Setting Up a DIFC Foundation in Dubai

23 May Setting Up a DIFC Foundation in Dubai

Over the past few years, the Dubai International Financial Centre (DIFC) has fast become one of the most important global financial hubs. DIFC is not only drawing businesses to expand into the MEASA region, however. It’s now a leading destination for heading up worldwide operations.

 

DIFC offers attractive incentives for businesses, like tax policies, quality infrastructure, and excellent corporate structures. In 2018, Dubai introduced a DIFC foundation initiative. Essentially, this was created to welcome further financial investment to the region, through succession planning, property, and other ventures.

 

Although the regime has been operational for over five years, many investors are not aware of it. However, with the influx of business to DIFC in recent times, more and more people are learning about the benefits of setting up a DIFC foundation. Below, we take you through the key details and steps. 

 

What is a DIFC Foundation?

Many people associate the term foundation with a charitable organization. However, foundations don’t necessarily have any links to charities. In fact, the word can mean different things depending on the context. 

 

In DIFC, a foundation is a legal entity, established by a founder. This autonomous entity is regarded as separate from the founder. This means that any assets allocated to the foundation are the foundation’s own. 

 

A foundation is made up of a council, the founder, beneficiaries, and a guardian. Any assets are generally transferred to the foundation by the founder. However, once the transfer occurs, the assets are then managed and controlled by the council. Essentially, the council acts as a board of directors. 

 

Beneficiaries are those who benefit from the foundation’s assets. The Guardian plays a supervisory role. This individual’s main job is to make sure the council’s actions fall in line with the charter and are in the best interest of the beneficiaries.

 

DIFC foundations can be established for a wide range of activities. The most common are for succession planning, real estate, tax mitigation, and charity. 

 

Why Should You Set Up a DIFC Foundation?

There are a number of reasons to set up a DIFC foundation. It’s a clever way to minimize the risk involved in asset management. 

 

Under DIFC foundation law, there’s an agreement between DIFC and the Dubai Land Department for property deals. Foundations are permitted to purchase properties registered with the department.

 

Aside from real estate, let’s take a look at three of the most popular reasons for setting up a foundation. 

 

Succession Planning

A DIFC foundation allows the founder to transfer assets, like property, savings, or belongings into a separate place from their personal wealth. Since DIFC foundations can be used to purchase local real estate, these can now be included in succession planning. Previously, the estate would’ve comprised primarily of overseas assets. 

 

Asset Control

Under DIFC foundations law, the founder can retain a high level of control over assets. The level of control essentially comes down to the by-laws as well as the terms agreed upon in the foundation’s charter. 

 

Flexible Operations

One of the biggest advantages of a DIFC foundation is the flexibility it offers. The founder can outline a precise management and governance plan for the foundation’s assets and ensure it’s reflected in the charter. 

 

You may also adjust the foundation’s objectives occasionally per the founder’s request. For example, the foundation’s beneficiaries may be changed. 

How to Set Up a DIFC Foundation

As with much of the commercial dealings in the UAE, setting up a DIFC foundation is a streamlined process. That said, it’s by no means quick and easy. Depending on your foundation plan and charter, things can get complex. It’s generally best to work with experienced Dubai business consultants. 

• Set the Foundation’s Purpose

The purpose of your foundation must be abundantly clear from the beginning. What’s more, it must fall in line with the UAE’s legal foundation regulatory structure. Then, you must name the foundation. It should be somewhat related to the foundation’s purpose and must align with the legal framework.  

• Prepare the Initial Endowment

To set up a DIFC foundation, you must be in possession of your initial endowment. This is the required capital to start and run the organization. Depending on the type of foundation you have, the endowment could be property, cash, or some other assets. The amount can vary according to the foundation’s needs. 

• Private or Public

At this point, you must declare whether your foundation will be private or public. A public foundation serves the public, while a private foundation is for an individual, group, or charitable cause. 

• Articles of Association

The Articles of Association are critical documents that officially delineate the foundation’s purpose and activities. It should also outline the foundation’s governance structure. This means listing all of the individuals involved in the foundation as well as their roles.  

• Submit Information for Registration

Once you’ve prepared your Articles of Association and checked that they’re in line with the UAE’s regulatory framework, it’s time to submit them. You’ll also need to send in other documents, including copies of your ID, the initial endowment, bank letters, and a lease agreement for the foundation’s offices. 

 

You may have to wait several weeks for the foundation’s registration to be completed. 

• Secure Permits and Approvals

After your foundation is fully registered, the next step is to secure any permits and approvals you need. The precise permits and approvals you need will rely on the nature of the foundation as well as its registered location. 

• Determine the Foundation’s Governance Structure

You should have already outlined the governance structure in the Articles of Association. Now that the foundation is registered, each member must be ready to begin their tenure. 

 

The DIFC foundation is now ready for regular operations and it should begin its business activities as outlined in the Articles of Association. 

 

Make Establishing a Foundation Easy with Dubai Business Consultants 

As you can see, there are many upsides to setting up a foundation in Dubai. However, the DIFC foundations law means you have to be on point with every step of the process. To ensure no missteps, contact Business Setup Consultants, the leading business consultants in Dubai. 

 

Our team of experienced consultants has helped thousands of businesses and individuals set up ventures in the UAE. We pride ourselves in making our clients feel like they’re our only client. Since establishing a foundation is often a personal endeavor, you’ll be glad to have us on your side.

 

We offer free first-time consultations. Don’t hesitate to schedule yours today.