The UAE has introduced a significant update regarding family foundations that is likely to reshape the way high-net-worth families manage their wealth and maintain their legacy.
The Ministerial Decision No. 261 of 2024, which has been in place from 1st June 2023, brings a host of transformative benefits to wealthy families. This decision simplifies governance and enhances tax relief, ensuring that such families experience greater flexibility. Interestingly, family foundations have emerged as an essential tool for wealth management in the UAE. Families looking to safeguard their assets and streamline succession planning must reach out to an established single family office in UAE to safeguard their assets and streamline succession planning.
What is a Family Foundation?
As per the UAE Corporate Tax Law, a Family Foundation is a legal structure like a trust or foundation that protects and manages the wealth of a family or an individual. These entities serve specific purposes, which include:
- Holding, investing, and managing assets and funds.
- Distribute resources for the benefit of charitable causes or individual beneficiaries.
What are the key highlights of the MoF Update?
1. Family Foundations Get Tax Transparent Status
The introduction of tax-transparent status for family foundations has been one of the outstanding features of the update. This provision simplifies tax treatment, the income of the foundation will be treated as if it belongs directly to its council members or founder. Families can eliminate the need to evaluate each individual asset holder. This simplified structure ensures clarity in tax reporting.
For families managing complex estates, this change reduces administrative burdens. Thus, they can focus on preserving wealth and expanding. Thanks to the tax-transparent status, compliance processes get streamlined, which provides an efficient and predictable framework for managing family assets in the UAE.
2. Income Treatment of Individuals
Historically, family foundations were eligible for corporate tax exemptions only on specific types of income. These include returns from investments or rental properties.
Now, under the new framework, income generated by fully owned entities of the foundations, including single family office in UAE, is treated as if it was earned directly by the council members or founders. This policy significantly enhances the flexibility of managing wealth, which allows families to enjoy tax advantages traditionally available to individuals.
3. Improved Succession Planning
4. Integration with the Tax Framework in the UAE
The updated regulations in the UAE align with its broader corporate tax structure, treating them like unincorporated partnerships. This facilitates seamless navigation of the tax regime in the country, ensuring that founders benefit from favorable tax treatments while maintaining operational flexibility across jurisdictions.
Family foundations now enjoy a more stable and predictable regulatory environment, whether they operate within the DIFC, ADGM, or RAK ICC.
5. Asset Consolidation Incentives
Optimize Wealth Management with Professional Consultancy Solutions
As new opportunities open up for family foundations in the UAE, wealthy families would be looking for expert guidance to proceed further. Check out this comprehensive guide to setup single family office in UAE. The IMC Group continues to be one of the leading advisory service providers, helping family offices and foundations navigate the latest legal frameworks to achieve their goals. The professionals offer tailored solutions to help family foundations adapt to the MoF update on UAE Family Foundations. With expert advice, these organizations can capitalize on the fresh opportunities and protect the wealth for future generations.
