DIFC Foundations and Trusts Formation

The Dubai International Financial Centre (DIFC) is a free zone with its own trust and foundation laws governing its management and establishment. It is a preferred destination for foundation and trust formation in the UAE. DIFC foundation and trust formation is a good option if you wish to plan or manage your assets and wealth in the UAE.

DIFC has specific regulations, rules, and guidelines governing trusts and foundations. DIFC Law No. 4 of 2018, called the DIFC Trust Law, is the primary governing law for trusts. DIFC Law No. 3 of 2018, amended by DIFC Law No. 8 of 2018 and DIFC Law. No. 2/2022, governs the foundation setup in DIFC.

So, if you need help planning your succession or managing your wealth, we at FAME can help. We are a leading DIFC trust setup consultant in the UAE, providing foundation and trust formation services. We assess your objectives and suggest an appropriate plan to fulfil them.

Perks of DIFC Foundation and Trust Formation

DIFC foundation and trust setup is popular owing to its many benefits, like the following:

DIFC’s Economy

DIFC has a strong multicultural business ecosystem with a friendly regulatory framework.
It has advanced infrastructure, a skilled workforce, and the latest technological systems to enhance business operations.
The independent judicial system, hassle-free regulations, and enabling support services make DIFC foundation formation easier.
It is a strong financial hub attracting investment and trade flows from several countries.
The legal system in DIFC follows the Common Law and conducts proceedings in English. It is a significant advantage for many foreigners choosing DIFC trust formation.

Flexibility

You can redomicile your foundation from any other country to DIFC or vice versa without hassles.
You can also convert a corporate into a foundation in DIFC.
You can migrate your DIFC trust to another jurisdiction.
A foundation can form direct contracts and agreements with other entities without more formalities.

No Physical Presence

The physical presence of a DIFC foundation is not compulsory. You can have a direct presence or through a registered agent. This is where you will receive all the communications and notices.
You do not need to be physically present for DIFC foundation and trust formation. It is a digital process, which you can manage online.

Confidentiality

The founder can select themselves, family, and dependents or associates as beneficiaries in the statute. It is not mandatory to reveal their names in the statute. Thus, you can maintain confidentiality and privacy.
Trust deeds and other trust documents are not available to public. You might need to disclose some information to follow AML and other regulations.

Foreign Ownership

The founder or other officers of a foundation need not be UAE residents or based in the country. That means foreigners can set a foundation in the country.
Non-residents can also establish trusts in the DIFC.

Asset Holding

A DIFC trust can own investments, property, cash, or real estate as assets. You can have these assets within or outside the DIFC.
You can have different types of assets, like shares, aviation assets, or bank accounts in a DIFC foundation.
A foundation can hold property in designated areas in the Emirates of Dubai under the MoU signed by the DIFC with the Dubai Land Department.
If the beneficial owner of the foundation and the property in the Emirate of Dubai is the same, you have to pay only the reduced transfer fee of 0.125% instead of 4%.
As a DIFC foundation, you can hold shares in companies formed in other free zones of Dubai, like DMCC, JAFZA, or others.

Financial Benefits

You are exempt from taxes on capital, profits, and income. Also, no withholding tax on royalties, dividends, or interests paid to non-residents exists. But a 5% withholding tax is applicable on distributions made to UAE-resident beneficiaries.
You need only US$ 100 worth of initial assets for the DIFC foundation and trust setup.

Prerequisites to Fulfil Before Forming a Trust or Foundation in DIFC

DIFC foundation and trust formation gives you many benefits. But before setting up a foundation or trust in DIFC, you must be aware of the following prerequisites to fulfil:

Types of Trusts

Per the law, you can form any of the following types of trusts:

Revocable or Irrevocable Trust: It depends on the settlor having or not having the right to revoke the trust during the settlor’s lifetime.
Discretionary or Fixed Rust: It depends on the flexibility of asset distribution among beneficiaries.

Types of Foundations

You have different options to choose from, even in the case of foundations:

Corporate Foundation: To manage CSR initiatives by a corporate firm.
Charitable Foundation: To support charitable initiatives and organizations.
Private Foundation: Individuals form such a foundation to plan their succession, manage their wealth, and conduct philanthropic activities.

Structuring

You must have at least one founder and at least a two-member Council as your governing body. The founder can be a member of the council. An individual or an entity can act as a guardian of the DIFC foundation. A Council member cannot act as the guardian of the DIFC foundation. Beneficiaries can be an individual, group, or entity. The statutes or articles of incorporation mention beneficiaries’ rights over the foundation’s assets.

Individuals, professional firms, or corporate entities can be the trustees in DIFC. The trustee must be DFSA-licensed or DIFC-prescribed. The settlor, protector, or trustee can be the beneficiary of a trust.

Foundation’s Founder’s Rights

The founder of the foundation has the following rights in DIFC:

To change the articles of incorporation
To make amendments to the by-laws
To terminate the foundation

Naming of the Foundation

Your foundation’s name must end with the word ‘foundation’. You must also follow the federal naming rules.

Visas

If you have a leased office space in the centre without the registered agent’s services, you can apply for residence visas and work permits. You can get one visa for every 100 sq. ft. of office space.

Annual Requirements

You are free from the need for account audits. However, you must prepare the annual accounts, get them approved by the council and have them signed by at least two members. If you have a registered agent, send a copy to them; if not, file a copy of your annual accounts with the Registrar.

The Procedure of DIFC Foundation and Trust Setup

Forming a trust or foundation in DIFC requires adherence to the following steps:

Step 1: Initial Application

The first step of the DIFC trust setup involves applying to the respective authority. In this application form, you will mention the proposed name, purpose, founder/settlor, and other relevant members of the trust or foundation.

Step 2: Documentation

In the second step of the DIFC foundation setup, you must collect all the identity documents for the founder, guardian, and council members of a foundation and the settlor, trustee, and beneficiary of a trust. You must also prepare the charter, by-laws, and articles governing the incorporation of the foundation. In the case of a trust, you prepare the trust deed.

You can use the standard templates to create them or customize them based on your unique needs. It is also time for you to identify a physical address for your office in DIFC. You can partner with a registered agent to get a registered address.

Step 3: Application Submission and Approval

After collating all these documents and proof of a registered office address, submit them to the DIFC Registrar of Companies. DIFC will review them, ask for clarifications, and check your responses. If all is well, it will approve the foundation and trust setup in DIFC. After this, you can apply for visas and open a bank account.

FAME’s Services in DIFC Foundation and Trust Formation

FAME Advisory is a professional firm helping clients with DIFC foundation and trust formation. We help you decide whether to go for a trust or foundation setup in DIFC. FAME provides all the support required to manage wealth and protect assets. Our consultants make this legal journey of DIFC foundation and trust setup easier and more efficient.

We help you with the following:

Set up the trust or foundation
Prepare the charter, by-laws, and other documents
Get a registered office address
Get necessary approvals
Administration, compliance, and secretarial services

Worried about the distribution of your wealth to beneficiaries?

Contact FAME for a well-structured DIFC foundation and trust formation.