High-net-worth individuals (HNWIs) and wealthy families worldwide are increasingly choosing UAE foundations for several reasons. Recent legislative enhancements in the UAE have made foundations even more attractive by strengthening asset protection, enhancing privacy, and offering greater flexibility in governance. Key reasons include:
- Enhanced Asset Protection: The UAE’s updated foundation laws provide robust safeguards against creditor claims, even in the case of foreign judgments.
- Tax Efficiency: Foundations benefit from a 0% corporate tax rate and 0% personal income tax, making them highly tax-efficient for wealth management.
- Complete Confidentiality: Beneficiaries and council member identities can be kept confidential, ensuring privacy.
- Global Asset Management: Foundations can hold a wide range of assets, including UAE and international real estate, financial investments, and intellectual property.
- Flexibility in Governance: UAE foundations offer flexible governance structures, allowing founders to customize decision-making processes and the roles of council members and guardians.
In the United Arab Emirates (UAE), foundations have emerged as a versatile and secure solution for individuals and families seeking effective wealth management, succession planning, and asset protection. With their unique legal structure and favourable regulatory environment, UAE foundations are an ideal choice for high-net-worth individuals (HNWIs) and families with diverse assets. This article explores the key features, advantages, and jurisdictional options for establishing a foundation in the UAE.
Understanding UAE Foundations
A foundation is an independent legal entity designed to hold, manage, and protect assets for specific purposes. Unlike traditional corporate structures, foundations do not have shareholders or members. Instead, they are governed by a council of members and may include a guardian to oversee compliance with the founder’s objectives. Foundations are recognized as “self-owned entities” or “orphan structures,” offering complete separation between the founder and the foundation’s assets.
Key Benefits of UAE Foundations
- Asset Protection: UAE foundations provide robust protection against creditors, legal claims, and third-party disputes, ensuring that assets are safeguarded for future generations.
- Succession Planning: Foundations facilitate smooth asset transfer to beneficiaries, avoiding the complexities of probate.
- Tax Efficiency: UAE foundations benefit from a 0% corporate tax rate and 0% personal income tax, making them an attractive option for wealth management.
- Confidentiality: Beneficiary identities remain confidential, providing enhanced privacy for family wealth management.
- Diverse Asset Holding: Foundations can own a wide range of assets, including real estate, financial investments, and intellectual property.
Jurisdictional Options for UAE Foundations
- Dubai International Financial Centre (DIFC):
- Legal Framework: DIFC Foundations Law No. 3 of 2018 with last amendments introduced by DIFC Law Amendment Law No. 1 of 2024
- Advantages: Robust legal structure under common law, strong asset protection, confidentiality, and flexibility in governance.
- Unique Feature: DIFC foundations can be converted into companies, providing additional flexibility.
- Abu Dhabi Global Market (ADGM):
- Legal Framework: ADGM Foundations Regulations 2017.
- Advantages: Common law jurisdiction, high level of confidentiality, flexible governance options, and strong regulatory support.
- Unique Feature: ADGM permits the appointment of corporate entities as council members.
- Ras Al Khaimah International Corporate Centre (RAKICC):
- Legal Framework: RAK ICC Foundations Regulations 2019.
- Advantages: Flexible governance, affordable registration, and confidentiality of council members.
- Unique Feature: RAKICC allows selecting the jurisdiction for dispute resolution (ADGM or DIFC).
Recent Amendments Strengthening UAE Foundations
The UAE has introduced significant updates to enhance the security and flexibility of foundations. Notably, recent amendments to the DIFC Foundations Law (Law Nos. 3 and 4 of 2018) provide enhanced asset protection, including:
- A three-year statute of limitations for claims against foundation assets.
- Stronger protection against foreign judgments that conflict with DIFC regulations.
- Expanded roles for registered agents, improving compliance management.
Integrating Foundations with Other Wealth Management Instruments
UAE Foundations can be strategically combined with other wealth management tools, such as trusts, family offices, life insurance policies, and corporate structures. These combinations provide a multi-layered approach to asset protection, succession planning, and tax optimization, ensuring a robust and flexible wealth management strategy.
Why Choose UAE Foundations for Wealth Management
The UAE offers a secure, tax-efficient, and confidential environment for managing wealth. With options in DIFC, ADGM, and RAKICC, individuals and families can choose the jurisdiction that best suits their needs. Whether for asset protection, succession planning, or philanthropic purposes, UAE foundations provide a reliable framework for preserving and growing wealth across generations.
How Motei and Associates can help
Establishing a foundation in the UAE requires careful planning and compliance with regulatory requirements. Our team of experienced legal professionals can guide you through the process, ensuring that your foundation is set up to achieve your objectives.
About Motei & Associates
Established in 2002, Motei & Associates is a Dubai-based boutique law firm renowned for its expertise in dispute resolution and corporate and commercial law. For inquiries or to consult with a lawyer, please reach out via phone at +971 4 4355959, mobile +971 55 3536953 or fill out the contact form here.
