After the introduction of corporate tax in the UAE, high net-worth individuals (HNWIs) are re-examining how to manage their wealth in a way that is compliant with the new tax laws. This guide breaks down what a family foundation is, its benefits, and how to keep your foundation compliant.
What is a Family Foundation in the UAE?
A family foundation is a type of legal structure for succession planning and protecting wealth.
Structures such as foundations and contractual trusts are commonly used to manage personal wealth and investments for various reasons, including asset protection, succession, philanthropic, and other reasons.
The foundation can receive, hold, invest, and manage assets and funds. Limited Liability Companies (LLCs) are not treated as family foundations; they are exempt.
On September 19, 2025, the Federal Tax Authority (FTA) issued “Public Clarification CTP008,” explaining exactly how corporate tax applies to family wealth structures.
Why UAE Family Foundations Are Popular in 2025
As more families in the country start to focus on long-term wealth protection instead of short-term ownership, family foundations present themselves as an ideal solution. If you’re a high net worth individual or have a Golden Visa in the UAE, you might be interested in setting up a family foundation in the country.
With the new FTA update, if a family foundation qualifies under Article 17(1), it can be treated as tax-transparent, i.e., it is not taxed at the entity level. The income flows directly to beneficiaries (family members), who don’t pay corporate tax on investment or real estate income.
For example, you set up a family foundation in DIFC that owns an SFO (Single Family Office) for managing your investments and properties. With the new clarification, the income earned from that office can pass through the foundation to your beneficiaries without being subject to corporate tax, as long as:
- The foundation’s main activity is wealth management.
- It’s not established for tax avoidance.
- It meets all FTA registration and documentation requirements.
Family Foundation vs. Family Office in the UAE
A family office in the UAE is not the same as a family foundation. Company formation in Dubai allows individuals to set up a family office, while a family foundation is an entity that can operate a family office.| Feature | Family Foundation | Family Office |
| Purpose | Protects and manages family wealth across generations | Manages the family’s day-to-day financial, investment, and administrative affairs |
| Legal status | Separate legal entity registered under DIFC, ADGM, or UAE Federal Trust Law | Usually a company or firm licensed in the UAE (mainland or free zone) |
| Main function | Holds assets, sets governance rules, and manages inheritance or succession | Provides services like investment management, accounting, and reporting |
| Corporate tax treatment | Can apply for tax-transparent status under Article 17 of the Corporate Tax Law | Considered a taxable person; may qualify for 0% tax if based in a regulated Free Zone |
| Ownership | Has founders and beneficiaries (family members) | Owned by the family or family foundation |
| Control | Managed by a council or guardian as per foundation charter | Managed by professionals or family-appointed executives |
| Privacy | Offers strong confidentiality; ownership details not public | Corporate details may be visible in licensing authorities’ records |
| Asset holding | Can directly own companies, real estate, and investments | Usually manages assets on behalf of the foundation or family |
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Benefits of Setting Up a Family Foundation in the UAE
The advantages of having a family foundation include asset protection in the UAE, family governance and continuity, corporate tax efficiency, and privacy and control.
1. Asset Protection
- A family foundation keeps family wealth separate from personal and business risks.
- It protects properties, investments, and shares from disputes or creditor claims.
- The structure is legally recognized in DIFC (Dubai International Financial Center) , ADGM (Abu Dhabi Global Markets) and RAK ICC ( Ras Al Khaimah International Corporate Centre).
- It helps families preserve their assets for future generations.
2. Family Governance and Continuity
- A foundation sets clear rules for how family wealth is owned and managed.
- It reduces the chances of disputes by defining how decisions are made.
- A council or guardian can be appointed to oversee the foundation’s work.
- It ensures stability and smooth succession when wealth is passed on.
3. Corporate Tax Efficiency
- The FTA allows eligible foundations to apply for tax-transparent status under Article 17.
- This means income passes to beneficiaries without being taxed at the foundation level.
- Foundations can also hold free zone entities that qualify for a 0% tax rate on certain income.
- It is an effective way to manage tax obligations while staying compliant.
4. Privacy and Control
- Family foundations keep ownership and governance details private.
- Founders can retain control through the foundation’s charter and bylaws.
- Wealth and assets can be managed quietly within a secure structure.
- The setup can be adjusted as family needs or goals change.
Compliance Requirements for Family Foundations in the UAE
These are a few ways individuals can maintain family foundation compliance in the UAE:
- A family foundation has to be set up under a recognized framework like DIFC, ADGM, or the UAE Federal Trust Law.
- The foundation needs FTA approval under Article 17 of the Corporate Tax Law to have and maintain its tax-transparent status.
- The setup should include the proper documents like foundation charter, by-laws, and a list of beneficiaries.
- Annual financial statements and accurate records of assets, meetings, and distributions must be maintained.
- Any holding companies or SPVs under the foundation have to also follow UAE company and tax regulations.
- The foundation should focus on managing family wealth, not running a business, to keep its tax benefits.
Want Expert Advice About Family Foundations? Get in Touch!
A&A Associate houses seasoned tax consultants who offer end-to-end advisory support for families looking to set up a compliant foundation in the UAE. The team helps structure assets under the right legal framework, obtain FTA approval, and stay compliant with current tax laws. Get in touch for a free consultation!
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