Trusts and Foundations in the UAE

 The tax-free environment in Dubai is the main reason why foreign entrepreneurs decide to establish their activities here. In order to protect their assets, local or foreign citizens can choose to set up trusts in Dubai through the Dubai International Financial Centre and its regulations in this matter. For a better understanding of the rules when setting up a trust in Dubai, it is recommended to talk to one of our lawyers in Dubai who can offer legal advice throughout the entire process.

Requirements for setting up a trust in Dubai


Individuals can set up charitable or not-charitable trusts, express trusts, and also protective trusts, under the strict supervision of the Financial Services Authority in Dubai, where the residence terms are not taken into consideration. A DIFC (Dubai International Financial Centre) trust does not require a certain capital, as a starting point, in order to be registered, and 100% foreign ownership is allowed. It is good to know that trusts in Dubai can be better controlled than the registered wills. Furthermore, trusts in Dubai are tax-free and are highly protected, regardless of the Sharia Law succession rules. A Dubai trust can be set up by will or by drafting a codicil which is known as a deed of trust made by a settlor or an administrator.

Why you should set up a trust in Dubai


A trust in Dubai allows foreigners with residence in the Emirates to have a clear idea about his/her wealth which at a certain point is going to be passed on in accordance with terms mentioned. Investors can create trusts in Dubai as part of their investment strategies, especially if they are interested in opening companies in the Emirates.
 
If you are a foreign investor who wants to set up a trust in Dubai, we invite you to solicit complete guidance and also legal support in this matter from our law firm in Dubai by contacting us.

The UAE and the development of the Trust Law

In the Abu Dhabi Global Markets (ADGM), trusts are common law structures which have been based on UK trust law, which offers decades of precedents. The Dubai International Finance Centre (DIFC) enacted its own Trust Law in 2018 to supersede the Trust Law 2005.

To better align with global standards, in 2021 the UAE enacted the UAE 2020 Trust Law, which introduced an Anglo-American trust arrangement into the UAE’s civil legal environment. This new law further supports the development of the onshore wealth management sector and provides additional reassurance for those investing in the region that with these type of structures in place, their assets will be legally protected.

The below table displays the key differences in requirements for trusts in both jurisdictions:


MatterADGM/DIFCUAE onshore
Applicable lawCommon lawCivil law
Trust register No

Yes, all UAE onshore trusts must be registered in the UAE Trust Register.

This must identify:

  • Trust purpose/beneficiaries
  • Trust property
  • Duration of the trust
  • Trust name
  • Powers and authority of trustee
Legal personality
NoYes
Licensed trustee requiredYesNo
AssetsHeld by trustee Held by trust


Trust vs foundation – what should you know?

A trust is not a legal entity and information regarding the trust is not available to the public, whereas a foundation is an entity registered with the relevant authority.

The trustee will hold the trust assets for the benefit of specified persons or objects (the beneficiaries). A trust structure is a legally binding arrangement whereby assets (the trust assets) are transferred from one person(s) (the settlor(s)) to another (the trustee).

MatterTrustFoundation
Constitutional documentsTrust deedBy-laws and foundation charter
Legal form Legal arrangement

Incorporated entity

Control
Vested in the trusteeVested in the council
ExistenceIn perpetuityIndefinitely
Asset ownershipTrustee has legal ownership, while the beneficial ownership is vested in the beneficiaries Owns its own assets
LocationADGM / DIFCADGM / DIFC / RAK ICC

A foundation is constituted by by-laws and a foundation charter that governs the organisation, assets and the purpose of the foundation. As mentioned above, a foundation is incorporated as a registered legal entity and has its own legal personality, however, it also has characteristics of a trust insofar as it allows for the separation of legal and beneficial interests. It does not have shareholders. A foundation allows the continuance of the founder to exercise control over the foundation.

It is worth noting that a trust deed prescribes the terms and conditions of the trust and how this must be managed by the trustee. It also sets out the rights and interest of the beneficiaries.
The settlor may provide a document setting out their wishes as to the management and disposition of the trust assets (this is not legally binding but considered by the trustee when making decisions).



















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