UAE Corporate Tax: Key Rules for Unincorporated Partnership Registration and Profit Sharing6 min read
- 08.01.2024
- Posted by: Uwe Hohmann
- Categories: Dubai, Tax
Unincorporated Partnerships are taxed transparently under the UAE Corporate Tax Law. This means the partnership is not taxable, but its partners are. Although the profit is determined at the company level, the partners are taxed according to their profit shares if the partnership activities are subject to corporation tax (to read more about the Unincorporated Partnerships in the UAE and their tax treatment, we kindly refer to our previous article.) In that case, the partnership’s partners must appoint a partner to act on behalf of all partners in tax obligations and proceedings as an “Authorized Partner.”
Appointment of Authorized Partner
The authorized partner’s responsibilities include:
Registration Application
Submission of an application for the registration of the Unincorporated Partnership under Corporate Tax to the FTA. The application must be completed using specified forms provided by the authority, leading to the issuance of a Tax Registration Number.
Annual Declaration
The authorized partner must submit an annual declaration on behalf of all partners within nine months from the end of the relevant Financial Year. This declaration must adhere to the Unincorporated Partnership’s financial reporting period, which can either be the Gregorian calendar year or any 12-month period for which financial statements are prepared. The declaration should encompass all necessary data to accurately determine each partner’s Taxable Income.
Taxable Person Status
However, the partners in an Unincorporated Partnership can apply to the FTA for the Unincorporated Partnership to be treated as a Taxable Person. If the FTA approves the application, the requirement of an Authorized Partner is no longer applicable. Instead, the Unincorporated Partnership must adhere to the broader regulatory framework laid out in the Corporate Tax Law. In that case, each partner in the Unincorporated Partnership will remain jointly and severally liable for the CT payable by the Unincorporated Partnership for those Tax Periods during which they are partners in the Unincorporated Partnership.
Determination of Distributive Shares
A fair and equal distribution is presumed when partners’ distributive share is not explicitly identified. In such cases, the Unincorporated Partnership’s assets, liabilities, income, and expenditures are allocated equally among the partners.
This equitable distribution principle ensures a balanced approach when partners cannot ascertain specific distributive shares. It promotes transparency and fairness within the Unincorporated Partnership, aligning with the overarching goals of the regulatory framework.
How TME Services Can Support Your Business
Understanding and complying with these regulations is crucial for partners engaged in Unincorporated Partnerships to fulfill their tax obligations and liabilities.
TME Services is a team of 45 professionals in legal-, tax-, accounting and compliance with over 18 years of experience. We advised a significant number of SMEs in the context of the implementation of the tax framework in the UAE and KSA over the last decade to make sure that our clients are well-oriented in the new and fast-evolving tax landscape and to reduce the legal liability of managers which may arise in connection with non-compliance.
