finalization by the Federal Tax Authority (FTA).
• Ambiguities exist around the treatment of trustee-held assets and purpose foundations under the new framework.

Next Steps for Families

Families and high-net-worth individuals considering restructuring should take the following steps to capitalize on these opportunities:

1. Assess current structures: Evaluate existing asset arrangements and determine whether a UAE family foundation is suitable.
2. Engage professional advisors: Seek expert guidance to ensure compliance with the qualifying criteria for tax transparency.
3. Monitor FTA updates: Stay informed about the release of the application form and related guidance.

Conclusion

The enhanced tax relief framework under Ministerial Decision No. 261 of 2024 marks a pivotal moment for family wealth management in the UAE. By offering tax transparency and corporate tax relief, the government has opened the door for families to optimize their asset structures, protect wealth, and plan for future generations.

With the UAE solidifying its reputation as a global wealth management hub, families looking for a tax-efficient jurisdiction should act promptly to explore this opportunity. For tailored advice and support in restructuring, contact our team of experts today.

This article is drafted by Marco Marazzi, Business Solutions Legal Advisor of Bizzmosis Group.

Looking to optimize your wealth structure under the UAE’s new tax framework? Our team is here to guide you every step of the way. Contact us at hello@bizzmosis.com or call us at +971 52 979 8169.