UAE Clarifies Tax Treatment for Family Wealth Management Structures under Corporate Income Tax Law

The Federal Tax Authority’s Clarification offers certainty on the tax treatment of family wealth management structures under the UAE Corporate Income Tax Law. It urges families and advisors to review their structures for fiscal transparency, regulatory compliance, and eligibility under the Free Zone regime.

On September 19, 2025, the United Arab Emirates (UAE) Federal Tax Authority (FTA) released the Public Clarification CTP008 on Corporate Tax Treatment of Family Wealth Management Structures (hereinafter, the “Clarification”), outlining how family wealth management structures are treated under the UAE Corporate Income Tax (CIT) Law.

The document expands on previous guidance issued by the FTA earlier in 2025,such as the Family Foundations Guide, and provides detailed insight into the tax status of a broad range of entities commonly used in private wealth and succession planning.

In this article, we examine the key points of the FTA’s Clarification, including the definitions applied to family wealth management structures, the distinction between entities with and without legal personality, the treatment of multi-tier arrangements, and the implications for Single and Multi-Family Offices.

We also explore how the Clarification affects the tax position of family members and beneficiaries, and what practical considerations families and advisors should take into account when structuring or reviewing their wealth management arrangements in the UAE.

Scope of the Clarification

According to the FTA, the term “family wealth management structure” broadly encompasses the following categories:

• Family Foundations, including trusts and similar entities;
• Holding companies established for asset consolidation or investment purposes;
• Special Purpose Vehicles (SPVs) used within family holding structures;
• Single Family Offices (SFOs) and Multi-Family Offices (MFOs) managing family assets or providing advisory services; and
• Family members or beneficiaries who receive income or distributions from such structures.

The Clarification aims to provide greater certainty on how each of these entities should be assessed under the CIT regime and under what circumstances they may qualify for fiscal transparency, exemption, or standard taxation. It also clarifies how multi-tier structures (such as those combining foundations, SPVs, and holding entities) should be treated for tax purposes.

Importantly, the FTA’s interpretation distinguishes between entities with legal personality and those without. Family Foundations or similar vehicles without separate legal personality, such as trusts formed under the Dubai’s International Financial Centre (DIFC) or Abu Dhabi’s International Financial Centre (ADGM) regimes, are considered automatically fiscally transparent, meaning they are not taxable in their own right. In contrast, entities with legal personality may apply to the FTA for fiscal transparency recognition, provided they do not engage in commercial or business activities.

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The Clarification also highlights that Limited Liability Companies (LLCs) are not considered similar entities to trusts or foundations and therefore fall outside this specific treatment. Furthermore, holding companies and SPVs owned directly or indirectly through a chain of fiscally transparent entities may themselves qualify as transparent, subject to meeting the relevant legal and operational conditions.

Treatment of Family Foundations in the UAE

Under the UAE CIT Law, the term “Family Foundation” is defined broadly to include not only incorporated foundations but also trusts and other entities with comparable legal characteristics. The latest FTA Clarification refines this definition, providing a clearer understanding of which structures may fall within its scope and how their tax treatment should be determined.

The FTA explains that entities regarded as “similar” to foundations or trusts are those that share comparable legal form and purpose, such as asset protection, succession planning, and wealth management for family beneficiaries. Crucially, the Clarification specifies that LLCs do not qualify as “similar entities.” This distinction is significant, as it separates traditional commercial entities from vehicles created primarily for family wealth preservation, ensuring that only genuine private wealth structures benefit from tailored tax treatment.

A key aspect of the Clarification is its discussion of fiscal transparency. Under the UAE CIT framework, whether a Family Foundation is treated as a taxable person depends on its legal personality and activities:

• Trusts and similar entities without legal personality: Are automatically treated as fiscally transparent. This means that the trust itself is not subject to corporate tax; instead, the income is attributed to its beneficiaries or underlying entities, depending on the structure.

• Foundations and similar entities with legal personality: May apply to the FTA for recognition as fiscally transparent, provided they meet specific conditions. The most critical of these is that the entity must not carry out commercial or business activities. The Clarification thereby draws a clear line between passive family wealth management and active business operations.

Multi-tier structures and fiscal transparency

The FTA’s Clarification also provides guidance on multi-tier family wealth structures, which often involve several layers of ownership through holding companies and SPVs established under or alongside Family Foundations. These structures are common among high-net-worth families seeking to segregate assets, manage investments, and consolidate control across jurisdictions.

According to the Clarification, juridical persons held through a continuous chain of fiscally transparent entities (for example, an SPV owned by a fiscally transparent Family Foundation) may themselves qualify for fiscal transparency, provided that they meet all relevant legal and operational conditions.

This interpretation effectively extends the possibility of tax transparency throughout the ownership chain, ensuring that the treatment of upstream entities is consistent and that taxation occurs only at the level of the ultimate beneficial owners.

For families employing multi-tier setups, this position has important structuring implications:

• To maintain transparency status, all entities within the chain must satisfy the same qualifying criteria, including the absence of commercial or business activities and adherence to the transparency requirements outlined under the CIT Law.
• Failure by any entity within the structure to meet these conditions could potentially disrupt the transparency of the entire chain, resulting in the imposition of CIT at the entity level.

In practice, this means that family groups and their advisors should carefully review the legal and functional characteristics of each layer within their structure to ensure alignment with FTA expectations. Proper documentation and regulatory compliance are critical to preserving fiscal transparency, particularly in structures spanning multiple Free Zones or combining regulated and unregulated entities.

Tax treatment of family offices

The FTA’s Clarification provides important guidance on the tax treatment of SFOs and Multi-Family Offices MFOs, which are increasingly used in the UAE to manage family wealth, investments, and administrative affairs. The Clarification draws a distinction between those entities that may be treated as fiscally transparent and those that are considered taxable persons under the CIT regime.

Alternatively, family offices may qualify for the free zone tax regime if they meet the conditions of a Qualifying Free Zone Person (QFZP). To benefit from the 0 percent CIT rate on qualifying income, an SFO or MFO must:

• Provide regulated fund or wealth management services; and
• Comply with all QFZP requirements under the relevant free zone legislation.

The Clarification emphasizes that regulatory oversight by a competent authority, such as the UAE Central Bank, the Dubai Financial Services Authority (DFSA), or the Financial Services Regulatory Authority (FSRA), is essential to access the preferential tax treatment. Merely holding a business license or operating within a free zone is not sufficient to qualify.

This ensures that only entities genuinely engaged in regulated financial or wealth management activities benefit from the 0 percent rate.

In practice, SFOs and MFOs should review their governance, licensing, and operational arrangements to confirm whether their activities fall within the definition of qualifying services and whether they meet the substance and regulatory requirements for Free Zone incentives. Proactive alignment with these standards is key to maintaining compliance and optimizing the tax efficiency of family wealth management structures in the UAE.Top of FormBottom of Form

Taxation of family members

The FTA’s Clarification reaffirms one of the fundamental principles of the UAE CIT Law: individuals are generally outside the scope of CIT, unless the income they earn is directly connected to a business or business activity carried out in the UAE. This principle ensures that private individuals who earn income from personal wealth or family assets are not subject to corporate taxation, maintaining the UAE’s position as a favorable jurisdiction for wealth preservation.

For beneficiaries of Family Foundations, trusts, or similar entities, this treatment provides an additional layer of certainty. When a Family Foundation or trust is considered fiscally transparent, income distributed to family members retains its underlying character. Consequently, if the income represents personal investment returns or real estate income, it remains outside the CIT regime in the hands of the beneficiary.

Key takeaways

The FTA’s latest Clarification provides welcome certainty for family-owned structures in determining their obligations under the UAE CIT Law. By defining how Family Foundations, trusts, family offices, and related vehicles are treated for tax purposes, the guidance offers a clearer framework for both compliance and strategic planning.

The move underscores the UAE’s continued effort to align private wealth management practices with its evolving corporate tax framework, while maintaining its reputation as a competitive and transparent jurisdiction for family wealth. It also reflects the government’s broader commitment to strengthening regulatory clarity and harmonizing local practices with international standards on tax governance.

In light of the Clarification, families and advisors should conduct a comprehensive review of their existing structures, focusing on:

• Legal structure and fiscal transparency eligibility, particularly for entities with or without legal personality;
• Regulatory status of Single and Multi-Family Offices, to assess potential qualification under the Free Zone tax regime; and
• Ownership chains within multi-tier structures, ensuring consistency with the FTA’s conditions for fiscal transparency.

Ultimately, families and their advisors are encouraged to reassess both their structuring and compliance approaches in view of the FTA’s position. Ensuring that all entities are properly classified, documented, and aligned with the latest guidance will be essential to maintaining tax efficiency, mitigating risks, and taking full advantage of the UAE’s evolving regulatory environment for family wealth management.

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