As noted above, partners in an Unincorporated Partnership can make an application to be taxed at the partnership level, with the partnership itself becoming a Taxable Person.310 This application will apply from the commencement of the Tax Period in which the application is made or from the commencement of a future Tax Period, or any other date determined by the FTA.311
The effect of this treatment is to ensure that Taxable Income is calculated at the partnership level rather than at the individual partner level. Whilst all partners remain jointly and severally liable for the Corporate Tax Payable for all Tax Periods in which they were partners, a single partner will need to be appointed as the partner responsible for complying with Corporate Tax related obligations on behalf of the partnership.312
Incorporated partnerships
Where a partnership is incorporated in the UAE and has a separate legal personality, as is the case for Limited Liability Partnerships and Limited Partnership Companies, they will be treated as a juridical person for Corporate Tax purposes. Their treatment will, therefore, be the same as other juridical persons such as Limited Liability Companies and Public Joint Stock Companies.
Tax treatment of a foreign partnership
A Foreign Partnership is a relationship established by contract between two or more Persons, such as a partnership or trust or any other similar association of Persons, in accordance with laws of a foreign jurisdiction. Foreign partnerships will be treated as Unincorporated Partnerships for the purposes of UAE Corporate Tax if:
• the foreign partnership is not subject to tax in the foreign country or territory;313
310 Article 16(8) of the Corporate Tax Law. 311 Article 16(10) of the Corporate Tax Law. 312 Article 16(9)(c) of the Corporate Tax Law. 313 Article 16(7)(a) of the Corporate Tax Law.
• each partner in the foreign partnership is individually subject to tax in respect of their distributive share;314
This means that in order for the Foreign Partnership to be treated as an Unincorporated Partnership for UAE Corporate Tax purposes, such partnership must be treated as not taxable in its own right in the foreign country or territory where it was formed, and the partners should be taxed on their distributive share of income received by or accrued to the partnership, subject to the tax residence of the partners and the respective tax treatment of income earned by the partners in the country of formation. Additionally, the foreign partnership must submit an annual declaration to the FTA to confirm that these conditions are met.315 Moreover, the foreign country or territory and the UAE must have adequate arrangements in place for the purpose of sharing tax information regarding the partners in the foreign partnership.316
Where these conditions are met, the foreign partnership will be treated as an Unincorporated Partnership and each of the partners treated as individual Taxable Persons, unless an application is made to the FTA to be taxed at the partnership level, with the foreign partnership itself becoming a Taxable Person.
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