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The UAE’s corporate tax framework continues to mature, and the Federal Tax Authority’s issuance of FTA Decision No. 5 of 2025 marks an important development for unincorporated partnerships, foreign partnerships, and family foundations. Effective 1 July 2025, the Decision provides much-needed clarity on registration, reporting and administrative obligations, supporting the UAE’s broader objective of enhancing transparency and consistency in the implementation of the Corporate Tax Law.
This update is especially significant for unincorporated partnerships (UPs), which typically do not have their own legal personality. Their structure requires a tailored approach to tax compliance that differs from traditional corporate entities.
1. How the corporate tax law treats unincorporated partnerships
Under the Corporate Tax Law, UPs are generally tax-transparent. This means the partnership itself is not taxed; instead, each partner is taxed individually on their relevant distributive share.
However, the law also gives UPs the option to apply to be treated as a taxable person, allowing them to operate in a manner similar to a juridical entity for corporate tax purposes.
FTA Decision No. 5 of 2025 operationalises these provisions by setting out detailed procedural requirements for:
- Partnerships that remain transparent, and
- Partnerships that choose to be treated as taxable persons.
A key feature of the Decision is the obligation for every UP to appoint an authorised partner, who becomes the responsible point of contact with the FTA and is accountable for ensuring the partnership meets all compliance duties.
2. Mandatory registration timelines
One of the most impactful changes introduced by the Decision is the introduction of strict registration deadlines:
- UPs whose first financial year ends before 1 July 2025 must complete corporate tax registration by 31 August 2025.
- UPs with financial year-ends after that date must register within three months from the end of their first financial year.
This creates a time-sensitive compliance requirement, reinforcing the importance of active oversight by the authorised partner.
3. Annual declaration requirement
The Decision introduces a compulsory annual declaration, which must set out:
- Income and expenses
- Assets and liabilities
- The distributive share of each partner
To support entities during the transition period, the FTA has granted a one-off extension until 31 December 2025 for partnerships whose financial year ends on or before 31 March 2025.
This recognises the operational adjustments partnerships may need to make when adopting these new requirements.
4. Importance of Documented Profit-Sharing Arrangements
FTA Decision No. 5 addresses situations where partnerships do not have clear or formal documentation of profit-sharing ratios. In such cases, the FTA will require an equal allocation of:
- Income
- Assets
- Expenses
- Liabilities
among all partners.
This requirement provides a strong incentive for partnerships to ensure that their internal arrangements are formally documented and legally enforceable to avoid unfavourable or unintended tax outcomes.
5. Deregistration when a partnership ceases operations
When a UP ceases business activity, it must apply for tax deregistration within three months. This prevents inactive or dissolved partnerships from remaining in the tax system unnecessarily, which could otherwise lead to compliance issues or administrative penalties.
6. What the Decision Means for UAE Partnerships
FTA Decision No. 5 of 2025 does more than outline technical compliance rules—it reshapes the governance expectations placed on partnerships.
The Decision:
- Introduces clear and structured compliance obligations,
- Strengthens alignment with international standards, and
- Signals a more sophisticated regulatory approach to partnership taxation.
In practical terms, partnerships should now:
- Review and update partnership agreements,
- Document profit-sharing and distributive shares,
- Confirm whether to remain transparent or opt for taxable-person treatment, and
- Prepare for timely registration and the annual declaration process.
For professional firms, joint ventures and family-run entities, these changes elevate the importance of robust governance and long-term tax planning. Compliance becomes not merely a regulatory formality but a strategic component of operating sustainably within the UAE’s evolving corporate tax landscape.
Note: This Legal Update / Newsletter is intended for general informational purposes only and should not be construed as legal advice. It is based on laws and legal interpretations in effect as of the date of publication. Laws and regulations may change over time, and their application can vary depending on individual circumstances. Readers are strongly encouraged to seek specific legal counsel before acting on any of the information provided herein.