TAX UPDATE: Application for Tax Transparency for Family Foundations is Now Open
Application for Tax Transparency for Family Foundations is Now Open
The Federal Tax Authority (FTA) has officially introduced the Tax Transparency application on the EmaraTax portal, enabling Family Foundations to apply to be treated as Unincorporated Partnerships.
Tax Transparency provides Family Foundations with an opportunity to have their income attributed directly to their founder and beneficiaries, which may lead to tax benefits if the founder or beneficiaries are individuals.
The application must be submitted annually for each entity along with the entity’s financial information, which is consistent with the ongoing obligations for all entities including Foundations to maintain books of accounts.
Supporting the application:
As part of the application, Family Foundations applying for Tax Transparency status must:
- Select a Tax Period: choice of “Previous,” “Current,” or “Subsequent” tax periods for the exemption to apply.
- Input Beneficiary/ies Details: full information for all individual beneficiaries must be provided. If a Public Benefit Entity is a beneficiary, its founding documents must be uploaded.
- Provide Financial Information: Full financial statements or Asset Ledger.
While foundations are not required to submit a Corporate Tax (CT) return, they must file an annual declaration to the FTA. The form of annual declaration is yet to be published.
Practical considerations:
- No separate application for extension to the underlying companies: The FTA portal does not currently have separate category to apply for an extension of the “Unincorporated Partnership” status for underlying entities held by Foundations. Presumably the application applies to all entities eligible for “Unincorporated Partnership” and can submit from their respective accounts.
- FTA Review Timeline: The FTA has not specified the timeline for reviewing applications for Unincorporated Partnership status. Foundations should prepare for potential delays and monitor for updates.
Next Steps
- Assess eligibility – Verify if the Family Foundation (and its underlying entities) satisfies the FTA’s eligibility requirements to be treated as an Unincorporated Partnership and determine whether such application is beneficial.
- Prepare Documentation – Gather beneficiary information and prepare the required supporting materials (e.g., financial statements, Asset ledger). If a Public Benefit Entity is a beneficiary, ensure its founding documents are available for submission.
- Stay Informed: Keep up-to-date with any further clarifications, changes, or additional guidance from the FTA regarding the application process for Unincorporated Partnership status
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M/HQ is a multi-services platform catering to successful individuals and entrepreneurial families. Our one-stop-shop offering is unique in the Middle East: a holistic and cross-disciplinary combination of a market-leading corporate services firm, a private client specialist team, and a regulatory & compliance services practice, all through one single platform.
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