Are you looking to protect your wealth and build a legacy that lasts for generations? Then establishing a Foundations in the United Arab Emirates (UAE) can serve with an excellent opportunity and solution for those looking to conserve their assets, secure seamless succession planning and achieve philanthropic objectives. According to a report by the UAE Ministry of Economy, the UAE ranked among the top 20 global destinations for wealth management, with over $1 trillion in investible assets under management in 2023.
By setting up a foundation in UAE, one can effectively handle wealth, manage allocation, and safeguard assets from potential threats.
Considering the same, let’s explore how the foundations in UAE can assist you in securing the assets in future and creating an enduring inheritance.
Going ahead, let us understand What are Foundations in UAE.
Foundations in UAE are a unique legal entity designed to consolidate and protect wealth by separating personal assets from business interests. Unlike traditional corporations, foundations are independent entities without shareholders, governed by a charter that aligns with beneficiaries’ interests, often family members. Foundations in UAE have quickly acquired popularity as a dependable option for inheritance planning and monetary protection. The UAE ranks as the 16th most competitive financial center globally, as per the Global Financial Centers Index (GFCI). This shows the country’s growing prominence in the global wealth structuring arena.
Foundations are accessible in the following three well-known free zones; providing people with a strong and adaptable framework for safeguarding their wealth.
Abu Dhabi Global Market (ADGM),
Dubai International Financial Centre (DIFC),
Ras Al Khaimah International Corporate Centre (RAKICC),
Jurisdictions Insights:
Abu Dhabi Global Market (ADGM)
- Regulated by the ADGM Foundation Regulations 2017.
- Appointment of Registered Agent is optional
- Minimum 2 council members and their identities are kept confidential
- Virtual office addresses are permitted
- No ongoing annual audit account filing unless requested.
ADGM accounts for approximately 35% of all foundation registrations in the UAE, reflecting its status as a key jurisdiction for wealth structuring.
Dubai International Financial Centre (DIFC )
- Regulated by DIFC Foundations Law No. 3 of 2018
- Appointment of Registered Agent is optional
- Minimum 2 council members and their identities are publicly available
- Mandatory Physical Presence
- Annual audit accounts must be filed
DIFC contributes 3.7% to the UAE’s GDP and is home to more than 200 financial institutions. Over 60% of Dubai’s wealth management companies are based within DIFC.
DIFC ranks among the world’s top 10 financial centers, according to the Global Financial Centers Index. It is home to 17 of the world’s top 20 banks, more than 200 asset management companies, and specialist global advisors, as well as 13 of the world’s top 25 wealth and asset managers. Additionally, over 60 significant funds are domiciled in DIFC, reinforcing its position as a leading financial hub for global investors and wealth managers.
Ras Al Khaimah International Corporate Centre (RAKICC)
- Regulated by RAKICC Foundations Regulations 2019.
- Appointment of Registered Agent is mandatory
- Minimum 2 council members and their identities are kept confidential
- Virtual office addresses are permitted
RAKICC has seen a growth of 25% in foundation registrations year-on-year, owing to its attractive regulatory framework and tax exemptions.
Note: Foundations are exempt from both Corporate Tax and Personal Income Tax and can also be transferred to other free zones, without any restrictions.
Advantages of Establishing a Foundation in the UAE
UAE foundations are increasingly preferred as asset security and securing long-term economic strength. The UAE’s free zones contribute over 30% of the country’s total non-oil GDP, emphasizing the importance of jurisdictions like ADGM, DIFC, and RAKICC in driving economic activity. Fundamental benefits of setting a foundation in the UAE possess:
Inheritance Planning
Regardless of succession rules, foundations offer the guarantee that the founder’s desires will be followed in allocating the assets or their benefits. Even in cases when enforceable wills are feasible, they only preserve assets at death and do not shield them against divorce, bankruptcy, incapacitation, or incarceration. On the other hand, a foundation can provide far more continuity by removing the need for drawn-out probate proceedings upon death.
For instance, a non-Muslim resident in the UAE could create a DIFC Will to specify how their assets, such as real estate and investments, will be distributed among their spouse, children, and siblings after their passing. This ensures their wishes are honored and avoids potential disputes under Sharia law inheritance rules that would apply if no will is present. The will could also appoint a guardian for minor children, providing clarity and legal protection for their family’s future.
Tax Benefits
Foundations benefit greatly from the tax-efficient environment in the UAE. The UAE is a great place to manage money since it offers 0% income, capital gains, and withholding tax rates for foundations, especially those set up in DIFC and ADGM. Furthermore, the UAE reduces double taxes on cross-border investments through its vast network of Double Tax Avoidance Agreements (DTAA).
The UAE has signed over 140 Double Taxation Agreements with countries worldwide to avoid taxing the same income twice. These agreements are governed by UAE federal laws and align with international tax standards set by bodies like the OECD.
The Ministry of Finance is the primary authority overseeing DTAs in the UAE.
Philanthropic Endeavors
UAE foundations play a vital role in driving philanthropic endeavors and social impact projects, funding community development, education, and charitable efforts to address societal challenges. The Erth Zayed Philanthropies, launched by the UAE President, unifies major entities like the Zayed Charitable Foundation and Emirates Foundation, advancing the UAE’s leadership in global philanthropy with a shared vision for impactful giving.
The UAE ranks 7th globally for charitable giving, with the country’s philanthropic contributions exceeding $1 billion annually.
Asset Protection
Assets within a UAE foundation benefit from strong protections against creditors and legal claims, including those arising from divorce, ensuring comprehensive asset safeguarding. These foundations also provide a strategic way to navigate Sharia-based estate distribution laws, granting greater flexibility and control over how assets are allocated. Notably, DIFC Law No. 2 of 2024 permits the inclusion of digital assets, such as cryptocurrencies, within foundations. Legal challenges to property transfers are restricted to a three-year window and require proof of fraud causing insolvency, with creditor claims limited to the founder’s original contribution.
Conclusion
To sum up, UAE foundations offer an exceptional option for families and businesses looking to preserve their wealth and ensure multigenerational inheritance. Foundations provide a stable and continuous structure for asset protection and governance, tailored to individual and family objectives. As of 2024, over 1,000 foundations have been established in the UAE, underscoring the growing interest in the UAE’s legal and financial structures for securing wealth and legacy.
