In May 2025, the UAE Cabinet issued Cabinet Decision No. 63 of 2025, which for the first time allows Unincorporated Partnerships (UPs) to voluntarily obtain the status of a corporate taxpayer (Taxable Person) and pay corporate income tax at a rate of 9 %.

This new option significantly expands the tax structuring opportunities for joint ventures (JVs), family funds, and partnership-based SPVs operating within DIFC and ADGM.

Until this Decision, UPs were treated as tax-transparent: profits were taxed at the level of each individual partner. In practice, this led to numerous legal and tax complications:

— difficulty in applying double tax treaties (DTTs) in many counterpart jurisdictions;

— multiple tax declarations required for each partner;

— risk of double taxation on cross-border distributions to foreign partners.

With the new regime, UPs can now obtain the status of corporate taxpayer, streamlining reporting, improving tax efficiency, and facilitating international transactions.

How the new regime works

In order to elect the opaque regime, all partners must unanimously approve the decision and appoint a “Responsible Partner” to communicate with the UAE Federal Tax Authority (FTA). The election must be submitted online to the FTA prior to the first tax period.

Once approved, the UP will be required to:

— maintain financial statements in accordance with IFRS;

— provide audited accounts if turnover exceeds AED 50 million;

— report any change in the composition of partners;

— retain tax and financial documentation for a minimum of five years.

It is essential to note that this election is effectively irreversible — cancellation is only possible with FTA approval and in exceptional circumstances, such as liquidation.

According to PwC Middle East, this option will “fill the gap” between the flexibility of partnership structures and the benefits of corporate residency. Andersen UAE highlights that this change will significantly enhance the attractiveness of the UAE as a jurisdiction for international funds and private equity. PhillipCapital DIFC experts note that for real estate and energy projects, the new regime will allow more efficient deal structuring and reduce registration costs.

Who benefits the most

The opaque regime is particularly useful for:

— family funds seeking unified tax treatment rather than reporting obligations for each beneficiary;

— joint ventures, especially in capital-intensive sectors such as construction, real estate, energy and logistics — the ability to benefit from DTTs and reduce cross-border tax leakage is key;

— private equity partnerships based in DIFC and ADGM that aim to claim treaty benefits on dividends and capital gains at the corporate level.

Key risks to consider

Before making this election, partners should carefully assess the potential risks:

— reversal of the opaque status is extremely difficult;

— not all foreign jurisdictions will automatically recognise the new tax status (double taxation risk may persist);

— groups with global revenues above €750 million will be subject to OECD Pillar Two minimum tax, and the 15 % top-up will apply at the level of the partnership.

Why you need expert tax advisors

Electing for the opaque regime is not simply “filing a form” — it requires detailed financial modelling, proper drafting of the updated partnership agreement, compliance with transfer pricing rules, and consideration of cross-border tax implications.

Errors at this stage could lead to loss of tax benefits or even blocked operations.

The ERG tax team can assist you with:

— full scenario modelling (pre- and post-election);

— drafting updated partnership agreements aligned with the new regime;

— preparing documentation for FTA approval and external audit;

— liaising with foreign tax authorities to ensure recognition of the new status.

If you are considering the “Partnership Election” for your business, JV or family fund — contact our team. We will provide a full assessment and guide you safely through every step of implementation.