To set up a DIFC foundation, you’ll need to start with registration under the Dubai International Financial Centre (DIFC) regime, which offers a robust legal structure for wealth management, succession planning, and asset protection.
Key points covered in this guide include:
- What is a DIFC foundation?
- How to set up a DIFC foundation?
- How much does a DIFC foundation cost?
- How is DIFC foundation regulated?
- Difference between DIFC foundation and trust
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The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.
What Is the Purpose of the DIFC Foundation?
A DIFC foundation is primarily designed to hold, manage, and protect assets under a transparent and internationally recognized legal framework.
It typically combines the features of a trust and a company, serving various purposes:
- Wealth preservation for families and business owners.
- Succession planning to ensure smooth transfer of control and inheritance.
- Asset protection against personal or corporate liabilities.
- Philanthropic use, where foundations can also be structured for charitable objectives.
Unlike offshore entities, DIFC foundations operate under common law principles, supervised by the DIFC Authority, giving them stronger legal credibility for global investors and expats.
How to Set Up a Foundation in DIFC?
To set up a foundation in DIFC, the founder must:
- Draft a charter and by-laws, outlining governance, beneficiaries, and asset management.
- Appoint a registered agent or council members to oversee foundation affairs.
- Submit an application through the DIFC Registrar of Foundations portal.
- Pay registration fees and provide KYC documents for founders, council members, and guardians.
Foundations are typically registered under DIFC Law No. 3 of 2018, which ensures confidentiality, legal separation from founders, and perpetual succession.
How to Register a DIFC Foundation?
To register a DIFC foundation, applicants must submit their documents through the DIFC Client Portal managed by the Registrar of Companies (ROC).
The process generally follows these steps:
- Create an account on the DIFC Client Portal to access the foundation registration services.
- Submit the foundation charter and by-laws, which define its objectives, governance, and distribution rules.
- Upload verified documents for the founder, council members, and registered agent.
- Settle the applicable fees which vary depending on advisory involvement.
- Await review and approval by the Registrar of Companies.
Upon approval, the DIFC issues a Certificate of Registration, officially granting the foundation legal standing and limited liability status under the DIFC framework.
How Much Does It Cost to Set Up a DIFC Foundation?
The total cost to set up a DIFC foundation typically ranges between USD 5,000 and USD 15,000.
This includes:
- DIFC registration fee: USD 200–500
- Annual renewal: around USD 200–300
- Professional/legal fees: USD 5,000–10,000 depending on complexity
These costs may rise if the foundation structure involves cross-border holdings or complex governance layers.
How Long Does It Take to Set a DIFC Foundation?
The registration process can take as little as 5 to 10 working days, provided all documentation is complete and due diligence checks are passed.
However, for multi-jurisdictional structures or when involving corporate founders or multiple beneficiaries, the process can extend up to 3–6 weeks.
DIFC Foundation Regulations
DIFC foundations are governed by DIFC Law No. 3 of 2018 and supervised by the DIFC Registrar of Companies.
Key regulatory features include:
- Separate legal personality (distinct from the founder).
- Confidentiality of beneficiaries.
- Mandatory governance structure with a council and, if applicable, a guardian.
- Asset segregation, meaning foundation assets are not subject to personal creditor claims.
These regulations make DIFC foundations comparable in strength to those in Jersey, Guernsey, or Liechtenstein, but with Middle East jurisdictional advantages.
Who Are the Beneficiaries of the DIFC Foundation?
The beneficiaries of a DIFC foundation are the individuals or entities designated to benefit from its assets, income, or distributions as outlined in the foundation’s charter and by-laws.
These may include:
- Family members, when the foundation is used for succession or estate planning.
- Charitable organizations, for philanthropic or endowment purposes.
- Corporate entities or trusts, when the foundation is part of a broader investment or holding structure.
Beneficiaries do not own the foundation’s assets directly—those remain under the legal ownership of the foundation itself, managed by the foundation council according to the founder’s intent.
This separation ensures asset protection, confidentiality, and controlled succession, key advantages for high-net-worth individuals and international investors.
Who Is the Default Recipient of the DIFC Foundation?
If no beneficiaries are named, or if all beneficiaries cease to exist, the distribution of the DIFC foundation’s assets is determined by its by-laws.
If the by-laws do not specify an alternative arrangement, the foundation council may apply to the DIFC Courts for directions on how the remaining assets should be distributed.
Can a DIFC Foundation Hold Shares?
Yes, a DIFC foundation can hold shares in private or public companies, both within and outside the UAE.
This makes it an effective tool for:
- Corporate structuring, such as owning an SPV or holding company.
- Succession planning, by centralizing family business ownership.
- Investment consolidation, simplifying management of multi-jurisdictional assets.
What Is the Difference Between a DIFC Trust and a Foundation?
A DIFC trust transfers legal ownership to trustees for the benefit of beneficiaries, while a foundation is a separate legal entity that owns its assets outright.
Example:
A family office may set up a DIFC foundation to hold shares in multiple companies for long-term control and governance, whereas a trust would rely on trustees to manage assets on behalf of heirs.
In short:
- Trust = relationship-based (trustee-beneficiary)
- Foundation = entity-based (independent ownership)
Conclusion
Setting up a DIFC foundation offers a secure and internationally recognized way to structure, protect, and transfer wealth.
Its strong legal framework, confidentiality provisions, and flexibility make it ideal for high-net-worth individuals, family offices, and global investors seeking long-term asset protection and succession planning in the Middle East.
Whether used for personal, corporate, or philanthropic purposes, the DIFC foundation provides a robust alternative to traditional offshore entities and trust structures.
FAQs
How to Set Up a Foundation for Charity?
To establish a charitable foundation, specify charitable intent in the charter, appoint a guardian, and ensure compliance with DIFC charitable regulations.
Approval may involve additional due diligence by the DIFC Authority.
What Is the 5% Rule for Foundations?
The 5% rule refers to the minimum investment return requirement for private foundations, primarily under US tax law.
It mandates that a foundation must annually distribute or spend at least 5% of the fair market value of its non-charitable-use assets, minus any related indebtedness.
While this rule is not imposed under DIFC regulations, many DIFC-based charitable foundations adopt similar practices voluntarily to align with global standards of transparency and good governance.
Is DIFC Tax Free?
Yes, DIFC is a tax-free zone—no corporate, personal, or capital gains tax applies on foundation-held assets, except in limited cases involving UAE mainland activities.
Which Is Better, a Trust or Foundation?
A foundation is better for families or individuals seeking long-term control, governance continuity, and asset protection under a perpetual legal structure.
It suits succession planning and multi-generational wealth management.
A trust, on the other hand, is better for those prioritizing flexibility, confidentiality, and ease of asset transfer, particularly for short- to medium-term arrangements or where discretion is key.
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