The decision clarifies that, by default, partnerships without separate legal personality are not taxable in their own right.

This means the partnerships are tax transparent; all their incomes and gains are deemed to be those of their partners.

Partnerships with legal personality, however, continue to be treated as taxable in their own right.

When partners of an unincorporated partnership elected to treat it as a taxable person, subject to UAE corporate tax (CT), that decision is irrevocable, except in exceptional circumstances.

Previously, when an application for an unincorporated partnership to be treated as a taxable person was approved, the Federal Tax Authority (FTA) had to be informed within 20 business days of any partners joining or leaving. Now the FTA has to be informed when the partnership files its annual CT return.

The UAE’s tax treatment of a foreign partnership will now match the jurisdiction where that partnership is established. So if the partnership is subject to corporate tax in its own country, it will also be treated as taxable (and cannot be treated as an unincorporated partnership) in the UAE.

If the foreign partnership is not subject to corporate tax in the other country in its own right, the partners are deemed to be "subject to tax" on their share of income, and the conditions will be met for the foreign partnership to be treated as an Unincorporated Partnership in the UAE.

This simplifies and reduces the administrative burden of taxation, although notification requirements, such as annual tax declarations, remain.

Family foundations that have a public benefit entity listed as one of their beneficiaries can now be treated as tax-transparent unincorporated partnerships if they meet certain criteria.

Income from assets held by family foundations are not taxable at a foundation level; it is only taxable in the hands of the beneficiaries. Generally, beneficiaries that are individuals would not be taxed on personal investment or real estate investment income.

The Decision extends the option to be tax transparent to family foundations’ underlying entities if they meet certain criteria.

The amendment allows family foundations to hold assets via an entity such as a company without compromising their overall tax efficiency.