In this month’s edition, we bring you crucial updates on corporate and indirect tax developments in the UAE. Our goal is to provide you with a comprehensive digest of the latest tax news, legislative changes, and enforcement actions in the United Arab Emirates (UAE).
Federal Tax Authority Launches ‘Family Foundations as an Unincorporated Partnership’ Application via EmaraTax Digital Platform
On March 10, 2025, the UAE Federal Tax Authority (FTA) officially launched the new application, allowing eligible Family Foundation to apply for recognition as an Unincorporated Partnership for UAE Corporate Tax purposes via the EmaraTax Portal.
Family foundations are legal entities designed to manage and protect wealth for individuals or families, often used for succession-planning and asset control. Under Federal Decree-Law No. 47 of 2022, family foundations are juridical individuals subjected to CT. However, Article 17 of the CT Law offers an alternative option for those foundations. If approved, they are treated as tax-transparent entities.
To apply for classification as an Unincorporated Partnership, Family Foundations must be registered for CT. Applications may be submitted by the taxpayer, their Tax Agent, or their legal representative.
Once the FTA approves the application, the Family Foundation will no longer be required to file CT Returns, effectively becoming tax-transparent for UAE CT purposes.
UAE updated tax rules for non-residents and foreign investors, under Cabinet Decision No. 35 of 2025
The decision outlines the conditions under which investments in Qualifying Investment Funds (QIFs) and Real Estate Investment Trusts (REITs) create a tax nexus for non-residents.
Under the CT law, QIFs are required to meet specific conditions to retain their eligibility for zero percent CT:
Real Estate threshold: Must hold less than 10% of total assets in real estate.
Ownership Threshold: For funds with fewer than 10 investors, no single investor may hold 30 percent or more. If the fund has more than 10 investors, then the threshold is less than 50 percent per individual investor.
With the CT return deadline approaching, businesses must prioritize Transfer pricing compliances. As per Article 55 of Federal Decree law No 47 of 2022, a taxable person is required to submit a transfer pricing disclosure form alongside the tax return.
Taxpayers are required to submit the TP disclosure form along with the CT return within 9 months after the conclusion of the relevant tax period.
The applicability of the thresholds for TP Reporting is linked to different matrics:
Related Party Transaction threshold: If the Aggregate of related party transaction value with all related parties exceeds 40 million in the Tax Period, the taxable person will be mandatorily required to complete the TP schedule in the Tax Return.
Connected Persons threshold: If the aggregate of payment/benefits to each connected Persons exceeds AED 500,000, the taxable person will be mandatorily required to complete the TP schedule in the Tax Return.
Businesses are required to conduct a benchmarking study to justify that the Related Party transaction and payment and benefits provided to Connected Parties are at Arm’s length Price.
On 13 March 2025, the Federal Tax Authority (FTA) released Public Clarification VATP040, providing interpretative guidance on the amendments to the Executive Regulations.
The amendment offers important clarification on the VAT treatment of supplies comprising multiple components. A supply will not be treated as a single composite supply unless it also satisfies the specific conditions.
All components must be provided by a single supplier.
The price must not be separately identified or charged for each component.
Even if subcontracting occurs, the supply may still be considered composite if the supplier remains contractually responsible.
If individual component prices are listed in any invoice, the supply will not qualify as composite.
The FTA has clarified important updates to the VAT treatment of virtual assets and fund management services.
Virtual currencies refer to digital currencies that do not represent fiat currency. Cryptocurrencies are a subset of virtual currencies.
These assets are not treated as “money” under UAE VAT law.
The transfer and exchange of virtual assets are exempt from VAT, effective from 1 January 2018.
Fund management services are VAT-exempt when provided to investment funds licensed by a competent authority in the UAE.
If the fund is not licensed, the management service is subject to standard VAT at 5%.
The FTA has clarified how the AED 2,000 threshold applies to deemed supplies. If the total output tax on deemed supplies in a 12-month period exceeds AED 2,000, VAT will apply only to the amount that goes over this limit.
The FTA has revised the documentation rules under Article 30 for zero-rating the export of goods.
Businesses were required to obtain an official export document issued by the local Emirate’s Customs Department.
Commercial evidence includes valid waybills showing the movement of goods.
Foreign proof of entry is now accepted.
The FTA has introduced key updates to Article 31 of the Executive Regulations.
If the recipient’s director has spent more than 30 days in the UAE during the past 12 months, they will be considered present – and zero-rating will not apply.
Services directly related to movable goods located in the UAE (e.g. repair or installation work).
Leasing of transport vehicles when the vehicle is located in the UAE at the lease start.
Hotel, catering, and F&B services consumed within the UAE.
Cultural, educational, or entertainment activities performed in the UAE.
Transport services that begin in the UAE.
The FTA has amended Article 33(1)(d) to clarify the VAT treatment of domestic transport services linked to international transportation.
Domestic transportation that forms part of an international transport service can be zero-rated only if supplied by the same supplier providing the international leg.
If the domestic leg is subcontracted to a different supplier, it will not qualify for zero-rating.
Under Article 34 of the Executive Regulations, certain means of transport can be zero-rated when supplied or imported.
A vessel used for commercial purposes does not automatically qualify.
To be zero-rated, the ship’s main purpose must be transporting passengers or goods.
Fishing boats, drilling ships, or dredgers do not qualify for zero-rating.
The FTA has clarified the input VAT recovery position related to medical insurance for employees and their families.
VAT incurred on providing medical insurance to employees and their families is now recoverable, regardless of whether it is legally required.
This recovery is only effective from 15 November 2024.
The updated Article 59(5) of the Executive Regulations introduces an important restriction.
Simplified tax invoices are no longer permitted when the reverse charge mechanism applies.
To qualify for voluntary registration, a taxable person must be conducting a business in the UAE and intend to make taxable supplies.
The amendment to Article 14 introduces tighter control over VAT deregistration.
A VAT deregistration application is only considered submitted when all steps are completed and the application is officially submitted through EmaraTax.
The FTA may initiate deregistration in certain cases such as when a person has only saved the deregistration application as a draft without formally submitting it.
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