The UAE Ministry of Finance has issued a Cabinet Decision allowing unincorporated partnerships to elect to be treated as taxable entities under Federal Decree-Law No. 47 of 2022, subject to approval by the Federal Tax Authority (FTA).
Under existing corporate tax law, unincorporated partnerships are generally considered tax-transparent, meaning the partnership itself is not taxed; individual partners are taxed on their share of income. The new decision permits these partnerships to apply for treatment as a legal person for tax purposes, aligning their tax obligations with those of incorporated entities.
Upon FTA approval, the partnership would be recognised as a resident taxable person, subject to corporate tax on its income. The decision outlines rules for determining taxable income to ensure clarity and compliance.
This measure aims to promote tax neutrality and allows unincorporated partnerships to access exemptions and reliefs available to incorporated entities under the corporate tax law.
The Cabinet Decision is part of the UAE’s ongoing efforts to enhance tax transparency and improve the business environment.
