Is income from a silent partnership in the UAE subject to corporate tax?

Dear Questioner,

Thank you for reaching out with your question!

Based on the information you've provided, here is an overview regarding the applicability of corporate tax on income derived from a silent partnership:

- Corporate Tax in the UAE:

As of June 1, 2023, the UAE implemented a federal corporate tax that applies to most businesses, with certain exceptions for qualifying free zone companies. The standard corporate tax rate is 9% on profits exceeding AED 375,000.

- Income from Silent Partnership:

If your company is generating income through a silent partnership, this income would generally be included as part of your company’s overall taxable income, and subject to corporate tax, provided your company is subject to the corporate tax regime.

- Exemptions or Exceptions:

Certain businesses in free zones may be eligible for exemptions or preferential tax treatment, which would need to be reviewed based on your company's structure and operations. However, unless your company qualifies for such exemptions, income from the silent partnership would typically be taxed.

- Next Steps:

I recommend reviewing your company’s specific tax obligations and structure, especially if it operates in a free zone or under any special tax arrangements. It would also be prudent to consult with a tax advisor to ensure compliance with the corporate tax laws.

Please let me know if you need further assistance or a more detailed discussion on this matter. I would be happy to assist you in ensuring your company’s compliance with the applicable tax laws.

Best regards,

Mohammed Salah

Legal Consultant

Under UAE law, if the silent partnership does not involve active business activity or management by the silent partner, your company may not be required to pay corporate tax on the income from this partnership.

You can contact us via WhatsApp for further details and assistance, as we specialize in this area.

Dear Client,

Thanks for your question! I hope you are doing well. I will assist you in this matter.

In the UAE, whether your company has to pay corporate tax on income from a silent partnership depends on the nature of the partnership.

If it is an unincorporated partnership, it is generally treated as "fiscally transparent," meaning that the income is taxed at the individual partner level rather than at the partnership level.

Therefore, your company would not pay corporate tax on the partnership income directly; instead, each partner would report their share of the income for tax purposes.

However, if the partnership elects to be treated as "fiscally opaque," it may be subject to corporate tax itself.

Thanks & Regards,

ABDUL WAHIED