This article has been researched and written by the Business Development team at Creation Business Consultants. AI has not been used in generating this article.
The Dubai International Financial Centre (DIFC) is at the forefront of financial innovation and offers leading-edge solutions for wealth management, asset protection and succession planning. The DIFC has many offerings, but the DIFC Foundation is an incredibly useful tool for High-Net-Worth Individuals (HNWIs), families, and businesses as a cost and tax efficient way to protect assets. As Lead Business Consultant at Creation Business Consultants, I have worked with many clients who have set up DIFC Foundations, and have provided them with tailored solutions based on their financial and legacy goals.
Following an overview of the DIFC Foundation, I will detail the set up process, outline key tax benefits, provide practical suggestions, and explain how Creation Business Consultants can help you develop and implement a sound financial future.
A DIFC Foundation is a distinct legal entity established under the DIFC Foundations Law, in essence, it provides a flexible structure that provides many of the benefits of a trust but retains some of the structure of a corporate entity. It is a flexible instrument to hold and manage assets for any purpose including wealth preservation, succession planning, or philanthropy. Unlike a typical trust, it has its own legal personality, entitling it to own assets and engage in contracts and business activities independently of the founding members and beneficiaries.
The DIFC is an attractive foundation setupvenue because of its reputation as a global and premier financial centre with a common law system.
INSIGHTS: OPTIMIZE WEALTH IN A DIFC FOUNDATION
In 2023, the introduction of 9% corporate taxes applicable to all at all levels of regulation in the UAE altered the financial landscape. Assisted by the country’s one the continent’s more flexible economies, DIFC Foundations continue to provide a highly tax-efficient vehicle for your finances, as follows:
No Personal Income Tax: The lack of personal income tax in the UAE means that an individual can benefit greatly from structuring capital into a DIFC Foundation which will best maintain and preserve their wealth.
Corporate Tax Exemptions: Using a Foundation for non-commercial purposes like family wealth and philanthropy can lead to exemptions from the 9% corporate tax, subject to conditions.
Double Taxation Treaties: With access to a wide network of treaties, the UAE reduces tax in relation of Foundations holding assets in other jurisdictions.
No Withholding Tax: Distributions by way of dividend or interest from a DIFC Foundation are generally free from withholding tax in the UAE.
LEGAL REQUIREMENTS FOR DIFC FOUNDATION COMPANIES
DIFC Foundations operate under the DIFC Foundations Law and must comply with regulations set forth by the DIFC Authority. Legal requirements include drafting a Charter and By-Laws, appointing a Registered Agent, and ensuring proper documentation of asset transfers.
PROCESS OF SETTING UP A DIFC FOUNDATION
Step 1: Define the Foundation’s Purpose
Establish the goals of the Foundation, whether for family wealth, philanthropy, or corporate structuring.
Step 2: Draft Charter and By-Laws
Collaborate with trusted legal partners to create a Charter outlining governance rules and By-Laws for private use.
Step 3: Submit Application
Include the following documents:
Charter
Council Details
Registered Office Information
Proof of Capital
Step 4: Regulatory Approval
Upon approval, the Foundation will receive a Certificate of Incorporation.
Step 5: Open a Corporate Bank Account
Establish a bank account to manage assets effectively.
DIFC FOUNDATIONS VS OFFSHORE COMPANIES
DIFC Foundations offer advantages over offshore companies, including stronger legal frameworks, confidentiality, and asset protection. They are ideal for individuals or families seeking secure wealth preservation structures.
Key benefits of the DIFC are as follows:
Common Law Framework: DIFC operates under an English-language common law system, offering familiarity and predictability for international clients.
Independent Courts: The DIFC Courts are autonomous and internationally respected, which enhances legal certainty and enforceability.
Robust Regulation: Foundations are governed by DIFC Law No. 3 of 2018, aligning with global best practices and strict AML/CTF compliance.
Onshore Credibility: Unlike many offshore jurisdictions that may be flagged for tax avoidance, DIFC is seen as a reputable, substance-based jurisdiction with real economic presence.
Global Recognition: Being part of a top-tier financial center adds legitimacy, especially when dealing with international banks, regulators, or counterparties.
ONGOING MAINTENANCE AND COMPLIANCE
After setup, the Foundation must comply with DIFC regulations, including Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. Creation Business Consultants assist in managing these aspects to ensure a streamlined operation.
The purpose of your foundation will determine how it is formed, whether it be family wealth; charitable purposes; or business purposes. We help our clients create their Charters with our trusted legal partners, which outline the purpose of the Foundation with rules on how the Foundation will be governed. There are also By-Laws which are drafted for private view only, and not public.
The By-Laws indicate how the roles differ with the Council (similar to the board); and Guardians. Any contributions made by the founding party whether it is real estate, shares or cash will need to be valued and transferred into the Foundation through the legal team. This transfer is also important to have documented for the record to comply with the rules, as well as avoid any future problems of disputes. At this stage, when all parties have signed all the requisite documents, the founding party should create a Council for all operational purposes, and a Registered Agent to interact with the DIFC Authority on all communications.
The role of Guardian can also be delegated and is responsible for monitoring to ensure that the objectives of the Foundation are being accomplished. When those steps are completed, we will assist you in applying and submitting your file to the DIFC Registry for our fee (starting at USD 5,000). When successfully approved, the Foundation will receive a Certificate of Incorporation. From there, we manage all compliance, including all AML and KYC rules to ensure a smooth process.
WHY CREATION BUSINESS CONSULTANTS?
At Creation Business Consultants, we are committed to helping you structure a Foundation to maximize tax efficiency.
This is why our clients trust us:
Expert Knowledge: Our professional team of consultants includes CMA qualified tax accountants and structuring specialists to ensure your Foundation achieves your current purposes.
Full Service: We can assist with planning your compliance requirements and provide a full end-to-end back office support.
Intelligence: Our Regional connections ensure your Foundation is aligned legally with the present and future business rules of the UAE & GCC.
Track Record: We have engaged with many clients to set up DIFC Foundations within a range of industries, rescuing HNWI millions in tax efficiencies and retention of civilization.
Feel free to contact me at +971503226190 to build a personalized approach that looks after both your wealth and your wishes for the future. Feel free to connect with us right away to begin with Creation Business Consultants.
