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The DIFC Foundation Regime | What, How, Benefits

MEDIA / Articles / 2018 / DIFC Foundation Regime
The Dubai International Financial Centre (DIFC), the foremost international financial hub in the Middle East, Africa and South Asia (MEASA) region, implemented a state-of-the-art foundation regime.

The IFC Foundations Regime was introduced in 2018 as a common law alternative to trusts for financial planning and structuring purposes.

What is the DIFC Foundation

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 (orphan entities).

They offer clients the opportunity of using a tax friendly local structure within a regulated Tier 1 financial center in the UAE instead of having to rely on vehicles in exotic foreign lands.

When to use the DIFC Foundation?

In line with the legal background of the DIFC, the foundations law is mainly based on the principle of the common law foundations and enhanced with some aspects of the Liechtenstein foundations model, the Dutch Stichting Administratienkantoor regime ("STAK"), and other features unique to the DIFC foundation.

Foundations, like trusts, are utilized for a variety of for financial planning and structuring purposes including wealth management, family wealth planning, and tax planning, asset protection, corporate structuring, and public interest foundations.

Legal framework

The DIFC foundation regime originates from a comprehensive review of the finest practices, models and principles of contemporary foundation regimes of both common law and civil law backgrounds. The result is based on the best practices of international financial centres.
The Foundations Law delivers strong rules and other mechanisms to protect the founder’s requirements and the foundation’s assets. The law provides flexibility on the founder’s powers whilst ensuring appropriate governance and control.
Primarily, a DIFC foundation shall be able to issue securities representing the value of the contributed assets based on the STAK model.

Benefits of the DIFC Foundation

The following is a summary of the benefit of the DIFC Foundation Regime?:

  • Tier 1 international financial centre
  • Strong governance structure
  • 0% corporate tax rate
  • No tax filing
  • Comprehensive tax treaty network
  • Flexibility
  • Can issue depository certificates
  •  An option of corporate migration to DIFC from overseas
  • An option to transform a company into a foundation
  • Private arbitration of disputes
  • Strategic location in the Middle East

Recognitions of foreign foundations

In addition, existing foundations operating in other centres can apply for a license to operate as a ‘Recognized Foreign Foundation’. Alternatively, the foundation can migrate to DIFC from other centres. Companies can also convert into Foundations. To register a foundation, any property can serve as an initial endowment.

In case you wish to learn more, visit our up-to-date comparison of DIFC Trusts and Foundations.

Or visit our asset protection page.

Do you wish to stay informed?

Thank you for your interest in Freemont Group, the specialists in company formation, asset protection and legal and advisory . Feel free to contact us with any inquiry you might have. We will provide you with a free initial consultation, and a customized solution for your personal situation.