UAE gives partnerships option to be taxed like companies

Dubai: 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.

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.

If approved, the partnership will be considered a “legal person” for tax purposes, much like a company. This would mean it is taxed directly and may be eligible for corporate tax benefits offered to other business structures.

The new decision also outlines how such partnerships should calculate their taxable income, giving more clarity to firms that choose this option.

According to the Ministry, this step supports the UAE’s broader goals of improving tax transparency, enhancing the ease of doing business, and maintaining a competitive environment for all types of firms.

While this change doesn’t affect all partnerships automatically, it gives certain businesses more flexibility in how they manage their taxes—particularly those looking to benefit from corporate tax incentives or simplify partner-level tax filings.

Businesses must apply and receive approval from the FTA before switching to this tax status.