The Federal Tax Authority’s June 2026 update to the Corporate Tax Guide on Family Foundations represents a significant evolution in how such structures are assessed under the UAE Corporate Tax regime.
While the legislative framework itself remains unchanged, the updated guidance provides greater clarity on the application of fiscal transparency rules, particularly in the context of multi-entity structures, underlying holding vehicles, and operational arrangements. The analysis now extends beyond the Family Foundation itself to the entire ownership and control chain.
A Foundation is a structured legal vehicle used for holding and managing assets in a controlled and purpose-driven manner. It is a separate legal entity which is established by one/ more founders and is governed by its charter and by-laws in line with the founder’s objectives. This structure allows for a clear separation between personal ownership and the underlying assets, making it an effective tool for centralized asset management. Foundations are primarily used for wealth structuring, asset protection, and succession planning, as they enable the segregation of assets from personal ownership, protect them from liabilities, and ensure their orderly transfer across generations. They are also flexible vehicles that can support philanthropic purposes and long-term legacy planning while operating within a defined regulatory framework
A Family Foundation that constitutes a juridical person is, by default, subject to UAE Corporate Tax as a separate taxable entity. However, it may elect to be treated as fiscally transparent, subject to approval by the Federal Tax Authority and satisfaction of the prescribed conditions.
Where such an election is approved, the Foundation is treated akin to an Unincorporated Partnership, with its tax attributes effectively flowing through to the relevant beneficiaries in accordance with their respective economic interests.
It would be worthwhile to note that term “Family Foundation” is not limited to structures benefiting members of the same family. Foundation can be established for the benefit of identified or identifiable natural persons (related or unrelated i.e., beneficiaries need not be members of the same family), public benefit entities, or both.
The FTA’s June 2026 update to the Corporate Tax Guide on Taxation of Family Foundations (CTGFF1) is not merely a technical refresh. Compared with the May 2025 guide, it provides clearer direction on LLCs, multi-tier holding structures, jointly owned SPVs, asset transfers, entry into and exit from fiscal transparency, and family office arrangements. The practical message is that Family Foundation treatment should be analysed across the whole structure - not only at the top entity. Each legal vehicle, ownership and control link, activity, asset class and beneficiary position must be tested.
Each entity within the structure including holding companies, SPVs, and intermediate entities must independently satisfy the relevant conditions.
For multi-layered holding arrangements, the guidance confirms that an unbroken chain of qualifying entities is required for transparent treatment to apply. The presence of a single non-qualifying or opaque entity within the structure may break the chain, thereby impacting the eligibility of entities further downstream. This introduces a heightened need for detailed structural review and ongoing monitoring.
In particular, a Limited Liability Company (LLC) is not regarded as a “similar entity” to a foundation or trust and therefore cannot independently qualify as a Family Foundation.
However, an LLC or SPV may still form part of a fiscally transparent structure where it is wholly owned and controlled by an eligible Family Foundation and satisfies the relevant conditions.
This is an important distinction between the legal form of the Family Foundation at the top of the structure and the treatment of underlying entities. An LLC or Special Purpose Vehicle (SPV) may still be capable of transparent treatment where it is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership and where the relevant conditions of Article 17 of the UAE Corporate Tax are met.
The updated guidance confirms that a juridical person may still meet the “wholly owned” requirement where it is collectively owned by more than one qualifying Family Foundation, provided that control conditions and other requirements are satisfied.
This provides greater flexibility for co-investment structures commonly used in family wealth arrangements.
Where assets are transferred into a Family Foundation by a taxable entity or a related party, the transfer would need to be evaluated from a Corporate Tax and Transfer Pricing perspective. In such cases, any taxable gain or loss should generally arise in the hands of the transferor and not Family Foundation. The tax outcome would depend on the nature of the asset transferred, the status of the transferor, the relationship between the parties, the consideration agreed and the applicable Corporate Tax and Transfer Pricing Rules.
As such, pre-implementation tax analysis is critical before any restructuring or asset migration is undertaken. Families should not assume that moving assets into a Family Foundation is automatically tax neutral. For example, a natural person transferring Personal Investment or Real Estate Investment assets should generally not be subject to Corporate Tax on the transfer. However, where a taxable company transfers investment assets, a Corporate Tax and transfer pricing review would be required before implementation.
It is pertinent to consider other taxes and transaction costs involved in such transfers such as Value Added Tax, Dubai Land Department/ DLD fees, Transfer Fees.
Accordingly, historical cost and tax positions continue to apply, which has implications for future disposals and tax computations.
Where such entities undertake operational or advisory functions, they may be regarded as carrying on a business activity, thereby falling within the scope of Corporate Tax in their own right.
This distinction is particularly relevant where family office arrangements coexist alongside asset-holding structures.
Where the single-family office /multi-family office is a Free Zone Person, it may benefit from a 0% Corporate Tax rate on Qualifying Income from Qualifying Activities, for example, wealth and investment management services, or fund management services, that are subject to the regulatory oversight of a Competent Authority in the UAE.
Given their inherent advantages, foundations in the UAE are most commonly established within established international financial centres such as the Dubai International Finance Centre (DIFC), Abu Dhabi Global Market (ADGM), and the RAK International Corporate Centre (RAK ICC), which offer well-developed and internationally recognised legal and regulatory frameworks.
DMCC, the leading international business district facilitating global trade through Dubai, is currently in the process of introducing a Foundations regime within its free zone as part of the continued expansion of its structuring platform.
While the framework is in the final stages of regulatory review, it is important to note that the proposals remain subject to approval and may evolve. Once implemented, the regime is expected to offer investors, family offices, and private wealth holders a flexible and internationally aligned structure to support succession planning, long-term asset holding, wealth preservation, and governance arrangements.
At this stage, stakeholders should closely monitor developments, as further clarity and formal guidance are anticipated in due course.
Insights
BDO is well positioned to support families, investors and private wealth stakeholders across the full lifecycle of a Foundation structure, particularly in light of the evolving regulatory landscape and recent FTA guidance. Our support includes:
From a strategic perspective, the focus under the updated UAE Corporate Tax guidance has clearly shifted from an entity-level assessment to a structure-wide analysis, requiring each element of the ownership chain to independently meet the prescribed conditions.
In this context:
As the UAE continues to expand its structuring ecosystem (including the anticipated DMCC Foundations regime), it remains critical for families to adopt a holistic, forward-looking approach ensuring that structures are not only legally robust but also aligned with evolving tax principles and supported by defensible documentation.
While the legislative framework itself remains unchanged, the updated guidance provides greater clarity on the application of fiscal transparency rules, particularly in the context of multi-entity structures, underlying holding vehicles, and operational arrangements. The analysis now extends beyond the Family Foundation itself to the entire ownership and control chain.
Core Principle:
A Foundation is a structured legal vehicle used for holding and managing assets in a controlled and purpose-driven manner. It is a separate legal entity which is established by one/ more founders and is governed by its charter and by-laws in line with the founder’s objectives. This structure allows for a clear separation between personal ownership and the underlying assets, making it an effective tool for centralized asset management. Foundations are primarily used for wealth structuring, asset protection, and succession planning, as they enable the segregation of assets from personal ownership, protect them from liabilities, and ensure their orderly transfer across generations. They are also flexible vehicles that can support philanthropic purposes and long-term legacy planning while operating within a defined regulatory frameworkA Family Foundation that constitutes a juridical person is, by default, subject to UAE Corporate Tax as a separate taxable entity. However, it may elect to be treated as fiscally transparent, subject to approval by the Federal Tax Authority and satisfaction of the prescribed conditions.
Where such an election is approved, the Foundation is treated akin to an Unincorporated Partnership, with its tax attributes effectively flowing through to the relevant beneficiaries in accordance with their respective economic interests.
It would be worthwhile to note that term “Family Foundation” is not limited to structures benefiting members of the same family. Foundation can be established for the benefit of identified or identifiable natural persons (related or unrelated i.e., beneficiaries need not be members of the same family), public benefit entities, or both.
BDO Decode: Why June 2026 Update Matters?
The FTA’s June 2026 update to the Corporate Tax Guide on Taxation of Family Foundations (CTGFF1) is not merely a technical refresh. Compared with the May 2025 guide, it provides clearer direction on LLCs, multi-tier holding structures, jointly owned SPVs, asset transfers, entry into and exit from fiscal transparency, and family office arrangements. The practical message is that Family Foundation treatment should be analysed across the whole structure - not only at the top entity. Each legal vehicle, ownership and control link, activity, asset class and beneficiary position must be tested.
Key developments and technical clarifications
- Structure-wide assessment rather than entity-level evaluation:
Each entity within the structure including holding companies, SPVs, and intermediate entities must independently satisfy the relevant conditions.
For multi-layered holding arrangements, the guidance confirms that an unbroken chain of qualifying entities is required for transparent treatment to apply. The presence of a single non-qualifying or opaque entity within the structure may break the chain, thereby impacting the eligibility of entities further downstream. This introduces a heightened need for detailed structural review and ongoing monitoring.
| 💡 BDO Pro-Tip: Multi-layered structures require a detailed structural review and ongoing monitoring, as one opaque or non-qualifying entity can break the transparency chain and impact downstream entities.approval status of each entity, to identify any break in the transparency chain before annual confirmation filings. |
- Distinction between legal form and tax treatment:
In particular, a Limited Liability Company (LLC) is not regarded as a “similar entity” to a foundation or trust and therefore cannot independently qualify as a Family Foundation.
However, an LLC or SPV may still form part of a fiscally transparent structure where it is wholly owned and controlled by an eligible Family Foundation and satisfies the relevant conditions.
This is an important distinction between the legal form of the Family Foundation at the top of the structure and the treatment of underlying entities. An LLC or Special Purpose Vehicle (SPV) may still be capable of transparent treatment where it is wholly owned and controlled by a Family Foundation that is treated as an Unincorporated Partnership and where the relevant conditions of Article 17 of the UAE Corporate Tax are met.
| 💡BDO Pro-Tip: Structure may need to be reorganised, if a passive investment holding LLC is not owned by a Foundation to qualify for tax transparency status. |
- Clarification on jointly owned entities
The updated guidance confirms that a juridical person may still meet the “wholly owned” requirement where it is collectively owned by more than one qualifying Family Foundation, provided that control conditions and other requirements are satisfied.
This provides greater flexibility for co-investment structures commonly used in family wealth arrangements.
| 💡 BDO Pro-Tip: The collective ownership position may support transparency, but the transparent status of each Family Foundation, control rights and Article 17 conditions should be clearly documented. |
- Tax implications of asset transfers
Where assets are transferred into a Family Foundation by a taxable entity or a related party, the transfer would need to be evaluated from a Corporate Tax and Transfer Pricing perspective. In such cases, any taxable gain or loss should generally arise in the hands of the transferor and not Family Foundation. The tax outcome would depend on the nature of the asset transferred, the status of the transferor, the relationship between the parties, the consideration agreed and the applicable Corporate Tax and Transfer Pricing Rules.
As such, pre-implementation tax analysis is critical before any restructuring or asset migration is undertaken. Families should not assume that moving assets into a Family Foundation is automatically tax neutral. For example, a natural person transferring Personal Investment or Real Estate Investment assets should generally not be subject to Corporate Tax on the transfer. However, where a taxable company transfers investment assets, a Corporate Tax and transfer pricing review would be required before implementation.
It is pertinent to consider other taxes and transaction costs involved in such transfers such as Value Added Tax, Dubai Land Department/ DLD fees, Transfer Fees.
- Entry into and exit from transparent status
Accordingly, historical cost and tax positions continue to apply, which has implications for future disposals and tax computations.
- Treatment of family offices
Where such entities undertake operational or advisory functions, they may be regarded as carrying on a business activity, thereby falling within the scope of Corporate Tax in their own right.
This distinction is particularly relevant where family office arrangements coexist alongside asset-holding structures.
Where the single-family office /multi-family office is a Free Zone Person, it may benefit from a 0% Corporate Tax rate on Qualifying Income from Qualifying Activities, for example, wealth and investment management services, or fund management services, that are subject to the regulatory oversight of a Competent Authority in the UAE.
Regulatory Update
Given their inherent advantages, foundations in the UAE are most commonly established within established international financial centres such as the Dubai International Finance Centre (DIFC), Abu Dhabi Global Market (ADGM), and the RAK International Corporate Centre (RAK ICC), which offer well-developed and internationally recognised legal and regulatory frameworks.DMCC, the leading international business district facilitating global trade through Dubai, is currently in the process of introducing a Foundations regime within its free zone as part of the continued expansion of its structuring platform.
While the framework is in the final stages of regulatory review, it is important to note that the proposals remain subject to approval and may evolve. Once implemented, the regime is expected to offer investors, family offices, and private wealth holders a flexible and internationally aligned structure to support succession planning, long-term asset holding, wealth preservation, and governance arrangements.
At this stage, stakeholders should closely monitor developments, as further clarity and formal guidance are anticipated in due course.
Insights
How BDO can support
BDO is well positioned to support families, investors and private wealth stakeholders across the full lifecycle of a Foundation structure, particularly in light of the evolving regulatory landscape and recent FTA guidance. Our support includes:- Structuring and feasibility assessment
Evaluating whether a proposed or existing Foundation structure meets the requirements under Article 17 of the UAE Corporate Tax Law, including suitability of jurisdiction (DIFC, ADGM, RAK ICC and emerging frameworks such as DMCC). - End-to-end structure review
Undertaking a comprehensive assessment of multi-tier holding arrangements, including SPVs, LLCs and intermediate entities, to determine eligibility for fiscally transparent treatment and identify structural gaps. - Regulatory and tax implementation
Assisting with Corporate Tax registrations, FTA applications for fiscal transparency, and alignment of legal and tax documentation with regulatory expectations. - Transaction and restructuring advisory
Advising on transfers of assets into or out of Foundation structures, including Corporate Tax implications, transfer pricing considerations and potential tax leakage risks. - Ongoing compliance and governance
Supporting annual confirmation filings, monitoring changes in ownership, control and activities, and ensuring continued eligibility across each tax period. - Family office and operating model review
Assessing family office arrangements to appropriately delineate passive asset holding from taxable business activities, including Free Zone considerations. - Documentation and FTA readiness
Developing robust documentation frameworks covering ownership structures, beneficiary rights, asset schedules and historic tax positions to ensure audit readiness.
BDO insights
From a strategic perspective, the focus under the updated UAE Corporate Tax guidance has clearly shifted from an entity-level assessment to a structure-wide analysis, requiring each element of the ownership chain to independently meet the prescribed conditions.In this context:
- The key risk is not limited to initial qualification, but extends to ongoing compliance across each tax period, particularly where there are changes in ownership, activities or asset profiles.
- The presence of a single non-qualifying or opaque entity within the structure may compromise fiscal transparency for the wider arrangement.
- Asset transfers and restructuring steps should not be assumed to be tax neutral and require detailed upfront analysis.
As the UAE continues to expand its structuring ecosystem (including the anticipated DMCC Foundations regime), it remains critical for families to adopt a holistic, forward-looking approach ensuring that structures are not only legally robust but also aligned with evolving tax principles and supported by defensible documentation.