A family we work with had been told, correctly at the time, that a holding company owned by two foundations could not be tax transparent. Since 10 June it can. The FTA's updated guide answers five questions families have been asking for a year, and one of the answers is not the one most family offices were hoping for.
The short answer
- On 10 June 2026 the Federal Tax Authority reissued its Corporate Tax Guide on the Taxation of Family Foundations (CTGFF1). It is guidance, not law, but it sets out how the FTA reads Article 17 of the Corporate Tax Law in practice.
- A company wholly owned by two or more family foundations can now apply for transparent treatment. Before June, a jointly owned SPV was treated as a taxable company regardless of who stood behind it.
- A single family office does not get the 0% rate on investment management fees unless that activity is regulated by the DFSA, the FSRA, the Central Bank or the SCA. A DIFC family office registered under the Family Arrangements Regulations is not DFSA regulated, so its management income is taxed at 9 per cent.
- An LLC is not a family foundation and cannot elect transparency on its own. It can be transparent only if a qualifying foundation owns and controls it through an unbroken transparent chain.
- A natural person settling personal investments or real estate into a foundation does not trigger corporate tax. Moving a company into or out of foundation ownership does not reset the base cost of its assets.
Last reviewed 27 September 2026
A family we advise had been told in 2025, correctly at the time, that a holding company owned by two of their foundations could not be tax transparent. Two branches of the family had set up separate DIFC foundations for good governance reasons, and they wanted to hold one property portfolio jointly beneath both. The answer then was that the joint vehicle would be a taxable company. Since 10 June 2026 it is not.
That is one of five changes in the Federal Tax Authority's updated Corporate Tax Guide on the Taxation of Family Foundations, reference CTGFF1. The guide is not law; it is the FTA's published reading of Article 17 of the Corporate Tax Law, and it is the reading the FTA applies. Four of the five changes make life easier. The fifth is the one most family offices were hoping would go the other way, and it is worth understanding before anyone relies on a free zone licence for a tax result it does not deliver.
What the family foundation regime actually does
A DIFC or ADGM foundation is a legal person. Left alone, it is a taxable person under the Corporate Tax Law like any other company. Article 17 lets a foundation that meets four conditions apply to be treated instead as an Unincorporated Partnership: fiscally transparent, so that its income is treated as arising directly to the beneficiaries. Where those beneficiaries are natural persons, and the income is personal investment income or real estate investment income, it falls outside corporate tax altogether.
The conditions are that the foundation exists for the benefit of identified or identifiable natural persons (or a public benefit entity, or both); that its principal activity is receiving, holding, investing, disbursing or otherwise managing assets for those beneficiaries; that it does not carry on a business or business activity that would be taxable if a natural person did it directly; and that it is not established to avoid tax. The application is made to the FTA, and transparency runs from the start of the tax period in which it is granted.
Everything in the June update is about how that regime works once a foundation has companies beneath it, families beside it, or a family office next to it.
Change one: a company owned by two foundations can be transparent
This is the change that solved our client's problem. The May 2025 guide's Example 9 had a single foundation above a single SPV. The June 2026 version shows an SPV held by two family foundations, each treated as an Unincorporated Partnership, and confirms that the ownership condition is met. As the Baker McKenzie note on the update puts it, collective ownership by multiple family foundations does not, in itself, prevent an entity from benefiting from tax transparency.
The conditions are the ones you would expect. The vehicle must be wholly owned and controlled by foundations that are themselves transparent, and control is assessed on voting rights, profit entitlement and the ability to determine the board. The chain above the vehicle must be unbroken: one opaque entity anywhere in it breaks transparency for everything beneath.
What it opens up is the structure many multi branch families actually want: a foundation per branch for governance, and shared vehicles beneath them for the assets the branches hold together. Before June, that meant choosing between good governance and a taxable holding layer. Our guide to structuring a family business company sets out where the branch foundations sit in a three layer structure.
Change two: the lower tier company inherits the beneficiary condition
A holding company beneath a foundation has no beneficiaries in the legal sense. Its shareholder is the foundation. The May 2025 guide left it unclear whether such a company could satisfy the beneficiary condition at all. The June version says that where a company is wholly owned and controlled by a family foundation, the condition may be regarded as satisfied by reference to the wider foundation structure, because the company serves the same purpose as the foundation above it.
Two consequences follow. A holding company or SPV does not need to have been owned by the foundation from incorporation: a pre existing vehicle can be acquired by the foundation and thereafter be transparent, provided it meets the conditions. And each entity still needs its own analysis. Transparency is not conferred on a structure; it is applied entity by entity, and a company that carries on a business activity beneath a transparent foundation is taxable however it is owned.
Change three: settling assets into the foundation is not a taxable event
The founder's first question is nearly always the same. If I transfer what I own into the foundation, is that a disposal? The 2025 guide was silent. The June guide is not.
Where the transferor is a natural person and the assets are personal investments or real estate investments, the transfer should not be subject to corporate tax. That covers the ordinary case: a founder settling the shares of a holding company, an investment portfolio and a property or two that they already hold personally.
Where the transferor is a company, the transfer may give rise to a taxable gain or loss depending on the facts. And where the transferor is a related party of the foundation, which the founder usually is, any transaction with the foundation must be on arm's length terms. That last point matters for valuation: the assets go in at market value, and the paperwork should show it.
Change four: moving companies in and out does not reset base cost
Families restructure. A company is brought under the foundation; a company is spun out to a branch that is leaving; a foundation is dissolved and its subsidiaries redistributed. Each of those changes may switch a company between transparent and opaque treatment.
The guide confirms that such a switch does not, by itself, adjust the tax base cost of the assets the company holds. There is no deemed disposal and no step up or step down. The years in which the company was transparent are simply ignored for the purpose of base cost. That removes a real fear: that reorganising a structure to reflect a family's changed circumstances would crystallise a tax cost the reorganisation itself created.
Change five: the family office answer
This is the one to read twice.
A single family office is a company that provides services to the family: administration, reporting, governance, sometimes investment management. It earns fees. The guide confirms, without much room for argument, that such an entity is unlikely to satisfy the condition that it does not carry on a business or business activity, so it will not be transparent. It is a taxable service provider, and its fees to the foundation, the holding companies and family members must be at arm's length.
The question families then ask is whether a family office in the DIFC or ADGM can at least use the free zone regime to reach the 0% rate as a Qualifying Free Zone Person. The guide's answer has a condition inside it that most summaries have under stated. A family office that is a Free Zone Person may in principle access the 0% rate on qualifying income from qualifying activities. Wealth and investment management services are a qualifying activity under Ministerial Decision 229 of 2025, but only where the activity is subject to regulatory oversight by a competent authority: the Central Bank of the UAE, the DFSA, the FSRA in ADGM or the SCA.
A DIFC single family office is registered under the Family Arrangements Regulations. It is not authorised by the DFSA; the whole point of the regime is that a family managing its own money does not need to be. So its investment management fees are not regulated activity, and they do not qualify. As Baker McKenzie's note observes, extending the services to unrelated families would bring the activity inside the DFSA perimeter, but that converts the entity into a multi family office needing DFSA authorisation, with the capital, personnel and compliance obligations that follow. A family that pursued the 0% rate that way would be taking on a regulated business to save 9 per cent on internal fees, which is rarely the right trade.
The practical position for most families is therefore this: the foundation and its holding companies can be transparent; the family office beside them is taxable at 9 per cent on its fees; and the fees should be set at a level that reflects what the office actually does, because the FTA will read them against the arm's length standard in both directions. Our guide to setting up a DIFC family office covers the licensing side of the same entity.
The LLC point, and why the foundation has to be on top
Buried in the update is a clarification that affects more families than the family office point. A limited liability company is not a "similar entity" to a foundation or a trust, and cannot apply for transparent treatment on its own. Families who hold their wealth through a mainland or free zone LLC, with no foundation above it, are not in the regime at all.
The fix is not to unwind the LLC. An LLC wholly owned and controlled by a qualifying foundation can be transparent through the multi tier rules. The fix is to put the foundation on top, which is where it belongs for succession and governance reasons in any case. Our comparison of the DIFC foundation and the trust covers the choice of vehicle at that top layer.
What to do with an existing structure
The guide changes enough that every family foundation structure set up before June 2026 is worth a short review. In our experience the review comes down to six questions:
- Is the foundation at the top, with every holding company beneath it wholly owned and controlled through an unbroken transparent chain?
- Are any vehicles owned jointly with another family foundation, and if so, were they set up as taxable companies because that was the only option? They can now apply.
- Has the foundation applied to the FTA for transparent treatment, and is the annual confirmation being filed? Transparency is granted, not assumed.
- Does the structure include a family office, and is it treated as a separate taxable entity with an arm's length service agreement?
- Is anyone relying on a free zone licence for a 0% rate on investment management fees that are not regulated activity?
- Are any transfers into the foundation, or reorganisations of companies beneath it, being planned on the basis of the May 2025 guide rather than the June 2026 one?
The last question is the one that changes decisions. A family that postponed a restructuring in 2025 because of a base cost concern, or that kept a jointly held vehicle outside the structure, has a different answer now.
How Atlas can help
Atlas establishes and administers DIFC and ADGM foundations and the holding companies beneath them, and works alongside the family's tax advisers on the Article 17 application, the annual confirmation and the arm's length arrangements with any family office. Tax work is delivered through the wider Atlas group. If your structure predates the June guide, speak with the Atlas team and tell us what sits above what; that is usually enough to see whether the update helps you.
This article is general information and does not constitute legal, tax or regulatory advice. DIFC and ADGM rules change; confirm the current position with a qualified adviser for your specific case.
Frequently Asked Questions
What did the FTA change in the June 2026 family foundation guide?
The FTA reissued its Corporate Tax Guide on the Taxation of Family Foundations on 10 June 2026, amending sections 2.5, 3.3, 3.4, 6, 7.8, 7.9 and 7.10 of the May 2025 version. The substantive changes are: a company jointly owned by more than one family foundation can be transparent; a lower tier company wholly owned by a transparent foundation is treated as meeting the beneficiary condition; transfers of personal investments or real estate by a natural person into a foundation are outside corporate tax; a company moving into or out of transparent treatment does not adjust the base cost of its assets; an LLC is not itself a family foundation; and single and multi family offices are taxable service providers, with the free zone 0% rate available only where the activity is regulated by a competent authority.
Does a DIFC single family office pay 0% corporate tax?
Not on its investment management income, in most cases. The guide confirms that a family office established as a Free Zone Person may in principle access the 0% rate on qualifying income, but wealth and investment management services qualify only where they are subject to regulatory oversight by a competent authority: the Central Bank of the UAE, the DFSA, the FSRA or the SCA. A DIFC single family office registered under the Family Arrangements Regulations is not authorised by the DFSA, so its management fees are ordinary taxable income at 9 per cent. Extending the service to unrelated families would bring it inside the DFSA perimeter, but that makes it a multi family office needing DFSA authorisation, not a single family office with a tax advantage.
Can an SPV owned by two family foundations be tax transparent?
Yes, since June 2026. The updated Example 9 in the guide shows an SPV held by two family foundations, each treated as an Unincorporated Partnership, and confirms the ownership condition in Article 17 is met. The SPV must be wholly owned and controlled by foundations that are themselves transparent, control being assessed on voting rights, profit entitlement and the ability to appoint the board. The earlier position, under which any jointly owned vehicle was taxed as a company, has been reversed.
Is transferring assets into a DIFC or ADGM foundation a taxable event?
Where the founder is a natural person and the assets are personal investments or real estate investments, no. The guide states the transfer should not be subject to corporate tax. Where the transferor is a company, or the assets are business assets, or the transferor is a related party of the foundation, the arm's length standard applies and a gain or loss may arise depending on the facts. The common case, a family settling shares in a holding company and an investment portfolio it already owns personally, is the one the guide confirms as tax neutral.
Can an LLC apply to be treated as a family foundation?
No. The guide states an LLC is not a similar entity to a foundation or trust and cannot apply for transparent treatment in its own right. An LLC wholly owned and controlled by a qualifying family foundation can be transparent through the multi tier rules, provided every entity in the chain above it is transparent. The practical answer for a family holding wealth through an LLC is to place a foundation above it, not to dismantle the LLC.
Does the guide change anything about DIFC foundations specifically?
The guide is federal and applies to DIFC and ADGM foundations alike. What it changes for a DIFC structure is the planning around it: the foundation should sit at the top, the holding companies beneath it should be wholly owned and controlled by it, and any family office should be treated as a separate taxable entity with an arm's length service agreement, not as part of the transparent structure. Our guide to DIFC family office setup covers the licensing side, and the Family Foundations guide covers the tax side; the two now need reading together.
Is the FTA guide legally binding?
No. It is the FTA's interpretation of the Corporate Tax Law and the Cabinet and Ministerial Decisions beneath it, and the FTA applies it in practice. A structure that relies on a reading the guide rejects should expect that reading to be challenged. Where the position genuinely matters, a private clarification from the FTA under its clarification framework is available.