UAE Corporate Tax - CD 55, CD 63 and FTA Decision 5

In Detail

CD 55: Exemption of certain foreign-incorporated entities​

CD 55 allows foreign-incorporated entities, which are classified as a Taxable Persons for UAE CT purposes (either by virtueof having a Place of Effective Management ("POEM"), Permanent Establishment ("PE"), or nexus in the UAE) to be exemptfrom UAE CT if they are wholly owned and controlled by certain Exempt Persons, as specified by Article 4(1)(a), (b), (f), and(g) of the UAE CT Law, and conduct any of the following activities solely for the benefit of those Exempt Persons:​

• Undertaking part or whole of the activity of the Exempt Person,​

• Holding assets or investing funds for the benefit of the Exempt Person, or​

• Carrying out activities that are ancillary to those of the Exempt Person.​

Key highlight​

This exemption is significant as it allows foreign entities that would otherwise be subject to UAE CT (due to POEM, PE, ornexus) to apply for an exemption without needing to restructure their governance or operational model. This providesadditional flexibility and certainty for specific investment structures where the owners are Exempt Persons.​

CD 63: Unincorporated Partnership treated as Taxable Person​

According to this decision, Unincorporated Partnerships that apply to be treated as Taxable Person shall be consideredboth juridical persons and Resident Persons. This update helps to clarify the status of Unincorporated Partnerships andtheir resulting CT position under the law.​

Key highlight​

It is important to note that under Article 12 of UAE CT Law, a juridical person with UAE Resident Person Taxable Personstatus is subject to UAE CT on its worldwide income, not just UAE sourced income. Unincorporated Partnershipsapplying to be treated as Taxable Persons should therefore carefully consider the impact on their overall taxation position.​

This update may also allow the partners of an Unincorporated Partnership to rely on Participation Exemption on incomefrom interest held in the Unincorporated Partnership.​

FTA Decision 5: Tax compliance requirements for UnincorporatedPartnerships, Foreign Partnerships and Family Foundations​

Unincorporated Partnership treated as a Taxable Person:​

• Unincorporated Partnership shall make an application to be treated as a Taxable Person before the end of the relevantFinancial Year. In case of FTA approval, an Unincorporated Partnership shall be treated as a Taxable Person effectivefrom the commencement of the Tax Period in which the application is made, or from the commencement of the next TaxPeriod as specified in the application.​

• The decision now provides that if the application is submitted by 31 December 2025, the FTA may approve theUnincorporated Partnership to be treated as a Taxable Person from the start of any Tax Period that ends on or before31 December 2025, as specified in the application.

Unincorporated Partnership NOT treated as a Taxable Person:​

Registration requirements:​

• Unincorporated Partnership that are not treated as a Taxable Person must appoint an authorised partner which isrequired to submit an application to the FTA to register the Unincorporated Partnership in accordance with the followingtimelines:

It is important to note that this decision does not address any compliance or registration requirements for the individualpartners of an Unincorporated Partnership that is not considered a Taxable Person.​

Annual declaration:​

• Similarly, the authorised partner of an Unincorporated Partnership that is not treated as a Taxable Person shall submitan annual declaration on behalf of all partners within the following timelines:​

Foreign Partnerships:​

• The decision provides that in case of treatment of a Foreign Partnership as an Unincorporated Partnership, a TaxablePerson who is a partner in the Foreign Partnership must submit an annual declaration on behalf of the ForeignPartnership when filing the Tax Return of that partner. ​

Family Foundations:​

• A Family Foundation can apply to be treated as an Unincorporated Partnership before the end of the relevant TaxPeriod. Once approved, it must submit an annual confirmation within 9 months from the end of the relevant Tax Period,confirming it continues to meet the required conditions. For periods ending on or before 31 March 2025, the deadlineis 31 December 2025.​

Distributive shares:​

• The decision reiterates that in case partners’ shares cannot be identified, assets, liabilities, income, and expenditure areallocated equally among partners.​

Tax deregistration:​

• A tax deregistration application must be submitted by an authorised person within three months from the date ofBusiness/Business Activity cessation.

Key takeaways

• Businesses with UAE and foreign partnerships, as well as family foundations, need to carefully consider the impact andrelevance of the CD 63 and FTA Decision 5.​

• While CD 55, which is effective retrospectively from 1 June 2023, provides for exemptions from UAE CT, the deadlinefor submitting exemption applications for 2024 Fiscal Year has passed. Given that the Decision was only issued on 2May 2025, taxpayers are advised to monitor for any potential waivers or extensions that may be granted by the FTA. ​

• For further assistance, you can reach us at CT.UAE@pwc.com or your dedicated PwC tax contact.​