Introduction to UAE Foundations
The United Arab Emirates (UAE) has established itself as a global financial hub, offering various legal structures for wealth management, asset protection, and business operations. Among these structures, foundations have become increasingly popular for their flexibility and robust legal framework. In the UAE, the three key jurisdictions offering foundations are the Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), and Ras Al Khaimah International Corporate Centre (RAK ICC). This article provides a comparative overview of these jurisdictions to help individuals and businesses make informed decisions.
1. Dubai International Financial Centre (DIFC) Foundations
The DIFC is a leading financial hub in the Middle East, Africa, and South Asia. Its foundation law is governed by DIFC Law No. 3 of 2018, which aligns with international best practices. The DIFC Authority regulates foundations within the jurisdiction, ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
Key Features:
- Purpose: DIFC foundations can be established for charitable, private, or commercial purposes.
- Structure: A DIFC foundation consists of a founder, council, registered agent, and beneficiaries. It is a separate legal entity, offering limited liability protection.
- Confidentiality: The names of beneficiaries and details of the foundation’s assets are not publicly disclosed, ensuring privacy. But DIFC has a public register of its entities and foundations.
- Taxation: DIFC foundations benefit from a tax-neutral environment, with no income tax, capital gains tax, or withholding tax.
DIFC foundations are commonly used for wealth management, estate planning, asset protection, and succession planning. They are also suitable for holding shares in family businesses, real estate, and other investments.
2. Abu Dhabi Global Market (ADGM) Foundations
ADGM, located on Al Maryah Island, is an international financial center with a progressive regulatory environment. The ADGM Foundations Regulations 2017 govern foundations in this jurisdiction. The ADGM Registration Authority oversees the establishment and management of foundations.
Key Features:
- Purpose: ADGM foundations can be created for private wealth management, charitable, or other lawful purposes.
- Structure: Similar to DIFC, an ADGM foundation consists of a founder, council, registered agent, and beneficiaries. It is recognized as a separate legal entity with perpetual existence.
- Flexibility: ADGM foundations offer flexibility in governance, allowing founders to tailor the foundation’s constitution and rules according to their needs.
- Confidentiality: ADGM foundations offer confidentiality for founders and beneficiaries, with minimal disclosure requirements.
ADGM foundations are ideal for high-net-worth individuals seeking to protect and manage their assets, engage in philanthropic activities, or establish family governance structures. They are also used for holding intellectual property, real estate, and other investments.
3. Ras Al Khaimah International Corporate Centre (RAK ICC) Foundations
RAK ICC, located in Ras Al Khaimah, is known for its business-friendly environment and cost-effective solutions. The RAK ICC Foundations Regulations 2019 govern foundations in this jurisdiction, providing a robust legal framework for asset protection and succession planning.
Key Features:
- Purpose: RAK ICC foundations can be established for various purposes, including wealth management, charitable activities, and holding assets.
- Structure: A RAK ICC foundation consists of a founder, council, and beneficiaries, with the option to appoint a guardian or enforcer. It operates as a separate legal entity with limited liability.
- Cost-Effectiveness: RAK ICC offers a more affordable option for establishing and maintaining foundations compared to DIFC and ADGM, making it attractive for smaller businesses and individuals.
- Confidentiality: Like DIFC and ADGM, RAK ICC foundations provide a high level of confidentiality, with no public disclosure of beneficiaries’ identities or assets.
RAK ICC foundations are suitable for individuals and businesses seeking a cost-effective solution for asset protection, estate planning, and wealth management. They are particularly popular among entrepreneurs, small business owners, and investors.
Conclusion to UAE Foundations
Choosing the right jurisdiction for establishing a foundation in the UAE depends on various factors, including the purpose of the foundation, cost considerations, and the desired level of confidentiality. DIFC, ADGM, and RAK ICC each offer unique advantages, making them attractive options for different types of clients. Whether for private wealth management, family business governance, or charitable endeavors, these jurisdictions provide robust legal frameworks that cater to the diverse needs of individuals and businesses.
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We hope this post will help you as a general introduction to foundations in UAE and remain available for any questions regarding this post of general application.
For more information published in English you can visit all our publications at this link as well as the videos in English of our Managing Partner Maria Rubert.
*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the concept and major differences between the available foundations in UAE.