With the introduction of the UAE’s Corporate Tax regime under Federal Decree-Law No. 47 of 2022, all business entities, including family-owned businesses, are now subject to new tax regulations. Traditionally operating under sole proprietorships, civil companies, or LLCs, family businesses must now understand how these laws affect their operations, profits, and long-term planning.
This blog provides a comprehensive overview of how the UAE corporate tax law applies to family-owned enterprises and offers insights into tax planning, restructuring, and compliance strategies.
Need help structuring your family business for tax efficiency? PEAK Business Consultancy Services specializes in VAT and corporate tax advisory tailored for UAE family businesses. We help you comply, optimize, and grow.
Understanding Corporate Tax Basics
As of June 1, 2023, the UAE imposes a 9% corporate tax on taxable income exceeding AED 375,000. All businesses—whether large corporations or small family-run operations—must assess their tax liability under this new law. Profits below AED 375,000 are taxed at 0%, which provides some relief for small and medium enterprises (SMEs).
Who is Subject to Corporate Tax?
Corporate tax applies to the following entities:
- Limited Liability Companies (LLCs)
- Civil companies and sole proprietorships (if conducting a business activity)
- Holding companies with investments
- Entities operating in Free Zones (if not qualifying for exemption)
Many family businesses in the UAE fall under these categories and thus come under the scope of corporate taxation.
Taxable Income for Family Businesses
Taxable income includes all income from business activities such as sales, services, consulting, and rental income. It also includes passive income such as interest, dividends, and royalties unless exempted.
Example: A family-owned trading business with AED 1.2 million in net profits after deductions will pay 9% on the amount exceeding AED 375,000, i.e., 9% on AED 825,000.
Business Structures Common Among Family Enterprises
Family businesses in the UAE may operate under different legal forms:
- Sole Proprietorship: Taxable if engaged in commercial activity
- Partnership or Civil Company: Each partner is taxed individually based on share of profit
- LLC or Holding Company: Taxable as a legal entity under the new regime
Each structure has different implications for liability, governance, and tax planning.
Family Businesses and Free Zone Entities
Many family businesses operate from Free Zones. If they earn income from mainland UAE or non-qualifying activities, they may lose their 0% tax benefit. They must prove that their income is “qualifying income” and meet substance and reporting conditions to maintain exemptions.
Tip: Maintain adequate economic substance in Free Zones and avoid transacting with mainland customers unless through a taxable branch.
Family-Owned Investment Holding Companies
Families often create holding companies to manage real estate, equity investments, or family office operations. These companies must assess corporate tax liability if:
- They earn dividend, interest, or capital gains income
- They control foreign entities (CFC rules may apply)
- They engage in commercial activities (leasing, consulting, etc.)
PEAK Business Consultancy Services helps families assess tax exposure on their investment holding entities and restructure them for optimized tax planning and compliance.
Group Taxation and Family Business Consolidation
Corporate tax law allows for tax grouping where multiple family-owned entities can file a single return. This offers benefits such as:
- Offsetting losses against profits across group companies
- Consolidated reporting to reduce compliance burden
- Intra-group transaction exemptions
Eligibility: Companies must be at least 95% owned and meet similar financial year and accounting standards.
Succession Planning and Tax
Corporate tax introduces a need for stronger succession planning. Transferring ownership to the next generation must now consider:
- Capital gains tax implications (currently exempt, but future rules may evolve)
- Shareholding restructuring
- Inter-generational wealth transfers
Advance planning reduces future tax burdens and ensures business continuity.
Compliance Obligations
All family businesses under the tax net must:
- Register with the Federal Tax Authority (FTA)
- Maintain proper financial records and supporting documents
- File tax returns within 9 months from the financial year-end
- Ensure compliance with transfer pricing rules for intra-family company dealings
Common Challenges for Family Businesses
Family-owned enterprises may face challenges such as:
- Commingling of personal and business expenses
- Lack of formal accounting systems
- Underdeveloped corporate governance frameworks
Non-compliance may result in penalties, audits, or legal exposure.
PEAK Business Consultancy Services offers tailored support to family businesses with registration, filing, and ongoing tax management. We help implement best practices and formalize tax reporting for multi-generational enterprises.
Conclusion
The UAE’s corporate tax regime requires all businesses, including family-run firms, to adopt transparent accounting, proper compliance, and strategic tax planning. Whether you run a trading business, investment holding company, or a diversified family group, now is the time to assess your tax exposure and take necessary actions.
Don’t leave your legacy vulnerable to tax missteps. Get expert advice from PEAK Business Consultancy Services to navigate the corporate tax landscape. From registration to restructuring, we help UAE’s family businesses thrive under the new tax regime with confidence and clarity.
