Setting up a foundation in Dubai – that will be the topic of today’s article.
Setting up a foundation in Dubai establishes a global wealth management structure for asset protection and international financial planning.
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Introduction
Nowadays, the country where you are born can no longer play an important role. A person with valuable knowledge and skills does not have to agree to a low-paid job in his own country. He can look for more attractive options that exist abroad. For a long time, the developed European countries and the USA were the leaders in the number of labor migrants. It was here that citizens of poorer powers flocked in search of a better life, work with a decent salary.
Most of them wanted to stay forever in the state of their dreams, not wanting to return to their homeland. Both Europe and the US made it possible for many foreigners to obtain citizenship, until the situation began to tilt towards the infringement of the rights of local residents. This is especially clearly seen in the example of European countries that are suffering from economic crises, terrorist attacks, etc.
For a long time, Europe and the United States have ceased to be the object of increased attention of labor migrants, because a new player has appeared on the arena: the United Arab Emirates. At the moment, this country, or rather, one of its regions, for example Dubai – is a hot spot among those people who wish to change their place of residence and life quality. Dubai is really a great place for many of us, since both entrepreneurs and labor migrants can realize their desires here.
The number of foreigners wishing to immigrate to Dubai is so high that today the ratio of expats to locals here is quite unusual: 80-85% to 20-15%. And there are good reasons for this, as Dubai has many advantages compared to other regions and has many benefits to offer expats. Although, of course, it has the most developed emirate of the UAE and some disadvantages. We have prepared for you 12 advantages and 5 disadvantages of Dubai for immigrants.
Life in the UAE is famous all over the world for luxury and carelessness. Indigenous people literally bathe in petrodollars. But once you take off your rose-colored glasses, things don’t look so rosy. The Emirates government is increasingly resorting to the use of cheap labor, so almost all foreigners manage to get a decent job compared to the working conditions that they had in their country. Tourists can also get a visa to the UAE for recreation without any problems.
An excellent opportunity to invest and save money in this difficult time is also the purchase of real estate in the UAE. This also makes it possible to obtain a resident visa (permit) for the whole family.
The United Arab Emirates is a country of contrasts and exoticism, luxury and conservatism. There is hardly a person who does not want to plunge into a fairy tale about sheikhs.
Do not forget that the Emirates is a Muslim country with many prohibitions. During the religious holiday of Ramadan, one should not eat, drink or smoke in public places during daylight hours. Also, unworthy behavior and defiant clothing are not welcome.
Non-Muslims need to respect such traditions. The use of narcotic substances is punishable by prison, and their distribution by the death penalty. It is forbidden to litter and use profanity on the streets. Every year the boundaries of decency soften. This is due to the high flow of tourists.
Education in the UAE is considered one of the best in the world. Diplomas of local higher educational institutions are quoted in all countries of the world.
It is not for nothing that since the end of the 20th century the government has allocated about 25% of GDP for the development of the education system. Tuition prices are much lower, so many foreign students tend to enroll in local universities.
The UAE is known for its strictness and tradition, but things change over time. Sharia law is no longer applied in Dubai and there are a lot of foreigners who have brought some of their habits and rules of conduct there. Feminization has not bypassed the state, and gradually women are emerging from the role of subordinates. There are even representatives of the fair half in the Parliament of the Emirates.
Benefits of Dubai for expats
Dubai has many advantages. The list may change depending on the purpose for which you move to the UAE, but the main advantages remain the same for entrepreneurs, employees, and luxury property hunters – in general, for all categories of expats.
Lots of options provided
Usually, when choosing a country for permanent residence, a foreigner already knows what he wants to get: favorable conditions for doing business, high income, employment, the opportunity to live in a rich, secure country, access to affordable real estate, etc.
But the United Arab Emirates is unique in this regard, as it provides expats with almost unlimited opportunities for a comfortable life in this country, whether as an entrepreneur, as an employee, or as a rich person enjoying life who has invested money in local real estate.
All three paths will allow you to live in Dubai for at least two years, enjoying the region’s high standard of living and safety, year-round access to the beach and much more. Having received a resident visa, you get almost equal rights with citizens and, if you adhere to the laws of the UAE, you will live here for decades.
Financial benefits (salary, business income, taxes, banks)
The Dubai government is often accused of allowing the almost slave labor of the poor from India, Bangladesh, Pakistan and other poor countries, who are paid several hundred dollars, to create an Arab miracle.
But you must admit, it is difficult to blame the sheikhs for the fact that every year unskilled laborers come to the UAE in search of a better life, who agree to work hard on construction sites in Dubai, because the low salary offered to them is still more than what they could count on at home.
Highly qualified specialists in Dubai can count not only on an excellent salary, but also on additional bonuses: medical insurance, tickets to visit the house, company housing and a car, etc. Businessmen who open a company here can also get excellent financial benefits. The standard of living of the population of Dubai, and the tourists who come here, is extremely high, so with the right approach to business, you can count on excellent profits.
The UAE is actually a tax-free jurisdiction, so both businessmen and wage workers can not be afraid that taxes will eat up a good part of their profits. Among the financial advantages of Dubai, one can also name a developed banking sector, so you don’t have to worry about the safety of your savings.
Ease of obtaining a resident visa
Immigrants working abroad often complain that they have to stay as illegal immigrants, because the legislation of the country where they work does not provide for a temporary visa. The United Arab Emirates solved this problem when they introduced resident and investor visas, documents that enable businessmen who have opened a company in the UAE, employees of Dubai companies and owners of expensive real estate to live in Dubai for a few years.
Entrepreneurs and owners of real estate worth more than 1 million dirhams independently apply for a visa, but wage workers wait until such a document is issued for them by the management of the company in which they are going to work. A resident and investor visa does not require the presentation of any special papers (mostly identification documents will be needed) and is issued in a week or two.
Many of the expats who are investors may be interested in setting up a foundation in Dubai. Later in this article we will talk about foundations and the setting up process.
What is a foundation?
Keep in mind that “foundation” is not a legal term. If an organization has this word in its name, do not assume that it provides grants. Broadly speaking, a foundation is a non-profit corporation or charitable foundation that makes grants to organizations, institutions, or individuals for charitable causes such as science, education, culture, and religion.
There are two types of foundations: private foundations and public charitable foundations:
- Private foundation money comes from a family, an individual, or a corporation. Private foundations must meet “payout requirements”, which means they must give away a certain amount of their assets each year.
- A public grant-giving charity (sometimes called a “public foundation”) receives money from many different sources, such as foundations, individuals, and government agencies.
Should you start a private foundation in Dubai?
If you donate large sums of money on a regular basis, you may be wondering if you should start your own private foundation. Perhaps you see a social need that has not been met, or perhaps you are intrigued by the prestige associated with running a charitable foundation on your behalf.
The most common type of foundation is a charitable foundation. It is a non-profit organization primarily funded by an individual, couple, family, or corporation. The assets of a private foundation are called donations, which are invested to generate income for the foundation. The Foundation is used to fund its activities and provide grants.
While private foundations can be labor-intensive and costly, the thousands of people, families and corporations that created them feel the sacrifice is worth it.
Registration of a trust or foundation in Dubai. What does the Dubai International Financial Center offer?
Registering a trust in Dubai (or opening a foundation in Dubai) is the choice of many entrepreneurs who want to protect their capital and want to be able to plan succession. In Dubai, trusts and funds can be created in a special financial free zone – Dubai International Financial Center.
In early 2018, the Dubai International Financial Center (DIFC) will introduce a new legal framework for foundations to offer improved wealth management and inheritance planning options for individuals, family offices and companies. This comes after a recent similar move by the Abu Dhabi Global Market.
The DIFC recently launched consultations on a new foundations law and consultations on a revision of the existing law governing trusts.
The new law on foundations is due to come into force in the first quarter of 2018. Stakeholders had the opportunity to comment on the new law, which borrows legislation from jurisdictions such as the Netherlands and Luxembourg.
The proposed new Trusts and Foundations Act will significantly improve DIFC’s wealth management offering by ensuring that DIFC’s work and family succession planning is legally sound.
Features of opening a foundation and registering a trust in the UAE
A foundation is a corporate body with functions and purposes similar to a company, but with features similar to a common law trust. The structure is an enterprise with a separate legal personality, but, unlike a company, such an enterprise does not have shareholders.
Unlike a company, a foundation cannot carry out commercial activities other than those necessary for its purposes.
Unlike a trust, a foundation does not need beneficiaries, does not have to provide information about the assets or about the management of the foundation, which means that the foundation may be more useful for geographically diversified or large families.
According to the provisions of the DIFC draft law, individuals and companies wishing to establish a foundation will not be required to have a physical presence in the free zone, but will be required to conduct business through a registered agent in the DIFC.
Notably, Abu Dhabi’s financial free zone, Abu Dhabi Global Market, introduced the UAE’s first legal framework for funds based on the laws of Guernsey and Jersey.
What improvements will DIFC offer in the near future when opening a foundation and registering a trust in Dubai?
The Dubai International Financial Center (DIFC) is the leading international financial hub in the Middle East, Africa and South Asia.
The DIFC is currently proposing a new legal regime for trusts and a new legal regime for foundations. DIFC has developed new trust and foundation legislation to expand the operating environment for wealth management and succession planning platforms under customary and Sharia law.
This law is part of the implementation plan for the 56 recommendations of the DIFC Working Group. The law will be enacted after careful consideration of the recommendations of the DIFC Working Group on Wealth Management, which were given to the Strategy and Policy Committee and approved by the DIFC High Council in 2016. The working group consists of 20 lawyers, lawyers and accountants, as well as DIFC administration officials. The recommendations were consulted globally.
Since its inception, the Working Group has made a significant contribution to shaping DIFC’s strategy to ensure DIFC’s future growth as a wealth management center. The group made proposals for legal reforms and also paid attention to the cost and ease of doing business in DIFC.
The idea also includes the creation of a DIFC Family Business Center that will provide support to national and international family offices that plan to transfer or transfer their private capital and succession planning structures to DIFC.
Currently, DIFC hosts about 200 asset management and consulting companies. This number will be in an advantageous position if the law comes into force along with the new DIFC capital regulation regime.
The new law revises all aspects of the growing need for new company formation in DIFC and the needs of existing asset management companies both nationally and internationally. The revision at the same time will allow for the development of legislation that not only reflects the model of other countries, but also stands out from others and deserves a reputation as a unique right.
DIFC is one of the top ten financial centers in the world, with a progressive legal and regulatory environment and drawing on the significant experience of world leaders in the financial services industry working in DIFC. The Center will continue to work closely with the financial community to support the evolution of its business environment in line with the 2024 strategy.
The development of the new laws was the result of a working group’s careful study of the needs of the regional and international wealth management industry. DIFC is not just copying what other jurisdictions are doing in the field of trusts and funds, but is developing a regime that is an example of the best world practice.
Opening a trust in Dubai. What does DIFC offer now?
The population of Dubai is doubling every 10 years. Dubai’s location between East and West, top-notch infrastructure, and a tax-free environment supported by a network of double tax treaties anticipate the continuity of this demographic growth, especially as business opportunities rise in preparation for EXPO 2020.
Currently, more than 2 million people live in Dubai and approximately 90% of the inhabitants are foreigners who have chosen to immigrate to Dubai.
These figures are important in terms of asset protection.
UAE laws are Sharia compliant and do not allow the same degree of flexibility as inheritance laws in other countries.
Developed on the basis of Sharia, the Personal Status Law covers marriage, divorce and succession. This law may apply to foreigners unless they choose to apply the laws of their own country. Therefore, when foreigners come to the UAE, the laws of the UAE apply unless the foreigner makes an explicit choice of the law of their country. Such a choice is usually made in inheritance procedures.
It is worth noting that a new inheritance law has been introduced in Dubai, which gives legal effect to the wills of foreigners.
However, there are a number of assets that will not automatically fall under the inheritance laws desired by a foreigner. A good option for management would be to set up a trust through the DIFC.
The DIFC Law describes the procedures and types of trusts that can be created, such as a protective trust, charitable, non-charitable trust. The regulator is the Dubai Financial Services Authority, which is the sole and independent regulator of DIFC’s financial services.
The Law of Trusts is exclusive to the DIFC and is dealt with by the Courts of the DIFC. The DIFC Courts have jurisdiction over a trust (whether it is a trust under the Dubai Trusts Law or a trust established under the laws of another jurisdiction) if:
- the trust is governed by the Dubai Trust Law;
- the trustee is a DIFC resident;
- the trust administers the DIFC.
There are no restrictions on the residence of the founder or beneficiary and on the location of assets. A foreign trust may be administered from the DIFC if:
- it is a DIFC trust, or
- if the trustee of the foreign trust is a DIFC resident, or
- if the property is in DIFC, or
- if administered from DIFC.
The law of trusts must be supplemented by principles of common law equity.
Factors contributing to the attractiveness of setting up a DIFC trust in Dubai:
- There are no minimum capital requirements for setting up a trust;
- 100% foreign ownership allowed;
- High level of anonymity;
- Complete exemption from taxes;
- High level of asset protection and money management.
It can also be noted that the DIFC is a common law structure, unlike the legal system of the UAE, which is a civil system with Egyptian and French roots.
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