Setting up a DIFC Foundation offers a legal structure for managing assets, protecting wealth, and ensuring effective succession planning. The DIFC (Dubai International Financial Centre) provides a unique, internationally recognised framework for Foundations, making it an attractive option for individuals and businesses looking to secure their financial legacy in the UAE.
In this article, we will guide you through the essential steps involved in establishing a DIFC Foundation, from initial registration to ongoing governance. Along the way, we will define what we mean by a Foundation, describe its purpose and benefits, and offer a detailed step-by-step setup process. We will also look at the costs involved.
So, let’s dive in.
What is a Foundation?
A Foundation is a business entity that may hold family businesses, real estate, financial portfolios, or even valuable personal assets such as artwork. Additionally, it can be used to facilitate charitable activities, enabling founders to give back to their communities in a structured and sustainable way. A DIFC Foundation provides a modern solution for managing wealth in the UAE, offering flexibility and autonomy while mitigating risks associated with asset fragmentation, inheritance disputes, or unforeseen legal challenges. This innovative approach makes it a compelling option for individuals and families seeking to achieve security, efficiency, and continuity in their wealth planning strategies.
The DIFC introduced the DIFC Foundation regime in 2018 through DIFC Law No. 3 of 2018, creating a flexible and efficient wealth management vehicle for expats living in the UAE, as well as international investors. This initiative was designed to cater to the specific needs of individuals and families seeking to protect their assets and businesses while ensuring they remain aligned with local and international legal frameworks. By providing a strong legal structure, the DIFC Foundation regime has become an attractive option for those who wish to preserve their wealth, manage succession planning, and maintain long-term control over their financial legacy.
What is the purpose of setting up a foundation in DIFC?
The primary purpose of creating a Foundation in the DIFC is to provide a secure and structured mechanism for managing and preserving wealth. This legal entity addresses key concerns related to asset protection, privacy, tax planning, and succession planning, ensuring that personal and family objectives are met effectively.
- Asset protection: A DIFC Foundation offers a robust framework to shield assets from potential claims. Unlike assets held in the founder’s personal name, those owned by the Foundation are legally distinct and protected from creditors, government actions, or disputes with other family members. This separation ensures that wealth is safeguarded from unforeseen risks.
- Privacy: Maintaining confidentiality is a central purpose of establishing a Foundation. The identities of founders and beneficiaries are not disclosed in public records or documents like land registries, company registers, or title deeds. This discretion helps protect against unwarranted claims from external or internal parties and supports the private management of wealth.
- Tax planning: For families with assets spread across multiple jurisdictions, a DIFC Foundation simplifies wealth management by mitigating tax liabilities. It provides a structured approach to minimise exposure to inheritance taxes and other local tax obligations, facilitating the efficient transfer of wealth across generations.
- Succession planning: A Foundation allows founders to define clear directives regarding the distribution of their assets after their passing. This ensures that the founder’s intentions are followed precisely, providing stability and continuity for future generations while reducing the likelihood of disputes. Through the Foundation, family members can benefit from an orderly and transparent transfer of wealth in accordance with pre-established conditions.
Benefits of setting up a foundation company in DIFC
Setting up a Foundation in the DIFC offers a unique combination of flexibility, privacy, and efficiency, making it an ideal choice for individuals, families, and businesses looking to manage and protect their assets. Below are five key benefits that highlight why the DIFC is a preferred jurisdiction for establishing Foundations:
- Legal framework: The DIFC operates under its own civil and commercial laws based on Common Law principles, offering a reliable and internationally recognised legal environment. All proceedings in the DIFC Courts are conducted in English, providing clarity and accessibility for global investors and expatriates.
- Asset versatility and independence: A DIFC Foundation can hold and manage a diverse range of assets, including shares, real estate, bank accounts, and even aviation assets, located within the UAE or globally. As an independent legal entity, the Foundation can enter into contracts and manage its assets directly, offering flexibility and autonomy.
- Governance and operational flexibility: DIFC Foundations allow for adaptable governance structures, which can be modified after establishment to reflect changing needs. There is no requirement for a physical office, as a service provider’s address within the DIFC can be used, and there are no residency requirements for the founder or officers.
- Confidentiality and privacy: The DIFC provides strong privacy protections, as the names of founders and beneficiaries are not disclosed in public records. This ensures confidentiality and shields sensitive information from third parties.
- Minimal administrative burden: With no requirements for filing annual returns, accounts, or audits, and an initial asset contribution as low as USD 100, establishing and maintaining a Foundation in the DIFC is cost-effective and straightforward, making it an efficient choice for asset and wealth management.
How to set up a DIFC foundation: Step-by-step
Establishing a DIFC Foundation requires appointing a registered agent and having a registered office within the DIFC. Here is a step-by-step guide to the process:
- Appoint a registered agent: Begin by appointing a licensed registered agent qualified to operate within the DIFC. The registered agent will act as your Foundation’s main point of contact and assist with the necessary documentation and compliance requirements.
- Provide a registered address: The registered agent will provide a formal DIFC address for your Foundation, fulfilling the requirement for a physical presence within the jurisdiction.
- Prepare incorporation documents: The registered agent will assist in drafting the necessary incorporation documents for your Foundation, including the Charter and By-Laws, which outline the structure, purpose, and operational rules of the Foundation.
- Submit to the DIFC Registrar of Companies: Once the documents are prepared, the registered agent will submit the Charter and By-Laws to the DIFC Registrar of Companies to formalise the registration process.
- Manage ongoing administration: After incorporation, the registered agent will remain the primary contact for any queries or administrative needs related to the Foundation. This includes ensuring compliance with DIFC regulations and supporting any changes or updates to the Foundation’s structure.
This process ensures a smooth establishment of your DIFC Foundation while addressing all regulatory and operational requirements effectively.
Costs of setting up a foundation in DIFC
The cost of registering a foundation in the DIFC usually starts at around USD 12,000, with additional annual charges. It’s important to note that there may be additional expenses for legal, consultancy, and administrative services, as well as registration fees. These costs will depend on the complexity of the Foundation’s structure, purpose, and operational requirements.
About Creative Zone
With extensive expertise in company formation, Creative Zone specialises in assisting individuals and businesses in establishing DIFC Foundations. Leveraging years of experience navigating the DIFC’s specific requirements and regulations, our team ensures a streamlined setup process tailored to your needs. From structuring governance and preparing incorporation documents to addressing compliance and strategic planning, we provide personalised support at every stage. Our goal is to make establishing and managing your DIFC Foundation as seamless and efficient as possible.
