A Vehicle for Wealth, Succession and Asset Protection for UAE Residents and European Individuals

Over the past decade, the United Arab Emirates (“UAE”) has emerged as one of the leading jurisdictions for private wealth structuring and estate planning, introducing foundation regimes in its major financial centers.

These include the Dubai International Financial Centre (“DIFC”), the Abu Dhabi Global Market (“ADGM”), and the Ras Al Khaimah International Corporate Centre (“RAK ICC”).

For both UAE residents and European individuals seeking effective tools to manage family wealth, protect assets, and plan inter-generational succession, the UAE foundation represents a powerful solution.

What is a UAE Foundation?

A UAE foundation is a legal entity with independent legal personality, established under specific free-zone legislation. It is formed by a founder (which can never be changed or replaced) and it allows the founder to transfers assets to be held and managed by the foundation, that is, through a council, possibly under the supervision of a guardian (although not mandatory), for the benefit of designated beneficiaries or purposes.

Unlike companies, foundations have no shareholders or partners. They are self-owned, I like to call them “orphan” structures that can hold assets, conduct limited activities, and act much like trusts, yet with greater legal certainty and recognition as separate juridical persons.

The concept combines the civil law notion of a fondation with common law trust principles. Through a foundation you can hold title to property, shares, and intellectual property in its own name, while the founder can define its governance rules through its charter and by-laws.

Each of the above mentioned UAE jurisdiction has enacted its own laws governing foundations, with particular features that appeal to different types of founders.

The DIFC Foundation is governed by DIFC Law №3 of 2018, which explicitly provides in Article 10 under PART 2: NATURE OF A DIFC FOUNDATION that “a Foundation is a body corporate with a legal personality separate from that of its Founder.” The DIFC regime allows the establishment of foundations for charitable, private, or commercial purposes, providing a flexible and internationally recognized legal structure.

The ADGM Foundation, established under the ADGM Foundations Regulations 2017, mirrors the DIFC model but with unique nuances. While it cannot be created solely for charitable purposes, it offers enhanced confidentiality, most notably, the identities of council members are not part of the public record. The regime is efficient, with minimal annual filing obligations unless the Registrar specifically requests them. Article 3 of the ADGM Regulations provides that a foundation “With effect from the date of registration stated in the certificate of registration, the Foundation shall be a legal entity having separate legal personality and may sue and be sued”.

The RAK ICC Foundation, created under the RAK ICC Foundations Regulations 2019, represents a more cost-effective and confidential alternative. A registered agent is mandatory, and there is no public register of foundations or beneficiaries. Article 4 of the RAK ICC Regulations under PART 2 NATURE OF A FOUNDATION, clearly provides that “A Foundation is a corporate entity with a legal personality separate from that of its Founder(s) and any other person” reaffirming its independent status. This regime is particularly suitable for asset-holding and family wealth protection structures where privacy and affordability are key.

Why the UAE Foundation Appeals to European Individuals

For European individuals, both UAE residents and non-residents, the UAE foundation offers a range of civil and common law features, global recognition, and strategic neutrality. Its independent legal personality ensures that assets are legally separated from the founder, providing protection against creditor claims and mitigating risks associated with personal liability or inheritance disputes. In many European jurisdictions where forced heirship rules apply, a properly structured UAE foundation can allow greater control over how assets are distributed upon death, while maintaining compliance with applicable laws.

Furthermore, the UAE’s favorable tax environment enhances the appeal of foundations. Under Article 17 of Federal Decree-Law №47 of 2022 on the Taxation of Corporations and Businesses, certain “Family Foundations” may apply to be treated as “Unincorporated Partnerships” for tax purposes. This means that the foundation itself is transparent, and income or gains are taxed in the hands of beneficiaries rather than at the foundation level, provided that the entity solely holds and invests assets on behalf of natural persons and does not conduct business.

This creates opportunities for European families seeking efficient cross-border asset structures.

Confidentiality is another defining advantage.

In RAK ICC, there is no public disclosure of foundation charters, council members, or beneficiaries. Even in the DIFC and ADGM, disclosure is limited and managed through regulatory filings, ensuring that sensitive family and asset information remains private. For European individuals accustomed to high-transparency regimes under CRS or DAC6, this privacy, while still compliant with global reporting standards, is an appealing aspect of UAE foundations.

How European Individuals Can Practically Benefit

European individuals can use a foundation to consolidate assets, protect family wealth, and establish governance continuity. A French or Italian entrepreneur, for instance, may transfer ownership of his international investment portfolio and shares in companies into a DIFC foundation, designating family members as beneficiaries (can be qualified recipient(s) or default recipients(s)) under clear by-laws. Similarly, an Austrian family with properties across Europe could establish an ADGM foundation to centralize ownership, appoint a professional council for oversight, and define distribution terms aligned with family governance rules.

Further, the UAE foundation serves as a neutral jurisdiction to hold global investments, detached from European tax residency or political fluctuations. Additionally, DIFC foundations can pursue philanthropic objectives alongside family governance, allowing European founders to structure charitable giving through a recognized legal entity within a stable and transparent jurisdiction.

It is important to note that Founders must ensure that the foundation’s charter and by-laws accurately capture their objectives and comply with both UAE and foreign laws. Professional legal and tax advice, across both jurisdictions, is essential to secure the full benefits of the UAE foundation structure. When properly implemented, a UAE foundation can become the basis of a cross-border legacy that endures well beyond a single generation.