THE LEGAL FOUNDATION: COMMON-LAW PROTECTION IN A CIVIL-LAW REGION
While the wider UAE operates under a civil-law system, the DIFC and ADGM apply English common law and have their own court systems. This gives international investors a familiar legal environment where contracts, trusts, and corporate structures are interpreted under principles similar to those in London, Singapore, or Hong Kong.
Given the ever-expanding financial services market within the UAE, it allows international investors to partner through legally familiar structures without being subject to a foreign legal system.
DIFC AND ADGM FOUNDATIONS: MODERN TOOLS FOR WEALTH PRESERVATION
A foundation is a unique hybrid between a company and a trust. It has a legal personality like a company but no shareholders only a founder, a foundation council, and often a guardian who ensures the founder’s wishes are respected.
The main reason foundations are a particularly useful structuring tool, as opposed to standard LLCs or holding entities, is that when assets are placed inside them, the ownership of those assets is completely severed. The assets are gifted to the foundation and are not personally owned by any individual.
This can mean that exposure to estate/inheritance tax is significantly reduced and can avoid death/gift transfer taxes in certain jurisdictions.
A good example of this would be a UK resident using a UAE foundation to remove assets from their estate for UK inheritance tax planning, subject to UK anti-avoidance rules.
TRUSTS AND PRIVATE TRUST COMPANIES (PTCS) IN THE UAE
The DIFC Trust Law (based on English trust principles) enables the creation of discretionary, fixed, purpose, or charitable trusts. Trusts are very useful when families wish to separate ownership and benefit, manage intergenerational transfers, or protect assets from future liabilities.
A Private Trust Company (PTC) may act as the trustee for one family’s trusts, allowing family members or trusted advisors to sit on the board while maintaining confidentiality and control. The DIFC’s recognition of trusts under common law means such arrangements are enforceable and respected internationally something not possible under UAE mainland law.
In practice, many families pair a foundation (as an overarching governance entity) with one or more trusts for specific asset classes, such as real estate portfolios, investments, or operating businesses.
HOLDING COMPANIES FOR TAX EFFICIENCY AND CONTROL
Beyond asset protection, structuring through a DIFC holding company (DIFC HoldCo) provides tax and business advantages. The UAE has a double taxation treaty (DTT) network with over 140 countries. When a UAE holding company owns foreign subsidiaries, it may qualify for reduced or zero withholding taxes on dividends, interest, and capital gains, benefits unavailable to entities incorporated in zero-tax but non-treaty jurisdictions like the Cayman Islands or BVI.
A DIFC HoldCo allows investors to consolidate shareholdings under a single onshore entity, simplifying governance, capital injection, and eventual exit. If for example, a Saudi operating company held by a DIFC entity can be sold through a clean share transfer, which would provide a more efficient capital-gains tax outcome in both the UAE and the buyer’s jurisdiction.
Holding companies also enjoy regulatory clarity: defined accounting standards, recognized corporate governance, and access to UAE banking. This increases investors’ confidence among potential acquirers, venture investors, and financiers.
HOLDING COMPANY FOR INTERNATIONAL INVESTMENTS
It is recommended for international investors to use a UAE holding company as a central hub for overseas investments. A UAE holding company setup allows investors to manage multiple assets efficiently and take advantage of tax treaties and UAE residency benefits.
EXAMPLE IN PRACTICE:
- A UAE holding company owns 100% of a French SAS.
- The holding company establishes UAE tax residency.
- The France–UAE double taxation treaty can reduce withholding tax on dividends e.g. sometimes from 25% down to 0%, depending on ownership.
- Dividends received by the UAE holding company are not taxed in the UAE.
- Distribution to the ultimate beneficial owner (UBO) depends on the UBO’s place of residency / domicile.
KEY BENEFITS:
- Low-tax or zero-tax repatriation of foreign profits into a UAE holding company.
- Distributions to beneficiaries (individuals) can generally be made tax-free in the UAE, with taxation only applying if their home country taxes them upon receipt.
STRUCTURE OVERVIEW:
