Tax and Reporting Obligations for Family Offices With Global Assets

This article provides general information on cross-border tax and reporting considerations for family offices. It does not constitute legal or tax advice. Tax obligations depend on specific facts, structures, and applicable laws in multiple jurisdictions. Families should consult qualified advisers in each relevant jurisdiction.

Kayrouz & Associates advises family offices and UHNW families on structuring, governance, and compliance coordination across UAE and international jurisdictions.

Introduction

The UAE has become a preferred jurisdiction for family offices. Zero personal income tax, no capital gains tax, a stable regulatory environment, and well-developed financial centres in DIFC and ADGM make it attractive for families relocating wealth management functions.

But there is a persistent misunderstanding.

Families assume that once they establish UAE residence and set up a family office in DIFC or ADGM, their international tax exposure disappears. It does not.

Assets located outside the UAE remain subject to the tax rules of the jurisdictions where they sit. Reporting obligations under CRS and local filing requirements continue. Economic substance rules apply to holding structures. And the coordination between advisers in different countries, which was complex before the move, becomes more complex after it.

This article addresses what families and their advisers often underestimate: the cross-border tax and reporting reality that persists after UAE setup.

TLDR

• UAE residence does not eliminate tax obligations in jurisdictions where assets are located; source-country rules still apply
• CRS (Common Reporting Standard) means financial account information is exchanged between the UAE and over 100 jurisdictions, including the UK, EU, and most of Asia
• Economic substance requirements apply to UAE entities that earn certain types of income, and inadequate substance can trigger adverse tax treatment abroad
• Holding companies, foundations, and trusts do not automatically shield assets from foreign tax exposure
• Coordination between UAE advisers and advisers in asset jurisdictions is essential and frequently fails

What "Cross-Border" Really Means for Family Offices

A family office is cross-border when any of the following apply:

• Family members are tax resident in different countries
• Assets are located in multiple jurisdictions
• Operating businesses generate income in countries outside the UAE
• The family office entity is subject to regulatory oversight in more than one jurisdiction
• Reporting obligations exist in multiple countries

For most families establishing offices in the UAE, all of these apply.

The family may have members who remain UK or EU resident. Real estate is held in London, Geneva, or Nairobi. Operating businesses are incorporated in India or Nigeria. The family office itself is regulated by DFSA or FSRA. And CRS requires the UAE to exchange financial information with the jurisdictions where family members or beneficiaries are resident.

Each of these connections creates obligations. UAE residence simplifies the UAE position. It does not simplify the others.

For background on establishing a family office in DIFC, see our article on DIFC family office setup for UHNW families.

Tax Exposure Families Underestimate After Moving to the UAE

The UAE's domestic tax position is favourable. There is no personal income tax. Corporate tax applies at 9% above the threshold, with exemptions for qualifying free zone income. Capital gains on most assets are not taxed.

But families relocating to the UAE often underestimate three categories of ongoing exposure.

Source-country taxation

Countries tax income arising within their borders regardless of where the recipient is resident. UK rental income is taxable in the UK. French dividends are subject to French withholding tax. US real estate gains trigger US tax obligations.

UAE residence does not change these rules. The income is taxed where it arises.

Exit taxes and deemed disposals

Some countries impose exit taxes when residents leave. The UK's remittance basis rules create complexity for non-doms who become non-resident. France has exit taxes on unrealised gains. India has rules on deemed disposal for emigrants.

Families who relocate without addressing these rules may face unexpected tax bills years after the move.

Ongoing reporting in former residence countries

Tax residence is not always a clean break. The UK's statutory residence test has detailed rules on when residence ends. Families with continuing ties, whether property, family members, or business interests, may remain UK resident longer than they expect.

Even after residence ends, some countries require ongoing reporting of foreign assets or income. The US is the most extreme example: US citizens and green card holders are taxed on worldwide income regardless of residence. But other countries have reporting requirements that persist after emigration.

Common Cross-Border Structures and Where They Break

Family offices typically hold assets through layered structures: holding companies, foundations, trusts, and operating entities. Each has cross-border vulnerabilities.

Holding companies

A UAE holding company can own international assets. But holding companies face two persistent issues.

First, economic substance. UAE holding companies that earn dividends, interest, or capital gains must meet economic substance requirements. Inadequate substance can result in the company being disregarded for tax purposes in other jurisdictions, with income attributed directly to the family.

Second, treaty access. The UAE has an expanding tax treaty network, but treaty benefits often require substance and beneficial ownership tests. A UAE holding company with no employees, no office, and decisions made elsewhere may not qualify for treaty benefits. This can result in higher withholding taxes on dividends and interest.

Foundations and trusts

DIFC foundations and trusts are useful for succession planning and asset protection. But they do not eliminate tax exposure.

A foundation holding UK property is still subject to UK tax rules. A trust with UK-resident beneficiaries may be subject to UK trust taxation. The UAE wrapper changes the legal ownership but not the underlying tax treatment in the asset jurisdiction.

Foundations and trusts also create CRS reporting obligations. Financial institutions must identify the controlling persons of foundations and the settlors, trustees, and beneficiaries of trusts. This information is exchanged with relevant jurisdictions.

For more on structuring considerations, see our article on shareholder agreements in the UAE.

Operating businesses

Families with operating businesses face the most complex cross-border issues.

An Indian manufacturing business owned by a UAE family office is still subject to Indian corporate tax. Transfer pricing rules apply to transactions between the business and the family office. Dividend payments may be subject to withholding tax. And the management activities of the family office may create a permanent establishment risk if decision-making occurs in the UAE but affects the Indian business.

African businesses present similar issues, often with less developed treaty networks and more aggressive local tax authorities.

Reporting Obligations That Do Not Disappear

Moving to the UAE does not eliminate reporting. In many cases, it increases it.

CRS (Common Reporting Standard)

The UAE is a signatory to the OECD Common Reporting Standard. Financial institutions in the UAE, including banks, custodians, and investment funds, must identify the tax residence of account holders and report account information to the UAE Ministry of Finance. That information is then exchanged with the tax authorities of countries where account holders are resident.

CRS applies to individuals and to controlling persons of entities. For a family office structured as a DIFC company, the controlling persons are typically the family members. Their tax residence determines where information is exchanged.

If a family member is UK resident, information about accounts held by the family office will be shared with HMRC. If a beneficiary is Indian resident, information will be shared with Indian tax authorities.

CRS does not create a tax liability. But it eliminates the information asymmetry that historically allowed families to hold undisclosed offshore assets.

Economic substance reporting

UAE entities subject to economic substance requirements must file annual economic substance reports demonstrating compliance. This applies to entities earning relevant income, including holding company income, intellectual property income, and certain service income.

Failure to meet substance requirements can result in penalties in the UAE. More significantly, it can result in information being exchanged with foreign tax authorities and adverse tax treatment in those jurisdictions.

For updates on UAE regulatory requirements, see our article on UAE corporate law changes and compliance trends.

Local filings in asset jurisdictions

Assets in foreign jurisdictions often require local filings regardless of where the owner is resident.

UK property owned by non-residents requires annual ATED returns if held through a company. French property owned through an SCI requires French corporate filings. Indian companies must file annual returns with the Registrar of Companies.

These obligations do not disappear because the ultimate owner has moved to the UAE. If anything, they become harder to manage because the family is no longer physically present in those jurisdictions.

The Illusion of Tax Neutrality

A common pitch in the UAE advisory market is that family offices can achieve "tax neutrality" through proper structuring. This is misleading.

Tax neutrality, in the sense of eliminating all tax exposure, is not achievable for families with assets in multiple jurisdictions. What is achievable is tax efficiency: structuring that minimises tax within the bounds of applicable laws and does not create unnecessary exposure.

The distinction matters.

Where neutrality fails

Source-country taxation cannot be structured away. If you own UK property, the UK will tax the income and gains. If you own an Indian business, India will tax the profits.

What structuring can do is ensure that tax is not paid twice (through proper use of treaties and foreign tax credits) and that assets are held in the most efficient manner given the family's circumstances.

The substance problem

Many "tax neutral" structures depend on entities being respected as separate from their owners. A UAE holding company that earns dividends and pays them to the family should be taxed only at the holding company level (often at zero in the UAE) with no further tax until the family receives distributions.

But this treatment depends on the holding company having substance. If the company has no employees, no office, and no real activity, tax authorities in other jurisdictions may look through the company and tax the family directly.

The OECD's work on BEPS (Base Erosion and Profit Shifting) has given tax authorities new tools to challenge structures that lack substance. Families who set up UAE holding companies without adequate substance are taking a risk that may materialise years later.

Where Family Offices Trigger Issues Unintentionally

Most families do not intend to create tax problems. Issues arise from gaps in planning, not aggressive avoidance.

Residency miscalculations

Families assume that moving to the UAE makes them UAE resident for all purposes. But residence rules are determined by each jurisdiction independently.

A family member who spends significant time in the UK, maintains a UK home, or has UK-based children in school may remain UK resident under the statutory residence test despite spending more days in the UAE. This can result in worldwide income being taxable in the UK.

Inheritance tax exposure

The UK imposes inheritance tax on worldwide assets of UK-domiciled individuals. Domicile is a distinct concept from residence and is much harder to change. Families who have been UK resident for many years may be deemed domiciled even after leaving.

Deemed domicile means that UK inheritance tax applies to worldwide assets, not just UK assets. Structures that work for non-domiciled individuals may not work for deemed-domiciled individuals.

Treaty residence tiebreakers

Families with homes in multiple countries may be dual resident under domestic law. Tax treaties provide tiebreaker rules to determine a single country of residence, but these depend on facts: permanent home, centre of vital interests, habitual abode.

If the tiebreaker goes the wrong way, the family may find themselves treated as resident in a high-tax jurisdiction despite having moved to the UAE.

Controlled foreign company rules

Countries with CFC rules tax their residents on the undistributed income of controlled foreign companies in certain circumstances. A UK-resident family member who controls a UAE entity may be taxable in the UK on the entity's income, even if no distributions are made.

CFC rules are complex and vary by jurisdiction. They can catch families who assume that retaining profits in a UAE entity defers tax.

Coordination Failures Between Advisers

One of the most common sources of problems is poor coordination between advisers.

A family moving to the UAE typically engages:

• UAE corporate lawyers (for entity setup)
• UAE immigration advisers (for residence visas)
• UK tax advisers (for exit planning)
• Possibly advisers in other jurisdictions where assets are located

Each adviser focuses on their jurisdiction. The UAE lawyer structures the family office. The UK tax adviser handles the departure. But nobody is coordinating the overall position.

Where this fails

The UAE structure may not be optimal for UK exit purposes. The timing of asset transfers may trigger unexpected tax consequences. Substance requirements in the UAE may conflict with the family's desired level of involvement.

Problems emerge years later when a tax authority queries a filing, an asset is sold, or a family member dies. By then, the original advisers may have moved on, and the family is left to reconstruct what was done and why.

What good coordination looks like

One adviser should have overall visibility of the structure and the family's objectives. This is typically a family office executive, a trusted private banker, or a lead legal adviser.

That person should ensure that:

• All advisers understand the full picture
• Advice in one jurisdiction does not create problems in another
• Timing of transactions is coordinated
• Documentation is consistent across jurisdictions
• Ongoing compliance obligations are mapped and monitored

This coordination role is often underinvested. Families pay for technical advice in each jurisdiction but do not pay for someone to make sure it all fits together.

Feasibility Checklist

Before finalising a family office structure with international assets, families should confirm:

• Tax residence of all family members is determined under each relevant jurisdiction's rules
• Exit tax and deemed disposal implications in former residence countries are addressed
• CRS reporting implications are understood for all financial accounts
• Economic substance requirements for UAE entities are mapped and can be met
• Source-country tax obligations for each asset class are identified
• Treaty access is analysed for holding structures (substance, beneficial ownership, limitation on benefits)
• UK inheritance tax exposure is assessed (domicile status, deemed domicile, excluded property)
• CFC exposure for any family members remaining in high-tax jurisdictions is reviewed
• Local filing obligations in each asset jurisdiction are documented
• Adviser coordination is established with clear responsibility for overall structure oversight

Common Mistakes

Assuming UAE residence is automatic

UAE residence requires meeting visa requirements and spending sufficient time in the country. It does not happen automatically upon setup of a family office.

Ignoring the family, not just the assets

Tax exposure depends on where family members are resident, not just where assets are held. A structure that works for a fully UAE-resident family may not work if some members remain in the UK or EU.

Relying on historic structures without review

Structures that worked five years ago may not work today. CRS, economic substance, and BEPS have changed the landscape. Families should review existing structures against current rules.

Underinvesting in substance

Adequate substance requires real activity: employees, office space, decision-making in the UAE. This has costs. Families who minimise these costs may find their structures challenged.

Not documenting decisions

Tax authorities may ask why a structure was set up years after the fact. If contemporaneous documentation does not exist, the family may struggle to demonstrate legitimate commercial purposes.

Treating setup as a one-time event

Cross-border compliance is ongoing. CRS reporting happens annually. Substance must be maintained continuously. Filings are due in multiple jurisdictions each year. Families who treat setup as the finish line will have problems.

What Legal Advisers Typically Scope

When families engage us on cross-border structuring, a typical engagement includes:

Initial assessment

• Family composition and residence status of each member
• Asset inventory by jurisdiction and type
• Existing structures and their documentation
• Identified objectives (succession, governance, tax efficiency, asset protection)

Structure review

• Analysis of current structures against applicable rules
• Identification of gaps, risks, and optimisation opportunities
• Coordination with tax advisers in relevant jurisdictions

Structuring recommendations

• Entity selection and jurisdiction recommendations
• Governance framework design
• Documentation of structures (constitutions, shareholder agreements, foundation charters)

For M&A and asset transfer aspects, see our article on due diligence for UAE M&A transactions.

Implementation support

• Entity formation and regulatory applications
• Coordination with immigration, tax, and banking advisers
• Documentation drafting and execution

Ongoing compliance framework

• Mapping of reporting obligations by jurisdiction
• Annual compliance calendar
• Periodic structure review

Scope and fees depend on complexity, number of jurisdictions, and family requirements. We provide estimates after an initial assessment.

For an overview of our work in this sector, see our financial services industry page.

Discuss Your Structure With Counsel

If you have established or are establishing a family office in the UAE and hold assets in multiple jurisdictions, it is worth reviewing your cross-border position with qualified advisers.

We work with families and their existing advisers to identify gaps, coordinate planning, and ensure structures are documented properly.

Contact us

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