The UAE Ministry of Finance has introduced a Cabinet Decision that allows unincorporated partnerships to opt for corporate tax treatment, marking a key step in improving tax clarity and transparency across the business landscape.
The decision enables these partnerships — pending approval from the Federal Tax Authority (FTA) — to be treated as taxable persons under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses.
Tax transparency option
Typically, unincorporated partnerships are considered tax transparent under the Corporate Tax Law. This means the partnership itself is not taxed, but each partner is taxed individually on their share of the income.
The new decision, however, offers partners the choice to have their partnership treated as a legal and resident person for tax purposes. Once approved, the partnership will be subject to tax in the same way as other legal entities.
Alignment with tax law
The Ministry confirmed that the updated framework also defines how the taxable income of such partnerships will be calculated. This is intended to provide businesses with greater legal certainty and streamline tax compliance.
By aligning the treatment of unincorporated partnerships with other entities, the move supports tax neutrality and allows eligible partnerships to access exemptions and reliefs offered under the Corporate Tax Law.
tanvir@dubainewsweek.com
