Structuring in UAE: DIFC Foundations and JAFZA


We are pleased to announce a very significant (and potentially crucial) development in that Jebel Ali Free-Zone Authority (JAFZA), the well-established Free-Zone in Dubai, will now accept Dubai International Financial Centre (DIFC) based Foundations to hold shareholdings in JAFZA registered entities. Why is this important?

Estate planning ramifications
The fact that DIFC Foundations will now be accepted as incorporators of JAFZA entities is particularly important with regards to estate planning and the protection of assets and real-estate in Dubai. JAFZA’s offshore entity has traditionally been the main (and in some cases, only) way by which an investor could own Dubai based property in a corporate name. 

Foundations, like Trusts, are utilised for a variety of purposes including wealth management, family wealth preservation, succession and tax planning, asset protection, corporate structuring, and for public interest foundations (excluding charities) across generations. Unlike Trusts however, Foundations are incorporated as a separate legal entity with their own distinct attributes and legal personality.  In this respect, foundations are similar to companies but without shareholders, and offer clients the opportunity of using a local structure within a regulated financial centre in the UAE, instead of having to rely on vehicles from outside the region. DIFC Foundations are relatively fast and simple to set up and manage with straightforward ongoing reporting requirements.

They enable investors, property owners, head of families, and entrepreneurs to safe-guard their investments, properties, and any other assets (stock portfolios, equities, bonds etc.) in the form of an entity that cannot be exposed by the standard corporate entity problems- probate, creditors, strike-offs etc. The names of beneficiaries are not placed on public record. DIFC Foundations can be used by both Muslims and non-Muslims. 

A DIFC Foundation being used in conjunction with a JAFZA structure to own and protect assets, investments, and real-estate. More than one JAFZA offshore could be used to ring-fence different interests. 

The benefits of this type of structure
The advantages of having a DIFC Foundation on top of any international business company or holding company are many-fold. It is considered better practice to consolidate all operational businesses under one “umbrella structure” which affords protection of assets from creditors, divorce, and probate courts and procedures whilst providing an increased level of privacy. The head of a family can keep control of the estate with less risk and more certainty. The DIFC Foundation can replace the traditional foreign holding company to reduce legalisation costs and keep everything inside the region without compromising on safety.

The time is right
Due to the current COVID-19 pandemic, both JAFZA and DIFC have implemented various financial incentives to boost business in this challenging time. These include fee waivers for license and registration fees in some cases! Now might be a better time than ever to consider restructuring your affairs through the use of a UAE based foundation. Please contact us if you would like more information.