The UAE Ministry of Finance has issued a new Cabinet Decision that permits unincorporated partnerships to be treated as taxable persons under the country’s Corporate Tax Law, marking a significant step toward enhancing tax transparency and improving the business environment.
Traditionally, unincorporated partnerships in the UAE have been treated as tax transparent entities. This means the partnership itself is not taxed; instead, partners pay tax individually on their shares of income. The recent decision now allows these partnerships, with prior approval from the Federal Tax Authority, to opt for tax treatment similar to registered legal entities.
Once approved, an unincorporated partnership will be recognized as a legal and resident person for tax purposes. This change aligns its tax status with other corporate entities, allowing it to benefit from the full range of exemptions and reliefs provided under Federal Decree-Law No. (47) of 2022, which governs corporate taxation.
The Cabinet Decision also clarifies how taxable income for these partnerships will be calculated, providing greater certainty and clarity for tax compliance.
By offering unincorporated partnerships the choice to be treated as taxable persons, the UAE aims to promote tax neutrality and streamline the tax framework, supporting business growth and compliance in the evolving economic landscape.
News Source: Emirates News Agency
