Partnership firms in UAE can now be taxed like companies

This move potentially opens up tax benefits for unincorporated partners

- BY JUSTIN GEORGE VARGHESE

Businesses operating in the UAE as unincorporated partnerships now have the option to be taxed as full legal entities similar to companies if they apply and receive approval from the Federal Tax Authority (FTA), the Ministry of Finance has announced.

The change could open up new benefits for certain partnerships, including access to the same corporate tax exemptions and reliefs available to other legal entities under the UAE's new Corporate Tax Law.

Unlock tax breaks

By default, most unincorporated partnerships in the UAE are treated as "transparent" for tax purposes. This means the partnership itself isn't taxed instead, each partner is taxed on their share of the income.

But under this new Cabinet Decision, partnerships that prefer a different approach can now apply to be treated as a single taxable entity.