Taxation of Unincorporated Partnerships under Corporate Tax Law

3 June 2025 – On 24 May 2025, the United Arab Emirates (UAE) Ministry of Finance (MoF) announced the release of Cabinet Resolution No. (63) of 2025 (the Decision). This Decision addresses the treatment of Unincorporated Partnerships (UPs) as taxable entities under the UAE Corporate Tax (CT) Law and is effective retroactively from 1 June 2023.

Clause (8) of Article 16 of the UAE CT Law allows partners in a UP to make an application to the Authority for the UP to be treated as a taxable person in its own right (i.e., fiscally opaque).

The Decision seeks to clarify that, if the Authority approves the application submitted by the partners of a UP, the partnership will be recognized as a juridical and resident person for the purposes of the UAE CT Law. 

This clarification was needed as previously, the Federal Tax Authority (FTA) had provided guidance that an electing UP would not be treated as a juridical person (See Section 9.1 of the Taxation of Partnerships Corporate Tax Guide issued in March 2024).

Implications for UAE established UP:

• This Decision aligns the CT treatment of UPs with other legal entities like UAE Limited Liability Companies.
• Once treated as a taxable entity, a UP can access exemptions and benefits available to legal entities under the CT Law, such as free zone benefits, provided specified conditions are met.
• Partners’ profit shares will not be subject to CT, as the partnership is regarded as a resident entity in the UAE. The CT Law exempts dividends and other profit distributions from a resident juridical person.

It is important to note that the Decision does not distinguish between a UAE established UP and a foreign UP. This raises a concern around the treatment of a foreign UP that elects to be treated as opaque, and whether such a partnership would now be viewed as a Resident Person (as opposed to a Non-Resident Person). From a fiscal policy perspective, we believe that foreign UPs electing to be treated as fiscally opaque should retain their status as Non-Residents, but clarity on this matter should be obtained from the Authority.

Notice

The above is only a brief summary of the current update, is valid at the time of circulation and is based only on information currently available in the public domain which is subject to change. This alert has been written in general terms and does not constitute any form of advice or recommendation by Deloitte and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we highly recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

Deloitte and Touche Middle East would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances.