Foundation in Dubai, UAE - info and facts.
Let’s start with the definition. Historically, trusts came into existence in the Anglo-Saxon legal system during the Middle Ages and since then their basic essence has remained unchanged: a private / family trust is a legal instrument for assets holding, protection and their transfer by inheritance to kids and other family members.
Dubai fully recognizes the trust law and the trust can be registered as per the applicable UAE legal framework. As per the government decision from Ministry of Finance of the UAE the trust law has been issued on the registration and operations of trust structures.
Trust sometimes is considered as some sort of a legal entity, a kind of company, but this is not entirely true, since the main task of a company is the commercial activity and making profits, and the main task for a trust is to preserve and transfer various assets (money, properties, shares, etc.), according to the conditions stated in the constituent documents. Trust does not have any shareholders. It has the settlor and the beneficiary / beneficiaries.
However it does not stop the trust from commercial activities as it can hold the shares in other companies which do different businesses.
Trust/foundation is the proven tool for asset protection, preservation of family wealth and inheritance planning. It provides the great solution for safeguarding family and children interests, to control your wealth and to protect the assets from third parties.
There are the following participants/ bodies in trusts:
- Founder - a person who establishes a trust and whose property and assets will be protected once transferred to a trust. After its establishment and the transfer of assets of a founder, this person can no longer manage them directly, but over a foundation only. Founder - also called grantor or settlor - can be a single person or multiple persons.
- Trustee - a person who manages the assets in a trust for the benefit of the beneficiary(s). The basis of his/her activities is stated in the deed. A trustee does not benefit from the assets in a foundation, receiving only a certain fixed fee for the service.
- A beneficiary is a person who benefits from the assets of a trust, and if certain conditions are met, the assets themselves. There can be one or several beneficiaries - as defined by the settlor/ grantor. Beneficiaries can be minor / underage or full age children, family members as well as third parties nominated by grantor.
- A protector. To ensure that the interests of the beneficiary are achieved, there may be additionally a protector appointed in a trust. A protector is a person appointed by a founder to oversee and control the actions of a trustee.
- Registration agent. If a founder is going to open a foreign foundation, a local company is required to provide registration and administration services for this foundation. These are specially authorized companies that act as intermediaries between a trust itself and local government registrar, ensuring the applicable laws are fulfilled and the administration of trust is done accordingly. Such companies are called Registration or Registered Agents in RAK IC and our company is such agent.
Private / Family Foundation - what is the difference to trust
A foundation, from the legal standpoint, is slightly another form of asset protection and safeguarding that comes from civil law. A foundation is similar to a company and has its legal standing, but at the same time, it has no shares. A foundation has several activities that are intended to benefit its beneficiaries. In real life foundation is very similar to a trust, just governed by slightly different law.
Foundation activities are regulated by its charter, which reflects the will of a founder. A foundation is managed by council members and a protector (optional), and the property / assets of a foundation belongs to the foundation itself.
People choose foundations due to the following reasons:
- For legal succession and family wealth planning within assets transfer to children;
- To protect family assets from the applied rules of inheritance;
- To protect family assets from claims of creditors;
- As a holding structure.
Benefits of trusts / foundation
Since a trust is not a typical legal entity from the legal point of view, it provides several significant advantages:
- High level of business protection against possible encroachments on assets (compared with a regular legal entity, for instance). Even in case of the bankruptcy of a founder, creditors, or other persons who try to recover funds from a founder in a court, in most cases it will not be able to do this with a trust.
- Outstanding protection in case of an offshore trust registration. In this case, even with a decision of a court of another jurisdiction, it is almost impossible to recover the founder’s funds.
- A variety of assets can be transferred to a foundation, including bank accounts, properties and company shares. At the same time, as a rule, it is not required for these assets to be located in the jurisdiction of the offshore trust.
- You can manage your private foundation online, without physical presence, only visiting the country for registration and bank account opening.
UAE provides great advantages when compared to other jurisdictions:
- There are no minimum capital requirements;
- 100% foreign ownership (same as for a company in a free zone);
- Great level of privacy;
- No taxes for foreigners;
- Great legal protection of assets.
The foundations are registered in the UAE free zones. These free zones are governed by laws based on the principles of common law, and the rest of the country is governed by the civil legal system. This gives an additional advantage when opening a trust abroad, particularly in the UAE free zone.
Trusts in the UAE. Legal basis/framework
In some particular fee zones of the UAE foreigners and local citizens can register trusts, in particular in Dubai, in the DIFC free zone, or Ras al-Khaimah in RAKK ICC. Legally, foundations are governed by the Trust Act 2005 (updated 2010) in the DIFC and the RAK ICC Foundations Regulations 2019 (in the RAKK ICC).
According to local law, a trust can be established either for a limited or an unlimited period, besides, a trust may have the conditions for its termination, for example, the marriage of a beneficiary, child attainment of the age of majority, etc. In any case, the activities of the trust are regulated by the jurisdiction in which it is registered and the statutes which specify all the terms.
How to register a trust in the UAE?
So how to settle a trust in the UAE? The process of trust incorporation in the UAE FTZ is as follows:
- Step 1 – Get in touch with us
- Step 2 – Prepare documents and trust deed. The required list of documents would be provided to you by us. Next, you must sign all the documents including trust deed and either hand them over personally by visiting our office in the UAE, or send by e-mail (the originals must be sent later by mail).
- Step 3 – Registration. After receiving and checking the documents, we proceed with the trust registration in the registrar.
- For bank account opening in the UAE personal visit is required. You can sign and send us all the documents for the foundation registration in advance or when you come to the UAE for account opening.
You cannot register yourself a foundation in Ras Al Khaimah (RAK) as this must be done by your register agent. This registered agent would handle the entire registration process for you as well as provide the registered address for your trust. Our company is the fully licensed registered agent.
Frequently asked questions and answers (Q&A) about trusts/foundations
What are the advantages of opening a trust in the UAE?
As in the case of a company in a free zone, you, as a foreigner, are exempt from any taxes, you can be a 100%-owner of your trust and get great protection of your interests and interests of your kids and other family members. You enjoy high level of safety combined with the excellent banking facilities. In addition the costs / fees for setting and running a trust structure in the UAE are much less when compared, for example, with Switzerland, Lichtenstein or Singapore.
Who is a registered agent in the UAE?
This is a local legal entity which has the special registration in the RAK IC registrar and who acts on your behalf to register and administer your trust. For the UAE trust registered in Ras Al Khaimah (RAK IC) you must have a registered agent who provides the entire foundation set-up support and registered address for your trust. The powers of the registered agent are limited to administration of the foundation only. Our company is such agent.
Who is the trust founder / settlor
The founder, also known as grantor is the one who creates / settles the foundation by registering the trust and placing some assets into the trust.
Can a founder be also a trustee?
Yes. Founder/settlor can also be beneficiary - as sole / single beneficiary or along with other beneficiaries.
Who is the Trustee in Dubai foundation?
Trustee is the one who manages and distributes the foundation assets to beneficiaries in accordance with the instructions of the settlor. The trust settlor can act as the trustee.
Who is the foundation Beneficiary?
Beneficiary is the one who receives benefits from the foundation. Such beneficiaries and their rights to receive the assets from the trust can be clearly regulated in the foundation documents.
Which assets trust can hold?
Private trust can hold any type of assets - bank accounts, securities, real estate, shares in other companies, etc.
What are the pros /advantages of a trust
You get the excellent solution for assets protection and inheritance planning. You can distribute your assets much more efficient without additional costs and with clear tax benefits.
What are the cons / disadvantages of a trust
When you hold your assets directly there are no extra costs which you have for the trust. However the trust costs in the UAE a just a couple of thousand dollars which is not a big amount compared to the advantages you get. Another disadvantage is that you need to make some paperwork related to trust establishment. However Most of this work is handled for you by your trust registered agent means us.
Where can I register a private / family trust in the UAE?
There are seven emirates in the United Arab Emirates - Dubai, Abu Dhabi, Sharjah, Umm Al Quwain, Fujairah, Ajman and Ras Al Khaimah. Trusts can be registered in Dubai - in DIFC Free zone and in Ras Al Khaimah.
Revocable and irrevocable foundation
Revocable аfoundation can be amended, changed or revoked / recalled. Irrevocable can not be recalled, but still can be amended.
Why UAE is a good jurisdiction for registering a trust?
UAE provides the very resilient legal base/framework for protection of interest of foreign investors combined with tax-free environment and great banking services. There is no access to the data on the trust by third parties which is critical point for confidentiality. And, as one of the key advantages is the taxation regime at zero percent for foundation income and assets distribution.
How much does to cost to settle a trust
The total costs of settling a trust/foundation in RAK, UAE is just a couple of thousand dollars and the yearly renewal fees are minimal.
How long does it take to settle a trust in Dubai, UAE
The entire process takes 3 to 5 business days. In the event you require particular amendments to the foundation bylaws and other documents - the additional time may be required depending on the scope of such amendments.
Does the family / private foundation need to file audit reports?
No, such for type of legal entity it is not required to file the audit reports.
What are the taxes on the foundation
UAE trusts are not subject to any taxation in the UAE - independent on its type of activities.
Which name can I chose for a foundation?
You can choose practically any name - same as for a company. At the end of the name there would be the word “Foundation” or “Fdn“
What shall I do to register a foundation in the UAE?
You still have questions on how to open your trust? Get in touch with us - and we guide you over the entire process, prepare all documents, register the trust and provide its further yearly administration. We are the registered agents for private foundations in the UAE.