What is a Family Foundation in UAE?
The United Arab Emirates (“UAE”) has positioned itself as a favourable jurisdiction for the establishment of family foundations. The Country offers a robust legal framework for effective real estate planning. Also, caters to the wealth management and succession planning needs of family businesses and high-net-worth individuals.
This article highlights Family Foundation in UAE and the right business jurisdiction for registering a Family Foundation in UAE. Also, the article focuses on the advantages of a Family Foundation and its differences from a Trust.
Many investors choose UAE for registering Family Foundation. It is due to the favourable tax treatment and corporate tax exemptions for Family Foundations in UAE.
What is a Family Foundation in UAE?
Demand for Family Foundation in the UAE has accelerated, thanks to the region’s unique economic, legal and cultural ecosystem.
A Family Foundation is a company structure ideal for high-net-worth families to structure their inter-generational legacy. Also to consolidate wealth and assets, business continuity, and for philanthropic reasons.
Establishing a Family Foundation anywhere in the world offers protection from legal liabilities. It is a robust governance structure and impressive asset protection entity. But by choosing the UAE, you can unlock additional advantages:
- Significant tax advantages – No inheritance or estate taxes, capital gains or personal income tax.
- Generational wealth planning – Seamless transfer of wealth across generations.
- International diversification – Strategic location offering cross-border transactions and investments.
- Confidentiality – Discretion in managing financial affairs.
RAKICC Family Foundation in UAE
RAKICC helps in establishing and managing Family Foundations. The company structure is tailored for the family’s succession planning needs. It will help to safeguard assets and fully align with the latest tax and legal frameworks.
- Enhanced succession planning and intergenerational wealth transfer.
- Strong asset protection within a controlled legal structure
- Independent guardian oversight for added accountability.
- Legacy lives on for next generations providing security.
- A separate legal identity that offers liability protection
- Tailored governance frameworks to reflect family values and goals.
Establishing a foundation with RAK ICC is one of the best way for rich families. It will help them to grow, preserve and protect generational wealth while offering enhanced succession planning.
Tax Treatment of Family Foundations in the UAE
Eligibility: RAK ICC Family Foundations are eligible to apply for Unincorporated Partnership status. However, they must meet specific criteria as defined by the Federal Tax Authority.
Application: The application process is conducted electronically via the “EmaraTax” platform. It can be submitted by the foundation itself, its designated tax agent, or its legal representative.
Corporate Tax Return Exemption: Upon successful approval of the application, the Family Foundation will be exempt from filing separate Corporate Tax Returns.
Beneficiary Responsibility: Individual beneficiaries will need to assess their own Corporate Tax registration and filing obligations for the relevant Tax Period.
Family Foundations
UAE foundations are independent juridical persons with separate legal personality and would therefore prima facie be subject to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (“CIT Law”) on their own right.
However, certain types of foundations, such as family foundations, may benefit from an exemption and its income not being subject to the corporate tax in the UAE.
A ‘Family Foundation’ is defined under the CIT Law as a foundation, trust or similar entity used to protect and manage the assets and wealth of an individual or family.
The main activity consists in receiving, holding, investing, disbursing, or otherwise managing funds and assets associated with savings or investment for the interest of individual beneficiaries or to achieve a charitable purpose.
Such activities would typically not constitute a ‘business’ or ‘commercial activity’ under the CIT Law, if such activities were undertaken directly by the founder, settlor, beneficiary, or any other natural person.
Why Should you Choose a Foundation?
FOUNDATIONS are an attractive legal structure for high-net-worth families and institutions. It’s not coming under the radar of Corporate Tax because it can be UNINCORPORATED PARTNERSHIP.
So, Family Foundations can apply for status as an Unincorporated Partnership, provided they meet specific conditions. This company structure could potentially offer greater flexibility, tax efficiency and wealth structuring for the family.
Additionally, the absence of Corporate Tax on a Foundation structure offers an important opportunity for Family Foundations. Being treated as Unincorporated Partnerships could mean:
- No corporate tax at the foundation level.
- Tax responsibility shifts to individual beneficiaries, who are responsible for assessing and reporting their share of income.
- Streamlined application process, submitted through the EmaraTax digital platform.
By removing the corporate tax burden, families can preserve more capital at the foundation level and structure finances with greater flexibility, all while maintaining total control and transparency and remaining compliant.
Tax Exemption for Family Foundations
Under art. 17 of CIT law, a Family Foundation can make an application to the Federal Tax Authority (“FTA”) to be treated as an unincorporated partnership and, therefore, be treated as tax transparent under the CIT law if certain conditions are met such as:
- The Family Foundation is established for the benefit of natural persons (identifiable or unidentifiable), the public, or both.
- The principal activity of the family foundation is to receive, hold, invest, and disburse, i.e., manage assets or funds associated with savings or investments.
- The family foundation is not engaged in any activity that would be considered a business or business activity under the CIT Law had the activity been undertaken, or its assets been held, directly by its founder, settlor, or any of its beneficiaries.
- the family foundation’s primary or fundamental objective is not to avoid corporate tax.
- any further conditions that may be prescribed by FTA or the ministry.
Assuming a Family Foundation is eligible to be treated as tax transparent, the exemption does not apply automatically. An application to the FTA is necessary.
Family Office Tax Treatment in UAE
If approved by FTA, the Family Foundation shall be treated as tax transparent, and the entity will not be considered as a taxable person under the CIT Law and the share of income attributed to the natural persons as beneficiaries would not constitute taxable income for the natural persons if it is not resulting from an activity to be considered as a business or business activity under the CIT law.
Furthermore, the UAE does not impose personal wealth tax, or inheritance tax on family foundations or natural persons.
This tax-neutral environment allows families to preserve and grow their wealth without the tax burdens that might be encountered in other countries, making the UAE an attractive option for individuals looking to establish long-term, multi-generational wealth planning structures to ensure the legacy to next generations.
Reporting and Compliance Obligations
Although Family Foundations in the UAE benefit from a favorable tax regime, they are still required to adhere to the reporting and compliance obligations set out by the relevant regulatory authorities.
This includes maintaining proper accounting records and submitting annual returns where applicable, particularly in the RAKICC, DIFC and ADGM. Failure to comply with these requirements can result in penalties.
The tax treatment of Family Foundations in the UAE offers significant benefits, particularly in terms of UAE tax exemptions. This, combined with the UAE’s strong legal framework and strategic location, makes it an appealing jurisdiction for the establishment and management of family wealth.
However, it is essential for families to ensure compliance with all regulatory requirements to fully benefit from the advantages offered by the UAE legal landscape.
Foundations versus Trusts: Which to choose?
Here is a glimpse of the major differences between a Trust and Foundation.
| Feature | Trust | Foundation |
| Legal nature | Contractual agreement between parties (not a separate legal entity) | Independent legal entity — hybrid of a company and a trust |
| Key parties | Settlor, Trustee, Beneficiaries, (optional) Protector | Founder, Council Members, Beneficiaries |
| Asset transfer at setup | Required — assets must be transferred to the trustee immediately | Not required upfront — no immediate transfer of funds needed to register |
| Governance | Managed by trustee; protector may oversee trustee’s actions | Governed by a Council nominated by the founder; founder retains influence |
| Duration | Fixed term or indefinite; assets redistributed on expiry per trust deed | Perpetual by default; can be converted or merged into other entities |
| Creditor protection | Strong — assets legally transferred away from settlor, shielded from their creditors | Strong — foundation is a separate legal entity with its own asset ownership |
| Suitable for | Succession planning, charitable giving, wealth transfer across generations | Private wealth management, financial restructuring, tax planning, charitable purposes |
| UAE jurisdictions | Mainland (MoF approval), DIFC, ADGM, RAKICC | Primarily RAKICC; DIFC and ADGM also support foundation structures |
| Regulatory compliance | Must comply with UAE Commercial Company Laws; free zones have own rules | Bound by contractual agreement and free zone regulations (e.g., RAKICC rules) |
Trust
A Trust is ideal for succession planning or charitable giving. Also, it will be managed by a group or individual trustee. It is helpful when the assets has to be transferred and managed formally. In UAE, DIFC is a popular Free Zone jurisdiction for opening Trusts.
Foundation
A Foundation is when the founder wants to have a better control over the assets and does not want to transfer the assets immediately. The management of the assets remain with the founder itself and the foundation can have a separate entity status from other companies that the founder owns.
UAE has a well matured infrastructure and regulatory framework for opening Trusts and Foundations across its business jurisdictions. RAKICC is the popular Offshore jurisdiction for Foundation. DIFC and ADGM also support for registering a Foundation. Similarly, for Trust DIFC Free Zone, RAKICC ADGM Free Zone, and Mainland is the available.
Connect with our expert team for further assistance on registering a Foundation in UAE the right way without any hassle.