Cabinet Resolution Clarifies Tax Status of Unincorporated Partnerships

The UAE Ministry of Finance issued Cabinet Resolution No. 63 of 2025 on Treating a Joint Consortium as a Taxable Entity and provided further clarification on the corporate tax treatment of unincorporated partnerships within the framework of Federal Decree-Law No. 47  of 2022 on the Taxation of Corporations and Businesses.

Under current tax regulations, such partnerships are treated as transparent entities, whereby each partner is individually taxed on their respective share of the partnership’s income.

However, the new Cabinet Resolution allowed unincorporated partnerships to be treated as legal persons for tax purposes, subject to the approval of the Federal Tax Authority. Upon approval, the partnership will be regarded as a resident person and will receive the same tax treatment as a company, including access to applicable exemptions and deductions.

According to the new Cabinet Resolution, this framework is designed to promote tax neutrality by allowing unincorporated partnerships the flexibility to choose a tax treatment that aligns with their specific operational structures and long-term financial objectives.

This initiative marks a significant step in aligning the UAE’s corporate tax framework with international best practices, particularly in the treatment of partnerships and joint business arrangements.

Under the Cabinet Resolution, unincorporated partnerships will have the option to elect to be taxed at the entity level, rather than at the level of individual partners. This provides greater flexibility and clarity for businesses, especially those involved in large-scale joint ventures or professional partnerships.

By allowing taxation at the entity level, the framework simplifies compliance, reduces administrative burdens, and ensures a more consistent approach to taxation, particularly in cases where partners are based in different jurisdictions.

The new Cabinet Resolution also helps preventing issues like double taxation or mismatches in tax treatment across partners, making the UAE a more competitive and transparent business environment.

 

Abdulla Ziad Galadari Senior Partner abdulla@galadarilaw.com