How UAE Corporate Tax Regime Applies to Partnerships

UAE Corporate Tax
How UAE Corporate Tax Regime Applies to Partnerships

How UAE Corporate Tax Regime Applies to Partnerships

As a business owner in the UAE looking to form partnerships to grow your business, you might be wondering how the new UAE corporate tax (CT) regime applies to partnerships. 


Since the inception of the corporate tax, a lot of businesses have been trying to comply, ensuring they get it right. This is why we have lots of  information concerning UAE corporate tax.


In this blog, you will learn how UAE corporate tax applies to different kinds of partnerships and how we can help you make an informed choice.

Types of partnerships in the UAE

Partnerships are deemed legal companies under the UAE corporate tax structure and must register and file for corporation tax accordingly. This means that the partnership will pay taxes on any taxable income it generates, including earnings from sales or return on investments. However, depending on their corporate structure, different kinds of partnerships could be subject to differing tax rates. 

In line with the UAE corporate tax, partnerships are divided into two forms, which are:

  1. Incorporated partnership
  2. Unincorporated partnership

Incorporated partnership: A partnership that is formally registered with the FTA as a legal organisation is known as an incorporated partnership. This covers limited partnerships, partnerships with restricted shares, and other such structures in which no partner bears exclusive responsibility for the obligations of the partnership or the actions of the other partners. A partnership of this type is governed by CT, just like a corporate body. 

Unincorporated partnership: A contractual arrangement including two or more parties is referred to as an unincorporated partnership. For UAE CT purposes, these partnerships are regarded as “transparent,” meaning that since they lack legal status, they are exempt from corporation tax. Rather, each partner must pay taxes on the portion of the partnership’s revenue that they receive.

UAE corporate tax influence on incorporated business partnerships

Since incorporated partnerships are commercial arrangements in which the partners’ liability for the debts and liabilities of the partnership is restricted, these partnerships will be regarded as either a distinct legal entity or a corporate entity. Unless expressly excluded, all activities carried out by corporate entities are considered business activities and are consequently liable to corporate tax.

Eligibility Criteria for UAE Corporate Tax Relief

A Taxable Person must fulfill specific requirements in order to be eligible for Small Business Relief:

  •   For the relevant Tax Period and all prior Tax Periods ending on or before December 31, 2026, revenue must be less than or equal to AED 3,000,000.

  •   Within the Tax Return for the relevant Tax Period, the Small Business Relief election must be made.

  •   Small Business Relief is accessible to qualified residents, including:
  1. Legal persons incorporated in the UAE, including those in free zones 
  2. Legal persons that are not based in the UAE  but are governed and managed from the UAE.
  3. Anyone who is a natural person and does business or related activities in the UAE 
  4. Any individual as determined by the cabinet in any given decision.

UAE corporate tax influence on unincorporated business partnerships

Since all partners in an unincorporated business partnership will be subject to individual taxes because the partnership does not function as a distinct legal entity, each partner in the business partnership will be responsible for filing their own taxes and will pay corporate tax on any income that is taxable with regard to their partnership shares. Therefore, unincorporated business partnerships and the persons involved will be subject to UAE corporate tax in the following ways:


  1. Expenses incurred by the partner in the course of doing business connected to the unincorporated partnership may be deducted from taxes.
  2. Interest costs incurred by the partner with regard to any contributions made to the unincorporated partnership’s capital may be deducted from taxes.
  3. One of the partners will be considered to have received an allocation of revenue from the unincorporated partnership for any interest paid to them. It will not be regarded as a tax-deductible expense as a result.
  4. Each partner will receive a foreign tax credit equal to their portion of the partnership’s total value for any foreign taxes that the unincorporated partnership is required to pay.


In conclusion, a thorough grasp of the legal structures involved and their ramifications is necessary to navigate the terrain of UAE corporate tax as it relates to partnerships. Businesses must guarantee compliance while optimising tax efficiency, whether they are operating as an unincorporated partnership, where individual partners are responsible for tax duties, or as an incorporated partnership, subject to corporation tax similar to corporate entities. 

How RSN finance can help

Here at RSN Finance, we’re experts in helping company owners navigate this complex landscape by providing specialised solutions that maximise tax advantages and reduce liabilities. With our knowledge of partnerships and corporate tax in the United Arab Emirates, we enable business owners to make wise choices that will help their companies prosper in a changing regulatory landscape. Allow us to be your reliable companion as you pursue financial success.

Contact us today.

Frequently Asked Questions

Q: How does the UAE corporate tax regime affect partnerships differently than other business structures?

Partnerships in the UAE are subject to the corporate tax regime, with differences in taxation depending on whether they are incorporated or unincorporated.


Q: Are there any exemptions or special considerations for partnerships under the UAE corporate tax laws?

Yes, there are exemptions and considerations for partnerships, such as deductions for business expenses and interest costs incurred by partners.


Q: What are the key differences between incorporated and unincorporated partnerships in terms of tax implications?

Incorporated partnerships are treated as distinct legal entities and are subject to corporate tax, while unincorporated partnerships are considered transparent for tax purposes.


Q: Can individual partners in an unincorporated partnership claim deductions for business expenses?

Yes, partners in unincorporated partnerships can claim deductions for business expenses incurred in the course of partnership activities.


Q: How does the UAE corporate tax regime treat partnerships with foreign partners or investments?

The UAE corporate tax regime treats partnerships with foreign partners similarly to domestic partnerships, with provisions for foreign tax credits.


Q: Are there any recent updates or changes to the UAE corporate tax laws that impact partnerships?

Recent updates to the UAE corporate tax laws may impact partnerships, so it’s important for partners to stay informed about any changes.


Q: What role does the Federal Tax Authority (FTA) play in regulating partnerships’ tax responsibilities in the UAE?

The Federal Tax Authority (FTA) regulates partnerships’ tax responsibilities in the UAE, ensuring compliance with corporate tax laws.

RSN Consultancy Accounting & bookkeeping firm

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