The Dubai International Financial Centre (DIFC) is a premier financial hub in the Middle East, Africa, and South Asia (MEASA) area and is one of the top 10 worldwide financial centers. With over 5,000 active registered firms and about 40,000 professionals operating within a thriving business ecosystem, the center offers a strong independent judicial system, a global financial exchange, creative architecture, and enabling support services.With nearly 20 years of experience, DIFC has helped to facilitate investment and trade flows throughout MEASA, a region that has a combined population of almost three billion and a nominal GDP of roughly USD 8 trillion.
What are DIFC Foundations?
The DIFC Foundations Regime was setup to provide a common law substitute for trusts in financial planning and structuring purposes. Like trusts, foundations can be used for a number of purposes such as asset protection, succession and tax planning, asset management, corporate structuring, and public interest foundations that serve multiple generations.
What are the benefits of setting up a Foundation in the DIFC?
Governments, creditors, and/or other family members who might otherwise have claims against the family can easily access assets kept under personal names. However, a Foundation’s assets are legally separate from the Founder, and hence not readily accessible in case of claims against the Founder.
The Founders and Beneficiaries of a DIFC Foundation are private and this helps in managing assets more discreetly. Names of the Founders do not appear on official docuements such as land registries, title deeds and company registers, and this minimises the risk of potential claims from related or unrelated third-parties.
Large families have members with assets in multiple jurisdictions and subject to local tax laws and inheritance taxes. Effective structuring can be achieved using Foundations to facilitate smooth transfer of generational wealth and minimise tax exposures.
A foundation gives the Founder the ability to specify their preferences for what happens to their assets and related benefits when they pass away and guarantees that the distribution of those assets will follow the founder's wishes and the conditions outlined in the foundation.
What are the specific advantages of setting up a Foundation in the DIFC?
- The DIFC is a financial free zone with it’s own civil and commercial laws with access to DIFC Courts where proceedings are carried out in the English language under the familiarity of Common Law.
- The assets of the Foundation may comprise shares, bank accounts, aviation assets and any other asset that is legally permissible, anywhere in the world.
- The Foundation has a distinct legal personality and hence the flexibility to enter into contracts and arrangements directly, like any other incorporated entity.
- Foundations can be redomiciled (migrated) in and out of the DIFC
- Governance structures can be amended once established
- Commitment of initial assets of as little as US$ 100 to the Foundation
- No physical office requirement – foundations can use the address of a company service provider in the DIFC
- No requirement for a Founder or Foundation’s officers to be based in the UAE or maintain residency in the UAE
- All Foundation roles can be individuals or body corporates
- Limited public disclosure with no individuals’ names on the DIFC public register
- No requirement for filing of annual returns, accounts or audits
Can I hold property in the name of a DIFC Foundation?
A DIFC Foundation is allowed to hold property in the Emirate of Dubai (both Muslims and non-Muslims) in designatedareas for foreign ownership. The DIFC has an existing MOU with the Dubai Land Department to this effect.
An application can be made for the transfer fee to be reduced from 4% to 0.125%, in instances where it can be demonstrated that the beneficial owner of a Dubai property being legally transferred to a Foundation is the same.
- Business Bay.
- Dubai Sports City.
- Dubai Marina.
- Dubai Motor City.
- Emirates Hills.
- Dubai South.
- International City.
- Jumeirah Lakes Towers.
- Jumeriah Islands.
- The Palm Jumeirah.
- Arabian Ranches.
- The World Islands.
- Mirdiff (specified plots).
- Downtown Dubai.
- Dubai Investment Park.
- Old Town.
- Discovery Gardens.
- Burj Khalifa.
- Jumeirah Beach Residence.
- Falcon City.
- Jumeriah Village.
Can a DIFC Foundation be a shareholder in other companies?
Yes, Foundations can be the direct shareholders of companies set up in the larger free zones in Dubai, such as JAFZA and the DMCC. Other free zones are also beginning to accept Foundations as shareholders in companies.
What is the process to set up a Foundation in the DIFC?
Setting up a Foundation in the DIFC involves the following steps:
- Collation of documents – This includes detailed KYC on the founder, council members and guardian of the Foundation.
- Preparation of resolutions and legal documents – Preparation of the Charter and By-Laws of the Foundation. While these can be standard templates, we recommend customization given the specific requirements of each client.
- Finalisation of Registered Address – this can be a physical address at the DIFC, or can be provided by 10 Leaves as a Registered Agent.
- Initial submission to the DIFC Registrar of Companies
- DIFC Review/clarifications and responses
- Final Approvals – the Foundation is now formed!
- Bank account opening/visas if applicable
- A foundation is a distinct legal entity, much like a company.
- A foundation can contract with external parties
- It can hold assets, including real property, in its own name.
- A foundation can sue and be sued in its own name.
- The foundation holds the legal and beneficial title to the assets.
- A trust is not a distinct legal entity.
- The legal rights and obligations are with the trustees (rather than the trust itself) and the trustee in effect contracts in its own name on the trust’s behalf.
- Legal ownership of the trust fund is with the trustees
- Beneficial ownership of the trust fund is with the beneficiaries.
- The trustees would have to sue and be sued in their name.
How can a Founder keep and exercise control on the Foundation and it’s assets?The following control mechanisms may be included in the Charter and By-Laws:
- Appointment and removal of Council Members and/or the Guardian;
- Appointment of the Founder as a Council Member with casting vote rights;
- Veto rights over specific matters (as Guardian);
- Reserved powers to amend the Charter and By-Laws, including dissolution of the Foundation.
- Leasing office space in the DIFC;
- sharing office space with an affiliate established in the DIFC; or
- appointing a Registered Agent.
- Assistance in setup of the Foundation
- Preparation and filing of the Charter and By-Laws of the Foundation
- Providing the Registered Address for the Foundation
- Administration of the Foundation and secretarial services
- Accounting and bookkeeping services
- Compliance and AML services
- the name of the Foundation;
- the name and address of the Founder or each of the Founders;
- the objects of the Foundation;
- if the Foundation has been established for a specific purpose, the purpose for which the Foundation has been established;
- a description of the Initial Assets;
- provisions for the establishment of a Council;
- the name of a natural person or Legal Person who shall become a Beneficiary;
- only in circumstances where a Foundation has no other Beneficiary (the “Designee”);
- the name and address (in the DIFC) of the Foundation’s Registered Agent, if any;
- the address of the Foundation’s registered office in the DIFC; and
- the term for which the foundation is established, if any, or the details of any contingent event, which will trigger the dissolution of the Foundation.
We offer the following services related to DIFC Foundations:
- Structuring and customization of the Foundation Charter and by-laws – in partnership with Legability, our legal platform, we are able to customize the Foundation to suit your requirements. We are able to factor in Common Law, UAE Law, European laws, Kuwaiti and Saudi Law, to deliver a highly personalized document for your asset protection requirements.
- Foundation Setup.
- Registered Address.
- Nominee Services (Council members, Guardians).
- Additional consultations on International Foundations in Luxembourg.
The team has been supportive in our initiative, they understand our vision and mission which has created synergy and an efficient work dynamic."
Director - Baytuki Tech Ltd. (DIFC Property Crowdfunding Platform).
Director and SEO - Triple Helix Capital (DIFC VC Fund Manager).
CEO-BAIMS (GCC Startup).
The Wish List.