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Under the 2025 guide, a Family Foundation is defined (for tax purposes) as any foundation, trust or similar entity used to hold family wealth – including real estate, investments, assets, and holdings – provided it meets the requirements of Article 17(1) of the Federal Decree‑Law No. 47 of 2022 on Corporate Tax.

Importantly:

  • It is not a new type of legal entity per se – rather it’s a tax-treatment classification for existing structures (foundations, trusts, other entities) that meet certain criteria.

  • This means that a foundation set up in a Free Zone such as DIFC (or equivalent zones such as RAK ICC or ADGM) can qualify – and likewise, a foreign foundation/trust owning UAE property may also qualify under the right conditions.

    • For wealth-holding, real-estate, and cross-jurisdictional families, the Family Foundation concept offers a powerful, flexible, and globally respected structure – now backed by clear UAE tax law. 

    What Conditions Must a Family Foundation Meet?

    To qualify as a “Family Foundation” (eligible for favourable tax treatment), the structure must satisfy all of the following under Article 17(1):

  • Beneficiary Condition: Beneficiaries must be identifiable natural persons and/or public-benefit entities.

  • Principal Activity Condition: The main activity of the foundation must be limited to receiving, holding, managing, investing or disbursing assets/funds – i.e. wealth/asset management, not operating an active business.

  • No “Business Activity” Condition: The foundation must not conduct commercial/business activities that a natural person would need a licence to perform.

  • No Tax-Avoidance Purpose: The foundation’s purpose must not be primarily tax avoidance. If the foundation’s objective is simply asset/wealth holding, investment, inheritance or charitable benefit, it passes.

  • If Distributions Are Made to Public-Benefit Entities: Additional rules apply – distributions of income to public entities must be made within defined timeframes for the foundation to retain its status.

    • Importantly, unincorporated trusts (such as those formed in DIFC or ADGM) which have no separate legal personality are by default treated as unincorporated partnerships for tax purposes – i.e. fiscally transparent – and may not need a separate “application,” although they still must meet the beneficiary/principal-activity conditions if regarded as a Family Foundation.

    What the Tax Treatment Now Means – Major Benefits for Investors

     Fiscally Transparent – Not Taxed at Foundation Level

    If approved, a Family Foundation (or trust/structure treated as such) will be treated as an Unincorporated Partnership – meaning the foundation itself is not subject to corporate tax. Instead, any income (rental income, capital gains, dividends, interest, etc.) flows through to the beneficiaries.

    Implication: Real estate investors, families and beneficiaries can benefit from UAE property income and gains – potentially with 0% UAE corporate tax, provided the recipients are natural persons (or certain exempt public-benefit entities).

    Multi-Tier Structures Are Supported

    If the Family Foundation owns other legal entities (e.g. companies, SPVs, holding vehicles), those can also be treated as transparent – provided they are wholly owned and controlled by the foundation, and the entire structure meets the Article 17 conditions.

    This allows complex family holdings – real estate, shareholdings, investments – to be inside a single transparent vehicle, with consolidated tax treatment. Very advantageous for families with multi-jurisdictional assets or mixed real estate + corporate holdings. 

    Flexibility for Foreign Foundations or Non-UAE Residents 

    The guide explicitly allows foreign foundations/trusts to qualify – provided the conditions are met. For many global families, this provides significant flexibility without needing to re-domicile to UAE.

    Streamlined Compliance – Registration + Annual Confirmation 

  • Applicable foundations must register for Corporate Tax with the FTA via EmaraTax.

  • Once approved, foundations (and wholly-owned subsidiaries) must file an Annual Confirmation (within 9 months of the end of each tax period) to confirm they continue meeting the qualification conditions.

  • If at any time the conditions are not met, the “transparent” status is lost – which would render the foundation (and underlying entities) taxable as standard corporate vehicles.

    • This encourages robust compliance, substance, and proper governance – making the structure robust, defensible, and sustainable over the long term. 

    Why a DIFC (or Other Free Zone) Foundation Is Often the Best Option in 2025 

    For investors and families – especially high-net-worth, multi-jurisdictional or globally mobile – a foundation formed under a reputable Free Zone foundation regime like DIFC offers a unique combination of:

  • Legal certainty: DIFC operates under English common law-inspired legislation; recognized globally.

  • Tax efficiency: When approved as a Family Foundation, it can deliver 0% UAE corporate tax on UAE-sourced income/gains.

  • Succession Planning & Estate Structuring: Clear governance, beneficiary designation, asset protection, and intergenerational transfer mechanisms.

  • Asset Protection & Confidentiality: Assets are held under the foundation rather than under individual names.

  • Flexibility: Works with real estate, investments, shareholdings, cross-border holdings, trusts — and supports multi-tier structures.

  • Ease of Compliance (relatively): Once structured and approved, ongoing obligations are limited to annual confirmation, record-keeping, and governance maintenance – far simpler than operating a fully licensed commercial entity.

    • For families investing in property, operating businesses, or building multi-asset portfolios – especially across jurisdictions – a DIFC Family Foundation often represents a best-in-class structure in 2025.

    What This Means for Clients of Knightsbridge Group 

    At Knightsbridge Group, our depth of experience in setting up mix-jurisdiction wealth structures, real estate holdings, and corporate vehicles gives us a distinct advantage. Based on the 2025 FTA guidance, we can:

  • Structure your real estate and asset holdings via a DIFC (or equivalent) Foundation

  • Help prepare and submit the application to FTA for “fiscally transparent” Family Foundation status

  • Set up multi-tier holding structures (foundations + SPVs + operating companies) if needed

  • Ensure full compliance with Article 17 conditions, UBO disclosures, substance requirements, and governance

  • Manage ongoing annual compliance and confirmation filings

  • Provide estate-planning, succession, and asset-protection services — ensuring long-term wealth preservation

    • The result: your assets are protected, tax-efficient, confidential, cross-border ready — and structured to stand the test of time and regulation. 

    Conclusion: The 2025 Family Foundations Guide Is a Game-Changer

    The May 2025 Corporate Tax Guide on Family Foundations marks a new era of clarity and flexibility in how wealth is held, protected, and taxed in the UAE.

    For global investors, expatriate families, real estate owners, and multi-jurisdictional entrepreneurs, a properly structured DIFC Family Foundation (or equivalent) is arguably the most powerful wealth-holding vehicle available in 2025 – offering transparency, tax efficiency, legal certainty, and generational security.

    At Knightsbridge Group, we believe this is the future of wealth structuring in the UAE – and we are uniquely positioned to help clients turn that future into reality.

    Content supplied by Knightsbridge Group